Tinubu slashes GenCos’ N6tn bill to N2.8tn after audit showdown
President Bola Tinubu has approved the payment of N2.8tn to electricity generation companies as the Federal Government’s verified liability for accumulated power subsidies dating back to 2010, decisively rejecting the N6tn claim initially presented by operators.
The decision, reached after months of negotiations and forensic scrutiny, effectively slashes GenCos’ N6tn bill by more than half and signals a tougher fiscal stance by the Presidency in managing legacy energy debts.
Highly placed officials familiar with the negotiations disclosed that the President insisted on a tripartite audit involving the Federal Ministry of Finance, the Nigerian Bulk Electricity Trading Plc, and representatives of the generation companies before committing public funds.
According to insiders, Tinubu declined to accept the operators’ invoices at face value, likening the initial documentation to the inflated subsidy claims that characterised previous fuel subsidy regimes.
The verified figure of N2.8tn has now been approved as the Federal Government’s final liability, with the President reportedly making it clear that no additional amount would be entertained.
Bond-backed payments under debt reduction programme
To demonstrate commitment while negotiations were ongoing, the government raised N501bn in January through a bond under the Presidential Power Sector Debt Reduction Programme.
The instrument was fully subscribed by pension funds, banks, and asset managers, underscoring investor appetite for sovereign-backed energy restructuring.
Officials explained that the bond issuance served as a good-faith payment while the final figure was being reconciled. With the audit now concluded, the administration plans additional phased disbursements.
Sources within the power ministry indicated that between May and July, another N600bn to N800bn could be released, bringing total payments to roughly half of the approved N2.8tn by mid-year.
The outstanding balance is expected to be settled over 12 to 24 months, depending on fiscal space and market conditions.
Why Tinubu slashes GenCos’ N6tn bill
The power sector debt crisis dates back to the 2013 privatisation of electricity assets. At the time, generation and distribution companies acquired national infrastructure for approximately N400bn.
However, regulated tariffs that failed to reflect cost realities, persistent liquidity shortfalls, and foreign exchange volatility created mounting payment gaps.
Operators argued that unpaid invoices accumulated as electricity subsidies widened, particularly because end-user tariffs did not fully cover generation and transmission costs.
By their calculations, legacy obligations ballooned to N6tn and, in some public statements, as high as N6.6tn.
But the Presidency’s audit reportedly identified discrepancies and unsupported figures, leading to the downward revision. Observers say the move to slash GenCos’ N6tn bill reflects a broader push for fiscal discipline at a time when public debt servicing already consumes a significant share of federal revenue.
Conditions tied to gas and infrastructure spending
Crucially, the N2.8tn approval is not an unconditional payout. Presidency sources disclosed that Tinubu attached strict conditions to ensure funds are channelled toward stabilising generation rather than diverted to unrelated expenditures.
A substantial portion of the disbursement will be ring-fenced to clear outstanding debts owed by GenCos to gas suppliers. Chronic non-payment to gas producers has repeatedly triggered supply cuts, contributing to recurring national grid collapses and generation dips below the minimum stability threshold.
Under the arrangement, the government will mandate specified percentages of the approved funds to settle gas obligations. The objective is to address supply bottlenecks that have kept electricity output fluctuating between 2,000 and 5,000 megawatts, far below national demand.
Additionally, operators will be required to allocate part of the proceeds to infrastructure renewal and capacity upgrades. Officials claim audits revealed patterns of underinvestment, with some companies allegedly prioritising revenue extraction over capital reinvestment.
The Presidency has demanded verifiable evidence of compliance before subsequent tranches are released.
Labour opposition and sector tensions
The Nigeria Labour Congress had earlier criticised proposals for large-scale payments to GenCos, describing the 2013 privatisation as flawed and questioning why firms that acquired assets at relatively low valuations should receive trillions in public support without commensurate service improvement.
Despite labour resistance, the administration argues that resolving verified legacy debts is essential to restore liquidity across the electricity value chain. Without intervention, officials warn, mounting arrears could trigger plant shutdowns, deepen grid instability, and deter fresh investment.
Five generation firms — including First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited, and Niger Delta Power Holding Company Limited — have reportedly signed structured settlement agreements with NBET totalling N827.16bn, payable in four instalments.
Broader tariff reforms and subsidy cuts
The move to slash GenCos’ N6tn bill comes amid incremental electricity tariff adjustments. In April 2024, the government removed subsidies for Band A customers, raising rates to N225/kWh while maintaining support for Bands B to E. Officials said the differentiated structure reduced the monthly subsidy burden, which had once approached N500bn.
By narrowing the verified liability to N2.8tn and restructuring repayment through bonds, the administration aims to balance fiscal prudence with sector stability. Analysts note that while bond financing eases immediate cash pressures, it also increases future repayment obligations.
Implications for Nigeria’s power future
The decisive audit and conditional approval mark one of the most significant interventions in Nigeria’s electricity market since privatisation. Supporters argue that enforcing accountability while honouring legitimate debts could rebuild investor confidence.
Critics, however, caution that without deeper reforms — including cost-reflective tariffs, improved metering, and stricter performance benchmarks — liquidity injections may offer only temporary relief.
For now, the Presidency’s stance sends a clear signal: legacy claims will be scrutinised, and public funds will be disbursed only against verified obligations.
By choosing to slash GenCos’ N6tn bill rather than accept it wholesale, the administration has drawn a firm line in the ongoing battle to stabilise Nigeria’s fragile power sector.
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