Business
FG Targets N2trn Payment to Gencos by Year-End Amid Mounting Sector Debts
The Federal Government has unveiled a plan to pay N2 trillion out of the N4 trillion owed to electricity generation companies (Gencos) by December 2025, in a bid to ease tensions in the power sector and avert potential plant shutdowns.
Minister of Power, Adebayo Adelabu, disclosed this on Thursday during the sixth edition of the 2025 Ministerial Press Briefing Series in Abuja. He said the payment would be made through a combination of cash and promissory notes, designed to meet the liquidity needs of Gencos and keep the sector operational.
According to Adelabu, the Ministry of Finance, led by Wale Edun, is collaborating with the power ministry to ensure budgetary allocations and guaranteed debt instruments are in place. He emphasized that the promissory notes would be “bankable,” enabling the companies to access immediate funding.
“These debts represent unpaid subsidies from the Federal Government—about half are inherited, while the rest accumulated during 2024,” Adelabu explained.
The move follows a recent warning by the Association of Power Generation Companies, which raised concerns over the escalating debt burden, now exceeding N4 trillion. The Gencos said the prolonged liquidity crisis is threatening their ability to continue operations, citing inadequate payments for electricity already supplied to the grid.
Speaking on the breakdown of the debts, the minister said: “We are not denying that Gencos have threatened to shut down. But we have put measures in place to gradually clear the debts. While we cannot pay everything at once, N2 trillion will be paid by the end of the year—partly in cash and partly through promissory notes.”
He added that the financial instruments would be liquid enough for Gencos to discount them at commercial banks.
Adelabu also addressed the recent tariff adjustments and growing concerns over affordability. He noted that the government has historically subsidized electricity at unsustainable levels, with Nigerians paying as little as N60 per kilowatt-hour, compared to the actual cost of N170.
“The government was essentially supplying electricity at an 80 per cent subsidy rate. That model is no longer viable,” he said. “Now, only 15 per cent of customers—mostly those in Band A—pay cost-reflective tariffs of N209/kWh.”
He emphasized that the aim of the reforms is not to eliminate subsidies but to better target them toward low-income households. “We are restructuring the subsidy model to ensure that only poor households benefit, rather than high-consuming homes,” Adelabu stated.
The minister also reiterated the government’s commitment to holding distribution companies (DisCos) accountable for service delivery. He warned that any DisCo charging Band A tariffs without providing a minimum of 20 hours of electricity daily would face sanctions.
Despite public backlash over the tariff hike, Adelabu insisted that the government remains focused on balancing affordability with the need for financial sustainability in the power sector.
“We’re not siding with the companies—we are on the side of Nigerians,” he said. “But we must also confront the reality that energy, like food, is expensive everywhere.”
Highlighting the impact of recent tariff reforms, Adelabu revealed that the power market has seen a revenue boost of N700 billion, marking a 70 per cent increase from the N1 trillion generated in 2023 to N1.7 trillion in 2024.
“This demonstrates that with the right reforms, financial viability and improved service delivery can go hand in hand,” he concluded.
