Nigeria’s electricity sector remained under severe strain throughout 2025 as outstanding government debts estimated at over ₦6 trillion to power generation companies (GenCos) compounded liquidity challenges and slowed reform efforts across the industry.
Industry data and regulatory disclosures show that the Federal Government’s unpaid obligations—largely arising from electricity subsidies, tariff shortfalls, and legacy market shortfalls—continued to choke cash flow within the power value chain. As a result, many GenCos struggled to pay gas suppliers, service loans, or carry out critical maintenance, leading to recurring drops in power generation and nationwide outages.
In an attempt to ease the crisis, the Federal Government proposed a ₦1.23 trillion bond programme as part of a broader plan to settle verified debts owed to GenCos and gas suppliers. While portions of the bond have been approved and partially issued, stakeholders say the intervention remains insufficient relative to the scale of the liabilities, leaving most of the debt unresolved.
The debt crisis coincided with a major structural shift in the sector. Following the Electricity Act, several states accelerated moves in 2025 to establish state-controlled electricity markets, setting up independent regulators and pursuing localized generation and distribution solutions. Proponents argue that decentralisation could unlock innovation and improve supply reliability, but experts warn that weak coordination between federal and state markets may further complicate an already fragile system.
Operational challenges also persisted. Power generation frequently dipped far below installed capacity due to gas shortages, grid constraints, and technical losses on transmission and distribution networks. Average generation at several points in 2025 hovered around levels insufficient to meet national demand, underscoring the depth of the crisis.
Energy economists and industry operators caution that without decisive action, the situation could worsen in 2026. They argue that full and transparent settlement of GenCos’ debts, implementation of cost-reflective electricity tariffs, and aggressive investment in infrastructure are critical to stabilising the sector. Estimates suggest Nigeria requires at least $10 billion in annual investment to upgrade generation plants, expand the grid, and reduce technical and commercial losses.
Regulators, including the Nigerian Electricity Regulatory Commission, have acknowledged the scale of the problem, noting that sustainable reform will depend on restoring investor confidence and ensuring predictable revenue flows across the power value chain.
As Nigeria heads into 2026, the power sector stands at a crossroads: without resolving the debt overhang and aligning federal and state reforms, experts warn that persistent outages and financial instability may continue to undermine economic growth and public confidence in the electricity market.
Abuja Network News
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