Electricity Generation Companies (GenCos) in Nigeria have issued a stern warning about an impending shutdown of their power plants. They say the federal government owes them a total of ₦4 trillion, which includes ₦2 trillion for 2024 alone and ₦1.9 trillion in past debts.
According to Premium Times, the GenCos are struggling under the weight of this debt, and it is severely affecting their ability to operate. They emphasized that continued non-payment is threatening not just their businesses but the entire electricity supply chain in the country.
They revealed that the current collection rate for 2024 has dropped below 30 percent. As a result, their financial obligations are becoming harder to meet, and operations are nearing a breaking point.
The group’s chairman, Sani Bello, expressed serious concern over the worsening liquidity crisis. He also cited difficulties in accessing foreign exchange, which is crucial since many operational costs in the power sector are paid in dollars.
He stated, “GenCos only get paid a portion of their invoices (9 per cent, 11 per cent) from whatever amount is left. This is an aberration as it is a clear departure from existing terms of the Power Purchase Agreement.”
Beyond the mounting debts, the companies are also battling high corporate taxes, royalty charges, concession fees, and newly introduced compliance requirements. These financial pressures are compounding the already dire situation.
The 2025 federal budget only provides ₦900 billion to support the sector. GenCos say that figure falls far short of what is needed to cover past debts and future obligations.
Moreover, GenCos say the current “payment waterfall” arrangement in the Nigerian Electricity Supply Industry (NESI) is flawed. It places them at the bottom of the priority list when it comes to disbursing available funds, leading to consistent underpayment.
Despite the July 2022 activation of partial contracts in the power sector, the companies say payments still fall far below what was agreed in their contracts. Inflation and unstable exchange rates have only made things worse.
They are now calling for a series of immediate actions from the government. These include a realistic and sustainable payment plan to settle all outstanding invoices, and changes to the waterfall structure to prioritize their payments.
They also want a financial backstop to secure payments, supported by institutions like the World Bank or the African Development Bank. In addition, they are asking for a transparent system to monitor billing, collection, and remittance of funds within the sector.
The GenCos stressed the need for investor-friendly policies and stronger enforcement of market rules. They believe this would restore confidence and help ensure a stable electricity supply for the Nigerian public.
Without swift action, they warn that the ongoing liquidity crunch could escalate into a national security issue, due to an inability to maintain steady electricity generation.
Article updated 1 week ago. Content is written and modified by multiple authors.
