GenCos decry non-payment despite N501bn debt bond scheme
Power generation companies in Nigeria have raised fresh concerns over liquidity constraints in the electricity market, as delays persist in the disbursement of funds under the Federal Government’s N501bn bond initiative aimed at settling longstanding sector debts.
Despite the much-publicised intervention designed to ease financial pressure across the value chain, operators say they are yet to receive any payments months after the scheme was launched, intensifying fears about the sustainability of electricity generation in the country.
Lingering cash crunch threatens operations
Industry stakeholders within the Nigerian Electricity Supply Industry (NESI) warn that the continued delay is undermining the core objective of the debt reduction programme.
The initiative was expected to inject immediate liquidity into the sector and stabilise operations for generation companies (GenCos), many of which have been operating under severe financial strain.
The Executive Secretary of the Association of Power Generation Companies, Joy Ogaji, confirmed that although agreements had been signed with selected companies, actual cash disbursement had not commenced.
Her disclosure highlights a widening gap between policy announcements and implementation—an issue that has long plagued Nigeria’s power sector reforms.
For GenCos, the implications are significant. Most operators depend heavily on timely payments to cover operational expenses, including gas supply, maintenance, and debt servicing.
Without adequate cash flow, the ability to sustain power generation capacity becomes increasingly constrained.
Bond issuance raises expectations
The Federal Government, through its broader reform agenda, had introduced the N501bn bond as part of the Presidential Power Sector Debt Reduction Programme, targeting an estimated N4tn owed to GenCos for electricity supplied over the past decade.
The bond, issued in Lagos and reportedly fully subscribed by institutional investors, was seen as a major milestone in restoring investor confidence. Pension funds, banks, and asset managers participated actively, signalling market optimism about the reform direction.
Officials described the move as a “reset” for the sector, combining debt resolution with structural improvements aimed at ensuring long-term financial viability.
However, the delay in translating the raised funds into actual payments has triggered skepticism among industry players, who argue that liquidity—not just policy—is the most urgent need.
Partial agreements, no disbursement
Available data shows that only a handful of GenCos have signed settlement agreements under the programme. These include major operators such as First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited, and the Niger Delta Power Holding Company Limited.
The negotiated settlement for these companies reportedly stands at over N800bn, to be paid in phased instalments.
Yet, months after the agreements were finalised, no funds have reached the beneficiaries.
Analysts say this delay could erode trust in the programme and discourage further participation, especially among other GenCos that are yet to sign onto the framework.
Structural weaknesses persist
Nigeria’s power sector has long been characterised by deep structural inefficiencies, including tariff shortfalls, transmission bottlenecks, and poor revenue collection across distribution companies.
At the heart of the crisis is a persistent liquidity gap, driven largely by the inability of end-user tariffs to fully reflect the cost of electricity generation and distribution.
This mismatch has resulted in a cycle of debt accumulation, with GenCos bearing the brunt of unpaid invoices.
Even with the intervention of the Nigerian Bulk Electricity Trading Plc, which acts as an intermediary buyer of power, payment delays have remained a recurring challenge.
Experts argue that without comprehensive reforms addressing pricing, metering, and collection efficiency, financial interventions alone may not deliver lasting stability.
Impact on generation capacity
The immediate consequence of delayed payments is reduced operational capacity. GenCos may be forced to scale down output due to insufficient funds to procure gas—the primary input for thermal power plants—or to maintain critical infrastructure.
Foreign exchange volatility has further compounded the situation, as many operational components and obligations are denominated in foreign currency.
This raises concerns about the reliability of electricity supply, particularly at a time when demand continues to outpace available generation capacity.
Industry insiders warn that prolonged liquidity constraints could lead to plant shutdowns, reduced grid stability, and increased reliance on alternative power sources such as diesel generators, which are significantly more expensive.
Government silence fuels uncertainty
Efforts to obtain official clarification on the delay have yielded limited responses, adding to uncertainty within the sector.
While policymakers maintain that reforms are ongoing, the lack of transparency around timelines for disbursement has left stakeholders in a state of limbo.
Energy economists note that credibility is a key factor in reform success. Delays in fulfilling financial commitments risk undermining investor confidence and could affect future fundraising efforts in the capital market.
Path forward: beyond financial intervention
Experts suggest that resolving Nigeria’s power sector crisis will require more than debt clearance.
Structural reforms, including cost-reflective tariffs, improved governance, and enhanced regulatory oversight, are essential to achieving sustainable growth.
There is also a growing call for better alignment between policy design and execution, ensuring that initiatives deliver measurable outcomes within realistic timelines.
For now, the delay in implementing the bond scheme underscores the complexity of Nigeria’s electricity challenges and the urgent need for coordinated, decisive action.
As GenCos continue to grapple with mounting financial pressures, the effectiveness of the debt reduction programme will ultimately be judged not by the funds raised, but by the impact on liquidity, generation capacity, and service delivery across the power sector.
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