In a bold move to avert an imminent collapse of Nigeria’s already fragile electricity sector, the Presidency has pledged to clear the N2 trillion legacy debt owed to electricity generation companies (GenCos) before the end of the third quarter of 2025.
The commitment was reaffirmed on Monday during the second Nigerian Electricity Supply Industry (NESI) Stakeholders’ Meeting of 2025, hosted by the Nigerian Electricity Regulatory Commission (NERC). A representative of the Special Adviser to the President on Energy, Eriye Onagoruwa, said the Tinubu administration is taking urgent steps to resolve the crippling debt burden.
“We are empathetic to what GenCos are facing,” Onagoruwa stated. “We are exploring alternative debt instruments, and I can confirm that both the Coordinating Minister of the Economy and the Debt Management Office are aligned with this effort. Internal approvals are currently underway.”
With fiscal space tight, the Presidency is reportedly considering non-cash alternatives such as bond issuances and structured instruments to meet the obligation without further straining public finances. These financial instruments would enable GenCos to secure liquidity and maintain operations while awaiting full cash payments.
According to sector analysts, settling the N2tn legacy debt is crucial to reviving Nigeria’s power generation capacity and avoiding further erosion of investor confidence. The inability of GenCos to recover their dues has severely hindered their ability to procure gas, maintain infrastructure, and invest in capacity expansion.
In April 2025, GenCos threatened to shut down electricity generation nationwide over the government’s failure to offset the N4 trillion total debt owed to market operators, of which N2 trillion represents legacy obligations. The remaining debt includes gas supply arrears and other outstanding payments in the electricity value chain.
Power Minister Adebayo Adelabu earlier revealed plans to clear 50 percent of the cumulative N4tn debt within the year. However, stakeholders warn that unless there is clear implementation, the power sector may grind to a halt.
“The industry is bleeding,” one senior executive of a leading GenCo told Daily Post. “Even with the privatization exercise over a decade ago, most operators still rely heavily on government-settlement of market shortfalls. Unless payments are made urgently, we might be forced to suspend operations.”
Despite over a decade since the power sector’s privatization, Nigerians continue to grapple with epileptic power supply, frequent grid collapses, poor infrastructure, and an electricity access gap that leaves over 85 million people without reliable power. Stakeholders say financial viability is at the core of the problem.
“The unresolved debts make the business environment unworkable,” said a source close to NERC. “You can’t ask GenCos to produce power without paying them. You can’t expect Disco efficiency when liquidity is choked. It’s a chain reaction.”
Experts also point to years of tariff shortfalls, forex volatility, and political interference as reasons the power sector has struggled to achieve cost-reflectiveness and sustainability.
The Presidency’s renewed commitment is seen as part of President Bola Tinubu’s broader economic reform agenda, which includes tackling subsidy burdens, increasing local production, and stabilizing the naira. However, economic observers warn that clearing the power sector debts without implementing structural reforms could amount to another bailout with short-term impact.
“The issue is not just about clearing debt,” said Dr. Ijeoma Akabogu, an energy economist. “What happens next? Will tariffs be made cost-reflective? Will gas pricing be deregulated? Will there be new investments in transmission infrastructure?”
With Q3 now a soft deadline, Nigerians are watching closely to see if Tinubu’s government can walk the talk. For many, it’s not just about avoiding another sector shutdown, but about restoring stable electricity—crucial to economic growth, job creation, and quality of life.
If the debt is cleared as promised, experts say it will be a key signal to domestic and international investors that Nigeria is ready to build a power sector that works. But failure to act decisively could push the sector deeper into crisis.