IN SHORT: President Tinubu has approved a N3.3 trillion ($2.1 billion) payment plan to settle legacy debts owed to power generation and gas companies accumulated between February 2015 and March 2025. Fifteen Gencos have signed N2.3 trillion in settlement agreements, N501 billion has been raised, and N223 billion disbursed. A second phase is expected later this quarter.
President Bola Tinubu has approved a N3.3 trillion ($2.1 billion) plan to settle a decade of legacy debt owed to Nigeria’s power generation and gas companies, with 15 Gencos already signing settlement agreements worth N2.3 trillion and N223 billion disbursed from N501 billion raised so far, in the most substantive attempt to resolve the liquidity crisis that has kept Nigeria’s electricity sector below 5,000 megawatts of available generation for a country of more than 200 million people. Special Adviser on Energy Olu Verheijen described the plan as "not just debt settlement but restoring confidence across the power sector."
- N3.3 trillion ($2.1 billion) approved as full and final settlement of legacy debts from February 2015 to March 2025 under the Presidential Power Sector Financial Reforms Programme.
- 15 power generation companies have signed settlement agreements covering N2.3 trillion of the total. N501 billion raised to date; N223 billion already disbursed with further payments ongoing.
- A second phase of the programme is expected to commence later this quarter, indicating the N3.3 trillion is the first tranche of a broader resolution.
- Nigeria’s installed generation capacity stands at approximately 13,000MW, but available capacity typically fluctuates between 4,000MW and 5,500MW, with daily average generation around 4,000MW.
- On a per capita basis, Nigeria generates roughly 20 to 25 watts per person, against a global average exceeding 1,000 watts per person in industrialised economies and South Africa’s 20,000MW-plus for a population one quarter Nigeria’s size.
- Distribution companies collect only 60 to 70% of billed revenue on average, with aggregate technical, commercial and collection losses above 40% in some networks, meaning a large share of electricity generated is stolen, lost, or unpaid for.
- The debt to Gencos is rooted in the 2013 privatisation structure: Gencos sell to NBET, which sells to Discos, but Discos under-collect, NBET cannot pay Gencos, Gencos cannot pay gas suppliers, and gas supply is throttled, compressing generation capacity.
Africaspoint has tracked the structural dysfunction of Nigeria’s power sector across multiple articles. The debt settlement addresses the most visible symptom: cash flow starvation of generation companies. But the underlying circuit remains broken. Discos that collect 60% of billed revenue cannot sustain the payment chain regardless of how much legacy debt is cleared upstream. The reform agenda Verheijen outlined, including service-based tariffs linking payment to quality of supply and accelerated metering, are the mechanisms that can change Disco collection rates and close the structural gap.
The Bigger Picture: N3.3 trillion in debt settlement is necessary but not sufficient. Nigeria’s power sector has accumulated this debt precisely because the commercial model is broken: below-cost tariffs, rampant theft, weak metering, and distribution companies that are structurally undercapitalised. Clearing the backlog removes one constraint on generation. It does not fix metering coverage, Disco revenue collection, or gas supply reliability. The second phase of the programme and the implementation of service-based tariffs will determine whether this is a genuine structural turning point or another injection into a leaking system. For investors evaluating Nigeria’s power sector, the question is not whether the debt is being settled but whether the CBN, NERC, and the presidency can hold the commercial reforms on track through the political pressures that have reversed previous tariff adjustments.
Source: This Day Live
