GenCos caution FG over rising power sector debts despite ₦4tn repayment plan

Electricity generation companies have warned that the Federal Government’s ₦4 trillion debt repayment programme may fail to resolve the liquidity crisis in Nigeria’s power sector, cautioning that fresh liabilities exceeding ₦7 trillion could accumulate before the initiative is completed.

The power producers, under the umbrella of the Association of Power Generation Companies (APGC), said although they support efforts to settle outstanding obligations through bond issuances, the strategy would have only a limited impact unless the structural causes of the sector’s mounting debts are addressed.

The association’s Chief Executive Officer, Joy Ogaji, made the remarks in an interview with Punch Newspaper while reacting to the Federal Government’s plan to float a second bond worth about ₦729 billion to offset verified legacy debts owed to generation companies.

The planned issuance forms part of the Presidential Power Sector Debt Reduction Programme, which aims to settle about ₦4 trillion in outstanding liabilities owed across the electricity value chain.

According to the Nigerian Bulk Electricity Trading Plc (NBET), the second bond follows the successful issuance of a ₦501 billion bond earlier this year. Together, the two issuances represent about ₦1.23 trillion, marking the first phase of the government’s broader debt settlement programme.

NBET said the repayment of the first bond’s coupon and principal had been completed as scheduled, describing the development as evidence of the government’s commitment to restoring confidence in the electricity market.

However, Ogaji argued that while legacy debts are being addressed, new obligations continue to mount every month because market participants are not receiving full payments for electricity supplied.

She maintained that the debts covered under the current programme relate only to obligations incurred up to December 2024, while unpaid invoices from 2025 and 2026 continue to accumulate.

According to her, by the time the seven-year repayment programme is completed, new debts could exceed ₦7 trillion if the current market structure remains unchanged.

She also called on the government to publish details of the first bond disbursement, including the beneficiaries and the amounts received, in the interest of transparency.

Ogaji stressed that generation companies were not opposed to the use of bonds to clear outstanding obligations but insisted that any repayment framework must reflect the time value of money and guarantee the financial sustainability of the electricity market.

She further criticised the existing electricity subsidy regime, arguing that the Federal Government has continued to announce subsidies without making adequate budgetary provisions to fund them.

According to her, the absence of dedicated funding for electricity subsidies has worsened liquidity challenges across the Nigerian Electricity Supply Industry.

She urged the government to adopt a more targeted subsidy policy by clearly identifying the category of consumers it can realistically support and making budgetary allocations to cover those commitments.

Ogaji said allowing distribution companies to recover costs from customers outside the subsidised category would help improve market liquidity and reduce the persistent debt burden.

She warned that unless broader reforms are implemented alongside the debt repayment programme, the financial challenges confronting the power sector would continue to undermine efforts to improve electricity supply and attract investment.