Nigeria’s power generation companies have issued a stark warning about the looming threat of shutting down power plants across the country due to a staggering N4 trillion debt owed by the Federal Government.
In a statement released on Monday by the Chairman of the Board of Trustees of the Association of Power Generation Companies, Col. Sani Bello (rtd), the GenCos revealed they are owed N2 trillion for electricity supplied so far in 2024, in addition to N1.9 trillion in legacy debts.
According to the GenCos, they currently receive less than 30 percent of the value of their monthly invoices for electricity delivered to the national grid, a situation they say is no longer sustainable.
“It is no more news that the power generation companies have continued to bear the brunt of the liquidity crisis in the Nigerian Electric Supply Industry (NESI),” the companies stated.
Despite making massive investments and ramping up capacity since the sector’s privatization in 2013, the GenCos lamented the lack of investor-friendly policies and a secure market structure, which they say has continued to hinder future planning.
“GenCos on their part as responsible investors with patriotic zeal have made large-scale investments and have continued to demonstrate absolute commitment by ramping capacities in line with their contract these over (10) years, amid system constraints, policies & regulations that are not investors friendly, increasing debts owed by the FGN without a clear financing plan, lack of firm contracts and a market without securitisation but based on best endeavours, thereby hampering future planning,” the statement continued.
They stressed that the power sector’s deepening cash flow problems have compromised their ability to fulfill contractual obligations, threatening to disrupt the entire electricity supply chain.
“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,” they said.
Efforts to secure relief through the World Bank’s Power Sector Recovery Operations, , they noted, have also been unsuccessful, due to other stakeholders’ failure to meet key performance benchmarks.
“The GenCos expectations of being settled through external support such as the World Bank PSRO has also been dampened due to other market participants’ inability to meet their respective distribution linked indicators (DLIs), enshrined in the Power Sector Recovery Program (PSRP),” they stated.
With the current challenges putting national security at risk, the GenCos are calling for swift government intervention.
“In the light of the severity of the issues highlighted above, the GenCos are requesting that immediate and expedited action is taken to prevent national security challenges that may result from the failure of the GenCos to sustain steady generation of electricity for Nigerians,” the statement warned.
They also pointed out that the 2024 collection rate has dipped below 30 percent, and projections for 2025 do not suggest any improvement.
Combined with heavy taxation, rising regulatory costs, and no clear funding alternatives, the GenCos say they are at a breaking point.
“The 2024 collection rate has dropped below 30%, and 2025 is not any better, severely affecting GenCos’ ability to meet financial obligations. Tax and Regulatory Challenges: High corporate income tax, concession fees, royalty charges, and new FRC compliance obligations are further straining GenCos’ revenue. GenCos are currently owed about N4 trillion (N2 trillion for 2024 and N1.9 trillion in legacy debts). No possible solutions, including cash payments, financial instruments, and debt swaps are in sight,” they emphasized.
The companies further noted that the N900 billion earmarked in the 2025 national budget is grossly inadequate to address the existing arrears and future obligations. They lamented that their power is fully consumed without matching payments despite regulatory measures and market reforms introduced since July 2022.
“The 2025 government budget allocates only N900 billion, raising concerns about its adequacy to cover arrears and future payments. The power generated by GenCos have continued to be consumed in full without corresponding full payment, notwithstanding the commencement of the Partial Activation of Contracts in the NESI which took effect from July 1, 2022, the minimum remittance order, bilateral market declaration, waterfall arrangement, the risks of inflation, forex volatility with no dedicated window to cushion the effect of the forex impact, the supplementary MYTO order which leaves about 90% of GenCos monthly invoices unmet without a bankable securitisation, or financing plan. This situation has dire consequences for the GenCos and by extension the entire power value chain,” the companies stated.
Calling for a viable payment plan to clear the outstanding debts, the GenCos concluded that resolving the cash flow crisis is key to achieving consistent and reliable electricity supply in Nigeria.
They observed, “the flow of money within the power industry is one of the fundamental problems preventing Nigerians from enjoying continued and sustainable improvement in electricity supply.”
