The Power Generation Companies (GenCos) have warned of a potential shutdown of their operations due to over N4 trillion in debt owed to them by the federal government.
In a statement, the Chairman of the Board of Trustees for the Power Generation Companies, Col Sani Bello (rtd), explained that this drastic measure is being considered due to the ongoing issues in the power sector.
He stated that GenCos have been unfairly treated in payment settlements for their services, despite fulfilling their commitment to expand their operations.
The statement highlighted that GenCos are continuously suffering from the liquidity problems within the Nigerian Electric Supply Industry (NESI).
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The increasing debt owed by the government, coupled with a lack of a clear financing strategy, absence of firm contracts, and a market without securitization, are hindering future planning.
“Against the backdrop of the many challenges facing the power sector in Nigeria, the crises from cash liquidity are on the top burner and have reduced GenCos’ ability to continue to perform their obligations, thereby threatening to completely undermine the electricity value chain,” the statement read.
It also noted that GenCos’ hopes of receiving payment through external support, such as the World Bank PSRO, have been diminished because other participants in the market have failed to meet their Distribution Linked Indicators (DLIs) as outlined in the Power Sector Recovery Programme (PSRP).
The statement further pointed out that access to foreign exchange is another significant problem, as major operational and maintenance needs in the generation subsector require US dollars.
According to the GenCos, their bill collection rate in 2024 has fallen below 30%, and the situation in 2025 shows no improvement. This severely impacts their ability to meet financial obligations.
Additionally, high corporate income tax, concession fees, royalty charges, and new Financial Reporting Council (FRC) compliance requirements are further straining their revenue.
“GenCos are currently owed about N4tr (N2tr for 2024 and N1.9tr in legacy debts). No possible solutions, including cash payments, financial instruments, and debt swaps are in sight. The 2025 government budget allocates only N900bn, raising concerns about its adequacy to cover arrears and future payments,” the statement emphasized.
Consequently, the GenCos demanded the immediate implementation of payment plans to settle all outstanding invoices, a reprioritization of payments under the waterfall arrangement to ensure 100% payment of their invoices as and when due, and a clear financing plan to address the exposures in the Nigerian Electricity Regulatory Commission’s (NERC) Supplementary Order to the Multi-Year Tariff Order (MYTO) and the DRO 2024.
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