A fresh dispute has emerged in Nigeria’s power sector as the Federal Government and electricity generation companies clash over the true value of outstanding debts, raising fresh concerns about transparency, liquidity, and long-term sector stability.
The disagreement centres on conflicting estimates of liabilities owed to generation companies, with the government suggesting a significantly lower figure than what industry operators believe reflects the actual financial exposure within the market.
The Minister of Power, Adebayo Adelabu, indicated that ongoing reconciliation efforts could reduce the widely cited debt figure of N6.3tn to approximately N4tn.
According to him, earlier audited figures had already adjusted previous estimates downward, reflecting the complexity of embedded financial components such as foreign exchange fluctuations and accrued interest.
He explained that while an initial figure of N4tn was recorded as of the end of 2024, a detailed audit process brought the verifiable portion closer to N2.8tn. The remaining differences, he noted, are subject to further reconciliation as discussions continue between government agencies and market participants.
Electricity debt reconciliation dispute deepens in Nigeria’s power sector
Despite the government’s position, stakeholders within the generation segment have pushed back strongly, insisting that the reconciliation process lacks inclusivity and transparency.
The Executive Secretary of the Association of Power Generation Companies, Joy Ogaji, questioned the methodology behind the revised figures, arguing that no comprehensive reconciliation exercise involving all parties has taken place since March 2025.
According to her, the integrity of any electricity debt reconciliation process depends on joint verification among stakeholders, including generation companies, regulators, and payment agencies.
She stressed that relying on unilateral calculations undermines confidence in the process and risks distorting the financial reality of the sector.
Ogaji further criticised the apparent dependence on data from the Nigerian Bulk Electricity Trading Plc, noting that while the agency facilitates payments, it is not solely responsible for validating the full scope of liabilities across the electricity value chain.
At the heart of the disagreement is the structure of claims submitted by generation companies, which extend beyond basic invoices for power supplied.
Industry operators argue that the outstanding debt includes multiple cost layers accumulated over years of operational challenges and policy inconsistencies.
These components include unpaid invoices for electricity generated since 2015, capacity payments for available but underutilised power, and “deemed capacity” costs arising from discrepancies between contracted and actual output. In addition, foreign exchange differentials have significantly increased liabilities due to the volatility of the naira against major currencies.
Further complicating the electricity debt reconciliation process are supplementary charges linked to frequent plant start-ups and shutdowns, which have surged from around 20 occurrences annually to over 365 in some cases.
These operational inefficiencies, driven largely by gas supply constraints and transmission limitations, have added substantial financial burdens to generation companies.
Industry experts also highlight interest accumulation on outstanding payments, calculated at the Nigerian Interbank Offered Rate plus four per cent, as well as Value Added Tax obligations on gas supply transactions spanning several years.
Beyond these, generation companies provide ancillary services such as spinning reserves and black start capabilities, which are critical for grid stability but remain largely uncompensated under existing tariff frameworks.
Operators argue that these hidden costs must be fully accounted for in any credible electricity debt reconciliation exercise.
The Federal Government, however, maintains that efforts are underway to sanitise the sector and establish a more accurate financial baseline.
A senior official familiar with the process disclosed that the approved N2.8tn represents verified legacy debt, while additional claims will be reviewed as part of ongoing engagements.
The dispute underscores broader structural challenges within Nigeria’s electricity market, including persistent liquidity shortages, tariff shortfalls, and weak enforcement of contractual obligations.
These issues have historically discouraged investment and constrained the sector’s ability to deliver stable power supply.
Analysts warn that unresolved discrepancies in electricity debt reconciliation could further erode investor confidence, particularly at a time when Nigeria is seeking to attract private capital into its energy infrastructure.
They argue that achieving clarity on liabilities is essential for restoring financial discipline and enabling sustainable reforms.
The situation also reflects deeper tensions between public sector oversight and private sector participation in a market that has struggled to balance commercial viability with social obligations.
While government interventions have aimed to stabilise the system, gaps in data transparency and coordination continue to hinder progress.
As negotiations continue, stakeholders agree that a credible and inclusive electricity debt reconciliation framework will be critical to resolving the impasse.
Such a framework, they say, must incorporate all cost elements, ensure stakeholder participation, and align with global best practices in power market governance.
Ultimately, the outcome of the current dispute could shape the trajectory of Nigeria’s power sector reforms, influencing not only debt resolution but also future investment flows, operational efficiency, and the reliability of electricity supply nationwide.
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