President Bola Tinubu has approved the payment of N2.8 trillion to power generation companies (GenCos) as the Federal Government's verified liability for accumulated electricity subsidies dating back to 2010, significantly reducing the sector's initial claim of around N6 trillion (later cited as N6.6 trillion by GenCos).
The decision follows months of negotiations, a tripartite audit involving the Ministry of Finance, the Nigerian Bulk Electricity Trading Plc (NBET), and the GenCos, and Tinubu's insistence on verifying claims to prevent inflated payouts similar to those seen in the fuel subsidy regime.
Key details from the development:
GenCos initially demanded up to N6.6 trillion, with the Association of Power Generation Companies (APGC) CEO, Dr. Joy Ogaji, warning that the debt was growing by roughly N200 billion monthly due to unpaid invoices and liquidity shortfalls in the power sector.
In an August meeting with President Tinubu, GenCos presented a N4 trillion claim, which was rejected and referred for further audit.
The audit concluded the verifiable legacy debt at N2.8 trillion, which Tinubu approved, stating the government would not pay "one naira more" than the audited figure.
As a good-faith gesture during negotiations, the government raised and disbursed N501 billion through a bond issuance in January 2026 under the Presidential Power Sector Debt Reduction Programme, fully subscribed by pension funds, banks, and asset managers.
Settlement agreements have been signed with five GenCos (First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited, and Niger Delta Power Holding Company Limited) for N827.16 billion, to be paid in four phased instalments.
Payments will be conditional: A portion must be used to settle GenCos' outstanding debts to gas suppliers to improve gas supply, grid stability, and reduce plant shutdowns.
Additional tranches of N600 billion to N800 billion are planned for May, June, or July 2026, with roughly half of the N2.8 trillion expected to be paid by mid-year, and the balance spread over 12 to 24 months.
The government will mandate a specified percentage of funds for infrastructure renewal and expansion, requiring evidence of compliance to address chronic underinvestment by operators since the 2013 privatization (when assets were sold for about N400 billion).
Context and implications:
The power sector has long grappled with liquidity crises, where regulated tariffs fail to cover full costs, leading to massive unpaid subsidies and debts.
GenCos blame unstable generation (fluctuating between 2,000 and 5,000 MW) and frequent grid collapses on unpaid gas bills, while critics, including the Nigeria Labour Congress (NLC), have accused operators of underinvestment and attempting to extract excessive bailouts from public funds despite limited improvements in service delivery.
Tinubu's approach emphasizes accountability, tying payments to gas debt clearance and verifiable infrastructure spending to break the cycle of inefficiency.
This move aims to enhance sector liquidity, stabilize supply, and prevent further escalation of the debt burden amid ongoing reforms, including the April 2024 removal of subsidies for Band A customers, which halved monthly subsidy outflows.
The decision has sparked mixed reactions, with some viewing it as prudent fiscal management, while others question the broader privatization outcomes in the power value chain.
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