• Promised N4tr bond yet to materialise
•Only 35% of monthly invoices are paid, Ogaji claims
Nigeria’s electricity supply industry (NESI) is facing a severe liquidity crisis, with figures showing that the country loses an average of N7.36 billion monthly to stranded generation capacity.
Industry data obtained by The Guardian indicated that from January to August 2025, the country had an average available generation capacity of 6,671 megawatts (MW). But only 4,809MW was actually generated and utilised, leaving a stranded capacity of about 1,866MW.
The unused generation translates to a monthly capacity payment loss of N7.36 billion on average, with the loss peaking in August at N20.17 billion.
A detailed review shows the problem has persisted for over a decade. Between 2013 and 2024, stranded generation capacity consistently averaged over 2,000MW yearly, costing the sector between N150 billion and N270 billion each year in unpaid capacity charges.
In 2016, stranded capacity hit a record 3,827MW, representing 54.4 per cent of total available capacity, and leading to a yearly loss of N273.32 billion. Although stranded capacity has reduced somewhat in recent years, it still stood at 2,140MW in 2025 (to August), with yearly losses already above N102 billion.
Analysts said these figures illustrated the systemic challenge where Nigeria builds more capacity on paper, but utilisation remains stuck at 3,500 to 4,000MW, undermining power generation companies’ (GenCos) revenues while consumers continue to face frequent blackouts.
The financial crisis crippling NESI has reached a tipping point, with GenCos warning that unpaid debts owed by the Federal Government have increased to N5.6 trillion as of August 2025 and are projected to surpass N6 trillion by December.
Managing Director/ Chief Executive Officer of the Association of Power Generation Companies (APGC), Dr Joy Ogaji, who spoke on national television yesterday, described the situation as an existential threat to the GenCos, stressing that the liquidity shortfall is worsening monthly with no clear financing plan in sight.
According to her, the power sector invoices an average of N280 billion monthly, reflecting electricity generated and consumed on the national grid. However, only about 35–36 per cent of this amount is settled, leaving nearly N200 billion unpaid each month.
“It is like a garri seller whose bowl costs N10,000, but each time customers pay only 3,000. No seller can survive on that. The GenCos are in the same situation,” she said.
Ogaji disclosed that during a July 25 meeting at the Presidential Villa, President Bola Ahmed Tinubu assured GenCo chairmen of an immediate intervention through a N4 trillion bond issuance to liquidate part of the legacy debt.
“We were hopeful because the President, as a father, promised to intervene with a N4 trillion bond. But as we speak, there is no clarity on the design, scope, or timeline of this bond,” she noted.
The first phase of the bond was meant to be completed within three to four weeks of the announcement, which should have been by August 22; however, by September 10, almost three weeks past the expected deadline, it had not materialised.
She further explained that the debt is not exclusively owed to GenCos but also to gas suppliers, who take 60–70 per cent of each invoice. This, she said, makes it critical for the Federal Government to provide a transparent and realistic repayment plan.
Compounding the problem is the limited provision in the 2025 budget. Ogaji revealed that the Debt Management Office (DMO) earmarked just N800 billion for sectoral obligations, a figure she described as grossly inadequate compared to the monthly N280 billion invoice cycle.
“Even if the entire N800 billion were allocated to GenCos, it cannot cover the shortfall. And promissory notes being proposed as an alternative are not tenable given the size of the debt,” she argued.
The GenCos have consistently raised concerns about market illiquidity, largely blamed on the inability of the Nigerian Bulk Electricity Trading Company (NBET) to fully settle invoices for power supplied since the privatisation of the sector in 2013. Despite an installed generation capacity exceeding 13,000MW, grid utilisation has stagnated between 3,500MW and 4,000MW, far below Nigeria’s energy demand.
Ogaji dismissed suggestions that GenCos were seeking subsidies. “This is not an intervention or subsidy. It is payment for power already generated, sold, consumed, but not paid for,” she insisted.
With debts already at N5.6 trillion and rising by nearly N200 billion monthly, stakeholders warned that without urgent intervention, Nigeria’s electricity supply could deteriorate further, threatening not only the survival of GenCos but also the stability of the entire value chain.
The Guardian learnt that failure to address the crisis may trigger disruptions in gas supply to thermal plants, which currently account for over 70 per cent of Nigeria’s electricity generation.
Electricity Market Analyst, Lanre Elatuyi, told The Guardian that the level of indebtedness in the Nigerian Electricity Supply Industry (NESI) is not sustainable, stressing that GenCos are unable to embark on capacity expansion, service their loan obligations, maintain turbines, or pay for the gas required for generation.
According to him, the debt overhang will continue to pile up unless distribution companies (DisCos) improve invoice settlement and the market transitions into a wholesale competitive framework.
“The GenCos may not all shut down at once because of national security, but NESI risks the challenge of resource adequacy that will impact Nigerians,” Elatuyi warned.
While acknowledging that the problem cannot be totally blamed on NBET, Elatuyi argued that the single-buyer or purchasing agency model has inherent flaws. He explained that there are no incentives for performance by load-serving entities such as the DisCos, while NBET has failed to enforce bank guarantee requirements meant to mitigate counterparty risk.
He added that although the Federal Government’s N4 trillion bond offers temporary relief, the industry remains exposed to cyclical debt accumulation until a full transition to a competitive wholesale electricity market occurs.
“It is only competition that will bring down electricity tariffs. Non-cost-reflective tariff has aggravated liquidity challenges, especially when subsidy commitments are not cash-backed. Charging end users cost-reflective tariffs alone will not resolve the crisis, particularly when reliability and security of supply are not guaranteed,” Elatuyi said.
He stressed the need for expert market designers and strong regulatory oversight to create an efficient electricity market that is both reliable and sustainable.
