Nigeria’s power generation companies (GenCos) have raised concerns over an escalating financial crisis, warning of potential electricity tariff hikes and possible shutdowns due to new tax impositions and unresolved debts.
In a letter to the Financial Reporting Council of Nigeria (FRCN), GenCos disclosed that additional taxes on power companies could force a tariff increase. Despite promises from President Bola Tinubu’s administration to address financial challenges in the sector, new data from the Nigerian Electricity Regulatory Commission (NERC) revealed that the Federal Government has only paid N371 billion, covering just 19.5% of the N1.9 trillion subsidy shortfall from the previous year.
Unpaid Bills and Rising Debt Crisis
The financial strain on GenCos is worsened by poor debt repayments. Between January and November 2024, GenCos issued invoices totaling N2.7 trillion, but only N762.1 billion was paid, leaving a N1.94 trillion shortfall. This translates to a 28.18% payment rate, highlighting severe revenue collection challenges.
A breakdown of payments showed:
January: Only 9.46% of the N256 billion invoice was paid.
February: 9.29% of N208 billion was covered.
March: 9.34% of N235 billion was settled.
April: Payments briefly improved to 40.91% but later fluctuated between 31.01% and 39.05%.
The funding gap has left 26,160MW of generated power stranded. Currently, 24 power plants on the national grid are generating between 3,900MW and 4,900MW, far below the 6,000MW target used to justify the recent Band A tariff increase.
Calls for Government Intervention
A letter from the Association of Power Generation Companies (APGC) to Minister of Power, Adebayo Adelabu, highlighted the severe impact of the payment shortfall. It noted that the Nigerian Bulk Electricity Trading (NBET) company remitted less than 30% of payments for electricity supplied to distribution companies (DisCos), making it nearly impossible for GenCos to sustain operations.
GenCos are now demanding:
- 100% payment of invoices by NBET.
- Immediate settlement of historic market debts to prevent sector collapse.
Although the government earmarked N450 billion for 2024 and N900 billion for 2025 to address these debts, stakeholders argue that without a sustainable funding model, the crisis will persist.
Tax Burden and Power Plant Struggles
In addition to debt challenges, GenCos have raised concerns over multiple taxes imposed at both federal and state levels, including:
30% corporate tax
3% education tax
Police tax
Land use charges and other local levies
Meanwhile, most power plants are on the verge of collapse. The February 2025 NERC report revealed that major plants, including Olorunsogo 2, Afam, Sapele Steam, and Alaoji, are operating at dangerously low availability levels. Alaoji Power Plant had 0% availability, meaning it was completely offline.
With the overall grid availability factor at just 40%, experts warn that without urgent intervention, Nigeria’s power sector could face further instability, leading to increased blackouts and higher electricity costs for consumers.
As the crisis deepens, GenCos continue to push for full debt settlement and relief from excessive taxation. The coming months will be crucial in determining whether the government can implement sustainable reforms to prevent a sector-wide collapse.
Would you like any additional edits or a different tone for the rewrite?
