The Federal Government has committed to settling N2 trillion out of the N4 trillion debt owed to power generation companies (Gencos) by the end of 2025, as part of a rescue effort to prevent a shutdown of electricity plants and stabilize the nation’s power sector.
Minister of Power, Adebayo Adelabu, made this known during the sixth edition of the 2025 Ministerial Press Briefing Series in Abuja on Thursday. He said the payment would be made through a combination of cash disbursements and promissory notes to ease the liquidity crunch facing the Gencos.
Adelabu explained that the payment strategy is being worked out in collaboration with the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, who has promised support either through direct budgetary releases or through the issuance of bankable promissory notes.
“These promissory notes will be strong enough to be discounted by banks to meet the immediate cash needs of the Gencos,” Adelabu said, adding that the government aims to defray about N2 trillion by year-end.
The intervention comes after power generation companies, under the Association of Power Generation Companies (APGC), issued a warning over the government’s failure to pay for electricity already supplied to the national grid, saying they are on the verge of halting operations due to a worsening liquidity crisis.
According to Adelabu, the bulk of the N4 trillion debt stems from unpaid electricity subsidies, with about half classified as legacy debt, and the rest accruing from the 2024 fiscal year.
“These are largely unpaid subsidies. About 50 per cent are inherited liabilities, while the other half arose during our administration in 2024,” he clarified.
The minister also addressed broader concerns in the power sector, including public criticism of the recent tariff adjustments and the continued subsidy regime. He noted that while Nigeria’s average energy cost is around N170 per kilowatt-hour, the majority of consumers—about 85 per cent—are still paying just N60.
“This means we’ve only reduced subsidies by 35 per cent despite the tariff reforms. The government continues to pay the shortfall,” he said, arguing that the previous model—where users paid just 20 per cent of the real cost—was unsustainable.
He further stated that the new tariff structure, which raised rates for Band A customers to N209 per kilowatt-hour, is part of a broader push toward cost-reflective pricing and sector viability. However, he reassured Nigerians that subsidies are not being eliminated, but rather restructured to benefit those who need them most.
“We are targeting subsidies toward low-income, low-consumption households,” Adelabu explained. “High-consuming households were the biggest beneficiaries in the past, which is unfair.”
On oversight, Adelabu warned that electricity distribution companies (DisCos) must deliver on service promises or face penalties.
“Any DisCo collecting Band A tariffs without delivering at least 20 hours of power daily will be sanctioned,” he said.
Despite the backlash over recent tariff hikes, the minister maintained that the reforms were necessary to attract investment and ensure long-term sustainability.
“We are not pro-DisCos; we are pro-Nigerian. But we must acknowledge that electricity, like every other essential commodity, comes at a cost,” he said.
Adelabu also highlighted the impact of the reforms on the market, noting that electricity sector revenue rose from N1 trillion in 2023 to N1.7 trillion in 2024—a 70 per cent increase attributed to the introduction of cost-reflective tariffs for Band A customers.
“This shows that financial reforms can drive both improved revenue and better service delivery in the power sector,” he concluded.
Leave a Reply