How ₦3.5trn power debt dispute threatening FG’s electricity

A dispute over ₦3.5 trillion in electricity generation companies’ debt claims is raising fresh questions about the Federal Government’s plan to restore liquidity to Nigeria’s troubled power sector, with the outcome potentially affecting investment, gas supply and electricity generation.

The Association of Power Generation Companies (APGC) has put outstanding government obligations to its members at about ₦6.8 trillion, while the Federal Government’s verification exercise produced an agreed settlement of ₦3.3 trillion for eligible legacy claims accumulated between February 2015 and March 2025.

The difference has become a major point of contention in a sector where persistent payment shortfalls have weakened the finances of power producers and gas suppliers, limiting their capacity to fund operations and maintain infrastructure.

The government’s position is that the ₦3.3 trillion settlement reflects verified, contract-backed obligations after a review of the claims. President Bola Tinubu approved the payment plan in April 2026, and implementation has proceeded through a bond-backed financing programme.

However, the APGC’s larger claim highlights the continuing disagreement over the scale of the sector’s financial obligations. The association has argued that the debts accumulated through years of incomplete payments for electricity supplied to the market.

Bond funding cannot replace structural reform.

The Federal Government’s broader power-sector debt reduction programme provides for up to ₦4 trillion in financing to settle verified arrears owed to generation companies and gas suppliers.

By September 2026, the government had raised about ₦1.23 trillion under the first phase of the programme, comprising a ₦501 billion first issuance and a second issuance of approximately ₦729 billion.

The intervention is intended to inject liquidity into the electricity value chain, allowing participating companies to meet obligations to gas suppliers, lenders and contractors. But settling historical debts will not, on its own, prevent new arrears from accumulating if payments for electricity supplied remain inadequate.

The scale of the challenge is reflected in the sector’s recurring revenue shortfall. Reports citing Nigerian Bulk Electricity Trading Plc put the annual gap at about ₦1.7 trillion, driven by factors including inadequate market revenue and tariffs that do not fully cover costs.

Transmission constraints deepen the dispute.

A further concern is the gap between electricity generation capacity and the amount the national grid can transmit and distribute.

Generation companies have argued that inadequate transmission infrastructure, gas supply constraints and distribution bottlenecks leave available electricity unused, weakening revenue and raising questions about capacity-related payments.

Data presented by the APGC to the National Assembly showed that available generation capacity reached 7,311 megawatts in May 2026, while average dispatch stood at 4,222.4MW. The association estimated that 3,162.4MW, or 43.25 per cent of available capacity, was stranded.

The figures underline the economic cost of a system unable to translate installed capacity into electricity delivered to businesses and households.

The unresolved debt dispute also raises questions about how contractual obligations for available capacity should be assessed when transmission limitations prevent electricity from reaching consumers. The specific claim that ₦3.5 trillion was removed through the treatment of available and utilised capacity has not been independently established by the material available.

The test is sustainable electricity supply.

For manufacturers, small businesses and households, the priority is more reliable power and lower dependence on expensive self-generation. For investors, it is whether the sector can establish predictable payments, enforceable contracts and a credible route to recovering costs.

The government’s settlement programme offers a means of addressing verified historical liabilities. Its lasting impact, however, will depend on whether payment discipline improves across the electricity market and whether investment in gas supply, transmission and distribution removes the bottlenecks that leave generating capacity idle.

Without those changes, the sector risks accumulating fresh unpaid obligations even as old debts are being settled.