In a significant move to rescue Nigeria’s struggling power sector, the Federal Government has announced plans to offset N2 trillion of the N4 trillion debt owed to power generation companies (Gencos) before the end of 2025. The Minister of Power, Adebayo Adelabu, made this disclosure during the sixth edition of the 2025 Ministerial Press Briefing Series held in Abuja on Thursday.
The minister noted that the massive debt, which has threatened to paralyze electricity generation nationwide, will be settled through a combination of cash payments and promissory notes. These financial instruments will serve as guarantees that can be traded with banks for immediate liquidity, thereby enabling Gencos to continue operations and maintain power supply stability.
The debt crisis, which has been accumulating over time, became more urgent after the Association of Power Generation Companies raised the alarm earlier this month. The group warned that many of its members were on the verge of shutting down operations due to the failure of the government to fulfill its financial obligations. The total outstanding debt now exceeds N4 trillion, comprising legacy debts and new shortfalls incurred in the 2024 fiscal year.
“These debts are unpaid subsidies of the Federal Government. Almost half of it was inherited, while the remaining half came from 2024 operations,” Adelabu clarified. “We’re not saying we will pay 100 percent of the debt this year, but we are committed to defraying a substantial part—about N2 trillion—between now and December.”
The minister confirmed that talks are ongoing with the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, to secure the required funds through budgetary allocations and the issuance of promissory notes.
“These promissory notes will be credible and liquid enough to be accepted by financial institutions,” Adelabu assured. “We are doing this to prevent any disruption in power generation that could severely affect the economy and public welfare.”
Adelabu also shed light on the roots of the mounting debt, attributing it largely to electricity subsidies that are no longer sustainable. He explained that the average cost of producing one kilowatt-hour (kWh) of electricity in Nigeria is about N170, but the majority of consumers—about 85 percent—still pay as low as N60/kWh due to government subsidies.
“This means we are still subsidizing about 65 percent of the true cost of electricity. In fact, before recent reforms, Nigerians were only paying about 20 percent of the cost, which made power almost free and unsustainable,” the minister stated.
He emphasized that the government is not eliminating subsidies outright but restructuring them to ensure that only low-income households benefit, rather than high-consuming wealthy users.
Defending the recent tariff hike for Band A customers—those guaranteed at least 20 hours of electricity daily—Adelabu explained that it was necessary to encourage investment and service improvement in the power sector.
“About 15 percent of customers now pay N209 per kWh under the new cost-reflective tariff, while others still enjoy subsidized rates,” he said.
He revealed that the recent reforms have already started yielding results. “Market revenue increased by N700 billion, rising from N1 trillion in 2023 to N1.7 trillion in 2024. This 70 percent growth shows that financial viability and improved service delivery can coexist,” Adelabu added.
To ensure that consumers get value for money, the minister warned that electricity distribution companies (DisCos) who fail to deliver 20 hours of daily supply to Band A customers would face sanctions.
“The government is not siding with the companies. We are on the side of Nigerians. But we must accept that energy—like food—is expensive everywhere, and we must pay the true cost to ensure uninterrupted supply,” he said.
Despite the public backlash following the tariff adjustments, the federal government remains firm in its commitment to revamping the power sector. Adelabu reaffirmed that achieving energy stability would require tough decisions but stressed that the benefits—stable electricity, job creation, and industrial growth—far outweigh the temporary discomfort.
As the December deadline approaches, industry watchers and consumers alike are closely monitoring the government’s efforts to avert a shutdown by fulfilling its N2 trillion payment promise. If successfully implemented, the bailout could mark a turning point for Nigeria’s power sector, unlocking new investments and improving service delivery for millions of Nigerians.