The decision by President Bola Tinubu to approve N2.8 trillion as the Federal Government’s verified debt to power generation companies (GenCos) has stirred fresh controversy in Nigeria’s electricity sector, after he rejected their N6 trillion claim and insisted on paying only what was confirmed by audit.
According to senior officials in the Presidency and the Federal Ministry of Power, the approval followed months of negotiations and a detailed review process involving the Ministry of Finance, the Nigerian Bulk Electricity Trading Plc (NBET), and representatives of the generation companies.
The GenCos had maintained that accumulated unpaid electricity subsidies dating back to 2010 had risen to between N6tn and N6.6tn. They warned that the mounting legacy debt was threatening their liquidity and could lead to plant shutdowns, worsening the country’s already fragile power supply situation.
However, sources said the President declined to accept the figures at face value. During a meeting with the operators last August, the companies reportedly presented an initial claim of about N4tn, which was later revised upward. Tinubu directed that a comprehensive audit be conducted to verify the actual liability before any public funds were disbursed.
The outcome of that audit pegged the government’s obligation at N2.8tn - significantly lower than the amount claimed. Officials said the President approved the payment based strictly on that audited figure and made it clear that no additional claims would be entertained.
To demonstrate commitment while negotiations were ongoing, the Federal Government in January raised N501bn through a bond issued under the Presidential Power Sector Debt Reduction Programme. The bond, which attracted full subscription from pension funds, banks, and other institutional investors, has already been disbursed to the operators.
Government insiders disclosed that further payments are scheduled between May and July, with an additional N600bn to N800bn expected to be released. If implemented as planned, this would bring total disbursements to roughly half of the N2.8tn liability by mid-year, with the remaining balance spread over the next 12 to 24 months.
Nigeria’s electricity market has battled chronic liquidity challenges since the 2013 privatisation of generation and distribution assets for approximately N400bn. Tariffs have remained below cost-reflective levels for many consumers, while foreign exchange volatility and weak revenue collection have compounded financial stress across the value chain. Power generation continues to fluctuate between 2,000 and 5,000 megawatts, far short of national demand.
The Nigeria Labour Congress (NLC) has criticised the proposed payout, arguing that companies that acquired public assets at relatively modest prices should not require trillions in government support without substantial improvements in service delivery.
In response to these concerns, the Presidency has attached conditions to the N2.8tn settlement. A significant portion of the funds will be ring-fenced for the settlement of outstanding gas supply debts - a major contributor to recurring generation shortfalls and grid collapses.
Additionally, operators are expected to reinvest part of the proceeds into infrastructure upgrades and expansion. Government officials have expressed dissatisfaction with what they describe as inadequate reinvestment in plant maintenance and system upgrades, which they say has undermined service quality.
Five GenCos: First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited, and Niger Delta Power Holding Company Limited, have already reached settlement agreements with NBET covering N827.16bn to be paid in instalments.
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