The Nigerian power sector, a cornerstone of economic stability, is teetering on the brink of collapse. Despite repeated assurances from President Bola Tinubu’s administration, a severe financial crisis threatens to plunge the nation into widespread blackouts. Generation companies (GenCos), the backbone of electricity supply, are sounding alarm bells, warning of potential shutdowns due to a crippling debt burden and the imposition of new taxes.
“The situation is dire,” as evidenced by the stark figures presented in recent reports from the Nigerian Electricity Regulatory Commission (NERC). I’ve analyzed these documents and found that the Federal Government’s contribution to covering tariff shortfalls from last year amounted to a mere N371 billion, a paltry 19.5 percent of the required N1.9 trillion. This leaves a gaping financial hole, highlighting the government’s struggle to fulfill its subsidy obligations.
A Cascade of Unpaid Bills
The financial strain is multifaceted. GenCos issued invoices totalling N2.7 trillion between January and November 2024, yet only N762.1 billion was paid, leaving a staggering N1.94 trillion shortfall. This translates to a dismal 28.18 percent payment rate, revealing deep-seated revenue collection and enforcement challenges. Imagine, as a consumer, paying your bills diligently, only to find the very system providing that power is on the verge of collapse. It impacts everyone.
“NBET’s remittance to GenCos for electricity sold to DisCos was below 30 per cent, making it nearly impossible for GenCos to sustain operations,” stated a letter from the Association of Power Generation Companies (APGC) to Minister of Power, Adebayo Adelabu. This stark reality forces us to confront the human cost of these financial shortfalls. The implications are far reaching: job losses, economic stagnation, and a decline in the quality of life for millions of Nigerians.
Stranded Power, Economic Strain
The NERC report reveals that 26,160 MW of generated power is currently stranded. As of time of filing this report, only 3,900 MW to 4,900 MW were being generated from 24 power plants, far below the targeted 6,000 MW that justified the recent tariff increase for Band A consumers. This disparity speaks volumes about the operational inefficiencies plaguing the sector.
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Furthermore, the imposition of new taxes, as outlined in the Financial Reporting Council of Nigeria (FRCN) Act (Amended) 2023, is adding to the financial woes of GenCos. These companies, already struggling to operate optimally, are now burdened with multiple taxes at both federal and state levels, including corporate tax, education tax, and various local levies.
Plant Availability
The operational state of several power plants paints a grim picture. According to the February 2025 NERC report, plants like Olorunsogo 2 reported a plant availability factor of only 5 percent, while Afam had 10 percent, and Alaoji recorded a complete shutdown at 0 percent. Overall, the grid total plant availability factor for these plants was a mere 40 percent. This indicates that a significant portion of the nation’s power generation capacity is either offline or operating far below its potential.
Urgent Intervention Needed
The APGC has called for urgent intervention, demanding immediate approval of a mechanism to ensure 100 percent payment of GenCos’ invoices by the Nigerian Bulk Electricity Trading (NBET) company and the settlement of outstanding historic market debts. While the government has earmarked funds for subsidy payments, stakeholders argue that a sustainable funding structure is crucial to prevent the crisis from spiraling out of control.
The current situation is not just an economic issue; it is a matter of national security and public welfare. Addressing the financial crisis in the power sector requires a concerted effort from all stakeholders, including the government, regulatory bodies, and industry players. Without immediate and decisive action, Nigeria risks plunging into a prolonged period of darkness, with devastating consequences for its economy and its people.
