To prevent a looming shutdown of power generation plants, the Federal Government has outlined a strategy to offset N2tn of the staggering N4tn debt owed to electricity generation companies (Gencos) by the close of 2025. The announcement, made by the Minister of Power, Adebayo Adelabu, during the sixth edition of the 2025 Ministerial Press Briefing Series in Abuja, comes against a backdrop of rising energy costs, contentious tariff adjustments, and mounting pressure from the Gencos.
Minister Adelabu revealed that discussions are in advanced stages with the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, to facilitate the debt settlement through a combination of budgetary allocations and guaranteed financial instruments, specifically promissory notes. These notes, according to the Minister, will possess sufficient liquidity to enable the Gencos to access immediate cash by discounting them at banks.
This intervention follows a stark warning issued by the Association of Power Generation Companies (APGC), as reported earlier by OkayNG, highlighting their precarious financial state due to the ballooning debt. The Gencos had expressed profound concern over the “inadequate payment for electricity generated and consumed on the national grid,” signaling that their operations were on the brink of collapse due to the escalating liquidity crisis.
Addressing the root of the massive debt, Minister Adelabu clarified that it primarily comprises unpaid subsidies, with approximately half being legacy debts and the remainder accruing from operations in the 2024 fiscal year. While acknowledging the Gencos’ threat to halt operations, he assured that the government is committed to a gradual but steady process of debt repayment, recognizing the impossibility of immediate full settlement.
“Let me first explain that these debts are unpaid subsidies of the Federal Government, which are due to the power-generating companies,” stated Minister Adelabu. “Almost half of it was inherited, while about half of it came from 2024 operations, which is N4tn. I agree with you, there was a publication in the papers where the companies threatened to shut down their plants.”
Elaborating on the payment mechanism, the Minister explained, “There are plans underway to make these payments. While I will not say it will be paid 100 per cent, we will be paying it gradually. And the mode of payment is in two ways… We have sub-budgetary provisions which will facilitate cash payment while we are discussing with generating companies to give them guaranteed debt instruments like a promissory note… Between now and the end of the year, we are going to pay close to N2tn out of this N4tn.”
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The necessity for subsidies and the accumulation of this substantial debt, according to Adelabu, stems from the significant disparity between the actual cost of power generation and the tariffs paid by the majority of consumers. “We believe that the average energy cost today per kilowatt of power is about N170 per kilowatt. But 85 per cent of customers are still paying N60,” he explained. This indicates that even after recent tariff adjustments affecting some users, a substantial subsidy burden remains.
Minister Adelabu defended the recent electricity tariff hikes, asserting that these adjustments are crucial for the long-term sustainability of the power sector and aim to better target subsidies towards those most in need. He pointed out that the existing tariff structure, where 85% of consumers paid a significantly lower rate than the cost of supply, has hindered essential investment in the sector by the 11 Distribution Companies (DisCos).
“Before now, about 85 per cent of customers were paying around N60 per kilowatt-hour, while the actual cost of supplying power was about N170. Only 15 per cent of customers—mostly Band A—pay N209, and that is where there is a small margin,” he stated. “We’re not eliminating subsidies, but we must restructure them. In the past, subsidies largely benefited high-consuming households. Now, we’re designing a system where only low-consumption users—mostly poor households—enjoy the subsidy.”
Furthermore, Minister Adelabu emphasized the importance of demand matching increased power generation to avoid financial losses for Gencos when their generated energy remains unused. He also assured that government oversight of DisCos would be intensified to ensure adherence to service obligations, with penalties for those charging Band A tariffs without providing the mandated 20 hours of daily electricity.
Despite public outcry regarding the recent tariff reviews, the Minister reiterated the government’s commitment to affordability while acknowledging the global reality of energy costs. “We are not on the side of the companies — we are on the side of Nigerians. But we must also face the reality that energy, like food, is expensive everywhere in the world,” he asserted.
In a positive development, the government highlighted the significant revenue boost resulting from the recent tariff reforms for Band A customers. According to Minister Adelabu, these reforms have generated an additional N700bn in revenue, marking a 70 per cent increase in market revenue from N1tn in 2023 to N1.7tn in 2024. “It is evident that, due to our transformative tariff reforms, the market has generated an additional N700bn in revenue, reflecting a 70 per cent increase. This results from the cost-reflective tariff adjustment for Band A customers,” he concluded, emphasizing the potential for financial viability and improved service delivery to coexist.
This multi-pronged approach, combining debt repayment with strategic tariff adjustments and enhanced regulatory oversight, signals the government’s intent to stabilize Nigeria’s critical power sector and ensure a more sustainable and reliable energy future for its citizens. The coming months will be crucial in observing the tangible impact of these plans on the ground and their ability to truly alleviate the financial strain on power generation companies and improve electricity supply across the nation.
