₦airaland Forum

N5.6tn debt: Energy crisis looms as gas firms cut supply

Nigeria faces the threat of nationwide blackouts as gas companies reduce their supply to power plants due to an outstanding N5.6 trillion debt owed to power generation companies.

The development has raised concerns about the stability of the national grid and the country’s ability to sustain its electricity supply.

The Managing Director/Chief Executive Officer of the Association of Power Generation Companies, Dr Joy Ogaji, confirmed the development in an interview with The PUNCH on Thursday. She warned that the situation, if not urgently addressed, could push Nigeria deeper into darkness.

This warning came shortly after another national grid collapse threw the entire country into blackout earlier in the week. Although partial restoration has since brought back about 4,000 megawatts, many plants are still operating below capacity.

Ogaji explained that while GenCos remain committed to supporting the country, the liquidity crisis in the sector has spiralled out of control. She disclosed that from January to August 2025 alone, an additional N1.6tn debt had accumulated, bringing the total outstanding to N5.6tn.

She recalled that President Bola Tinubu had met with the GenCos on July 25 to discuss an estimated N4 trillion debt owed to them, covering legacy debts and unpaid invoices. At the meeting, Tinubu appealed for patience while the government completed the verification and validation of the claims. He also approved, in principle, a N4tn bond programme to address the liquidity gap in the sector.

“Almost two months after that meeting, there has been no follow-up engagement with the GenCos on how these debts will be settled,” Ogaji lamented.

She explained that about 60 per cent of GenCos’ revenues go to gas producers, meaning that the debt burden directly undermines gas supply. With suppliers already reducing deliveries, she warned, the electricity market could soon grind to a halt.

Ogaji stressed that despite the patriotic commitment of operators to keep the lights on, factors outside their control make it nearly impossible to sustain generation. She listed gas supply, maintenance of machines, procurement of spare parts, and obligations to other creditors as key challenges.

“Gas suppliers have already started reducing supply. There are critical maintenance works on our machines, spares to purchase, and other creditors who are no longer willing to wait for payments. They now prioritise those who pay them promptly,” she stated.

According to her, the prevailing market structure is incompatible with Nigeria’s growth ambitions. “No substantial private sector investment will flow into this sector unless urgent reforms are implemented. Only the Federal Government, in collaboration with NBET and NERC, can unlock these challenges,” she said.

The APGC boss revealed that GenCos’ monthly invoices average N270bn, but only about N70bn is paid, leaving N200bn outstanding every month. She faulted the 2025 federal budget, which earmarked N900bn for the power sector without cash backing, calling it grossly inadequate.

She also expressed concerns over the Federal Government’s plan to issue promissory notes to settle the debts. According to her, the details of such instruments remain unclear, raising apprehension among investors.

“Promissory notes and bond proposals go to the root of our contractual agreements in the market. We must understand the terms, conditions, and risks before committing,” she said.

Ogaji highlighted the risks of such instruments, including interest rate exposure, foreign exchange volatility, credit risk, and liquidity risk. She noted that promissory notes cannot be repurchased in the open market, which creates refinancing risks at maturity.

“GenCos will not make concessions that undermine our obligations to other creditors. Any breach of contractual terms by the government has a ripple effect on our finances and relationships with bankers and other partners,” she warned.

Ogaji urged the Federal Government, the Nigerian Electricity Regulatory Commission, the Debt Management Office, and the Nigerian Bulk Electricity Trading Plc to urgently engage GenCos on viable solutions. She questioned whether the proposed promissory notes would be exclusive to GenCos or open to other government contractors, which could dilute the chances of settlement for power producers.

“GenCos remain patriotic investors, but patriotism alone cannot run power plants. Without urgent action, Nigeria risks another round of prolonged blackouts,” she said.

Efforts to obtain the reaction of the Minister of Power, Adebayo Adelabu, were unsuccessful, as his spokesman, Bolaji Tunji, did not respond to calls or messages.

Meanwhile, the Transmission Company of Nigeria confirmed some recovery on the national grid, with power generation climbing to nearly 4,000 megawatts by Thursday. However, several power plants are yet to resume full output, underscoring the fragility of the system.

Industry stakeholders say that unless the Federal Government swiftly addresses the liquidity crisis and debt overhang, Nigeria’s electricity sector may face deeper collapse, with dire consequences for homes, businesses, and the overall economy.

TechCapon:
let the national grid collapse as many times as it wants. not my business.. solar is the way

richiemcgold:
It seems the gencos are not making huge profits as I always assumed. One thing we should all understand is that we truly want to enjoy uninterrupted power supply in this country, we should be ready to apy heavy bills. Power supply is not cheap anywhere in the world. That's the fact.

Tritonal:
Take a late night flight from PH to Lagos and see the amount of gas flaring.. Bunkering flames.. The cloud just can't hide it as it glows at night.. We have enough power to generate electricity through heat water turbine.. We are not even using EVs on high scale say.. We have every reason to produceexcess power as we used to.. Even invest in wind mills too.. But the touts have hijacked the government system.. Is now filled with clowns and nitwits.. Sorry Nigeria.. We are a sorry lot!.. The educated have been widely outnumbered by uneducated.

nairalanda1:
You get what you pay for.

This is the result of most of us not paying cost reflective tarrifs

You can abuse me, it doesn't change that fact.

oche2020:
We are never serious as a country only to tax the citizens

chisomkachy:
Nigerian President Bola Tinubu’s first supplementary budget includes a fleet of SUVs for himself and his wife, a presidential yacht and the renovation of his villa amid a cost-of-living crisis for some of the poorest people in the world.

The proposal — which seeks additional funding beyond the annual budget approved by Tinubu’s predecessor — comes as the government asks Nigerians to persevere through pain caused in part by a raft of economic reforms ushered in by the new president. Africa’s most populous country faces rampant unemployment, soaring food prices and a plummeting currency.

Federal lawmakers approved the president’s request for extra spending on Thursday, but eliminated the provision of 5 billion naira ($6.01 million) to buy a presidential yacht. Instead, they doubled the allocation to a student loan fund to 10 billion naira, according Abubakar Bichi, chairman of an appropriations committee in the House of Representatives.

The lawmakers approved 1.5 billion-naira proposed to purchase SUVs for the office of First Lady Oluremi Tinubu — an amount larger than that allocated to many individual federal colleges. The supplementary budget also proposes almost 6 billion naira to purchase SUVs for the presidency — more than the amount initially allocated to fund a student loan program for poor families.


https://www.bloomberg.com/news/articles/2023-11-02/nigeria-budgets-for-suvs-and-yachts-amid-economic-hardship

Blazetrailer:
..... , you cant even pretend for a day to hide your source of daily feeding....