Nigeria’s Electricity Crisis and Financial Challenges
As Nigeria grapples with a deepening electricity crisis, homes across the country are experiencing frequent blackouts, especially during the sweltering heat of March. In an effort to address some of the financial challenges within the sector, the federal government recently made a payment of N71.49bn from the total N1.92trn electricity subsidy it owed to Electricity Generating Companies (GenCos) in 2025.
According to documents obtained from the Nigerian Electricity Regulatory Commission (NERC), the government’s payment on its obligation was just 3.7% of the total sum. This has led to significant concerns among GenCos, who have been struggling to meet their obligations due to reduced gas supplies. The lack of cost-reflective tariffs has forced the government to cover the gap between the actual costs and the allowed tariffs in the form of tariff subsidies.
For ease of administration, the subsidy is applied to the generation cost payable by Distribution Companies (Discos) to the National Bulk Electricity Trading Plc (NBET) at source in the form of a DisCo’s Remittance Obligation (DRO). The DRO represents the total GenCo invoice that is billed to the Discos by NBET based on what the allowed DisCo tariffs can cover.
However, the document showed that Discos paid 93.80% of the N1.23trn bills issued to them by GenCos during the year. This means they paid N1.16trn, leaving an outstanding payment of N71.49bn.
In total, an invoice of N3.16trn was issued by GenCos with N1.24trn paid while an outstanding of N1.92trn is being owed. The breakdown of the payments reveals that the government did not pay any subsidy from the N536.4bn it incurred in the first quarter of 2025. However, this amount is included in the N4 trillion bond programme.
In the second quarter, the government paid N76.95bn from the N514.36bn bill issued, leaving an outstanding payment of N437.41bn. For the third and fourth quarters, no payments were made for the N458.76bn and N418.79bn bills issued.
Additionally, for January 2026, the government was issued a bill of N126.48bn but has yet to make any payment as a deposit.
Payments by Distribution Companies
For the Discos, it was reported that they made payments of N310.9bn from the N325.32bn issued in the first quarter, leaving an outstanding payment of N14.42bn. In the second quarter, they paid N287.51bn from the N302.27bn bill issued to them, with a remaining N14.76bn.
In the third quarter, they paid N266.66bn from the bill of N282.12bn, leaving a balance of N15.45bn. In the fourth quarter, N300bn was paid from N326.94bn, remaining N26.86bn. For January 2026, the Discos were able to pay 50% of their bill, N126.11bn, from the N252.59bn issued to them.
Key Findings from the Document
The document states that out of the N1.92trn owed to GenCos for the energy supplied in 2025, only 3.7% is market shortfall. The remaining N1.85trn is tariff shortfall (i.e., unfunded government subsidy). The only payment that was made towards the 2025 tariff shortfall was N76.95bn in April 2025. While the total DRO-adjusted invoice for Discos represented only 39.07% of the total GenCo invoice, the Discos accounted for 93.80% of the total remittance in 2025.
The DisCos achieved a 93.80% remittance rate towards DRO invoices for 2025. The cumulative invoice settlement rate for GenCos in 2025 was 39.25%.
Stranded Electricity Losses
Meanwhile, the GenCos reported a total loss of N36.03bn to stranded electricity generated in the first two months of 2026. Operational data obtained from the GenCos showed that despite available generation capacity, a significant portion of power remains unevacuated (unutilized) due to transmission constraints, resulting in widespread load shedding and unstable electricity supply nationwide.
The data showed that the average capacity of the GenCos was 7,283Megawatts (MW) but generation capacity stood at 4,541 megawatts in the month of January with 5,033MW as generation declared capacity. From this, 2,985 8.00MW were stranded and not evacuated, resulting in a loss of N18.1bn.
For the month of February, 7,492MW is the available capacity but 4,218MW was the average generation while 4,476MW was the declared generation capacity. 3,274MW was the stranded generation, resulting in N17.93bn loss.
Federal Government Issues N501bn Bond
In a bid to address these challenges, the federal government has embarked on a N501.02bn bond issuance—an intervention widely seen as a defining step towards restoring liquidity and repositioning the electricity market for long-term sustainability.
A statement by the media aide to the Minister of Power, Bolaji Tunji, said the bond, executed through Nigerian Bulk Electricity Trading Plc as part of a broader N4tn Presidential Power Sector Debt Reduction Programme approved by President Bola Ahmed Tinubu, represents a strategic shift from ad hoc interventions to structured, market-driven solutions.
He said at the heart of the reform is the drive to stabilize the Nigerian Electricity Supply Industry (NESI) by improving cash flow across the value chain. ‘Chronic revenue shortfalls, largely due to non-cost-reflective tariffs and underfunded subsidies, had left generation companies unable to meet obligations to gas suppliers and maintain critical infrastructure. The bond proceeds are expected to reverse this trend by settling legacy debts, restoring gas supply, and enabling improved plant maintenance—key factors in boosting electricity generation.’
Providing insight into the reform, Tunji said the bond issuance is central to restoring confidence and unlocking growth across the electricity value chain. According to him, ‘This intervention is not just about settling debts; it is about resetting the foundation of the power sector. By restoring liquidity, enhancing bankability, and creating a more predictable investment climate, the government is laying the groundwork for sustainable growth and improved electricity supply.’
He added that the initiative, alongside targeted subsidies and tariff reforms, reflects a deliberate policy shift towards full commercialisation and long-term viability of the sector.
