In a move that could reshape Nigeria’s struggling power sector, President Bola Ahmed Tinubu has approved a ₦4 trillion (about $2.6 billion) debt refinancing plan to clear outstanding obligations owed to electricity generation companies (GenCos). The initiative, announced by the Ministry of Finance, marks one of the largest government interventions in Nigeria’s energy industry since its partial privatization in 2013.
According to official sources, the refinancing scheme aims to settle verified debts accumulated between 2015 and 2023, which have crippled the operations of GenCos, gas suppliers, and other critical stakeholders across the electricity value chain. The debts, once cleared, are expected to restore liquidity, stabilize electricity generation, and rebuild investor confidence in Nigeria’s long-troubled power sector.
Background: Years of Unpaid Debts and Declining Power Supply
The Nigerian electricity sector has long been trapped in a cycle of inefficiency, underpayment, and poor service delivery. Since the privatization of generation and distribution assets in 2013, private investors have repeatedly complained about mounting debts owed to them by the federal government through the Nigerian Bulk Electricity Trading Plc (NBET).
For years, GenCos have supplied power to the national grid without receiving full payment for their energy invoices. Many companies reported that they received as little as 30% of their monthly bills, forcing them to operate far below capacity. The liquidity crisis, in turn, affected gas producers, who often cut supply to power plants due to unpaid bills.
As debts ballooned, electricity generation dropped from an average of 5,000 megawatts to barely 3,500 MW, leading to frequent blackouts, unstable voltage, and increased reliance on generators by homes and businesses.
What the Debt Refinancing Plan Entails
Under the newly approved plan, the Debt Management Office (DMO) will issue a combination of federal bonds and treasury instruments to settle the outstanding liabilities owed to the power companies. The repayment will be carried out in phases, ensuring that verified creditors receive funds without overwhelming the national budget.
Finance Minister Wale Edun explained that the refinancing would be implemented over a period of several months, after an exhaustive verification process to prevent inflated claims or fraudulent invoicing. The government emphasized that only validated debts—confirmed by both NBET and the Office of the Accountant-General—will be refinanced.
Officials say the intervention is expected to improve cash flow for GenCos, enable them to pay their gas suppliers promptly, and allow the companies to undertake overdue maintenance and capacity expansion projects.
Reforms to Prevent Future Debt Accumulation
Alongside the refinancing approval, the Tinubu administration has rolled out a series of reforms aimed at ensuring sustainability. These include:
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Partial Removal of Electricity Subsidies:
The government has agreed to reduce electricity subsidies by about 35%, paving the way for more cost-reflective tariffs.
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Tariff Adjustment for Urban Consumers:
Tariffs will be adjusted upward for commercial and high-consumption users, while targeted support will continue for vulnerable households to cushion the effect of rising costs.
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Enhanced Revenue Collection:
The Nigerian Electricity Regulatory Commission (NERC) has introduced stricter metering and billing enforcement to reduce revenue leakages from power distribution companies (DisCos).
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Improved Transparency and Monitoring:
A new electronic payment tracking system will allow NBET, DMO, and the Power Ministry to monitor all payments and debts in real-time, ensuring that new arrears do not build up unchecked.
Expected Benefits of the Plan
Experts have described the ₦4 trillion debt refinancing as a “lifeline” for Nigeria’s energy industry. By clearing backlogs, the government hopes to:
- Improve generation capacity as GenCos gain access to cash to buy gas and repair idle turbines.
- Strengthen investor confidence in Nigeria’s electricity market and attract new foreign investment.
- Boost reliability of power supply, which will, in turn, support small businesses and industrial productivity.
- Reduce dependence on diesel generators, cutting operational costs for companies and pollution in urban centers.
With adequate liquidity, power companies are expected to resume full operations, and gas producers—who had withheld supply due to unpaid invoices—may finally increase their deliveries.
Challenges and Skepticism
Despite the optimism, not everyone is convinced the plan will bring lasting stability. Critics have raised concerns over transparency and accountability, warning that unless the debts are properly audited, the refinancing could become another round of government bailouts with limited real impact.
Consumer advocates also worry that tariff increases could hit poor Nigerians the hardest. They argue that the government should ensure that subsidy reforms are balanced with protections for low-income households, especially given the high inflation and cost-of-living crisis.
Moreover, experts emphasize that liquidity alone will not solve Nigeria’s power woes unless deeper structural reforms—such as grid expansion, improved metering, and anti-theft enforcement—are implemented.
Industry Reactions
The Association of Power Generation Companies (APGC) praised the Tinubu administration for taking decisive action. In a statement, it said:
“This is a long-awaited step toward restoring financial stability in the power sector. With liquidity restored, we can now refocus on improving generation capacity and reliability.”
On the other hand, the Nigeria Labour Congress (NLC) cautioned that the refinancing must not become a justification for aggressive tariff hikes. The group urged the government to prioritize transparency and public engagement in implementing the plan.
Conclusion
The ₦4 trillion electricity sector debt refinancing plan is one of the most significant economic interventions of President Tinubu’s administration so far. If successfully executed, it could revitalize a key sector that has held back Nigeria’s industrial growth for decades.
However, success will depend on strict transparency, efficient implementation, and the political will to carry out long-overdue reforms in tariff structure, metering, and regulatory enforcement.
For millions of Nigerians who have endured years of darkness, the hope is simple: that this bold financial move finally lights up their homes—and keeps the lights on.
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