A mounting N6.8 trillion debt burden is forcing several power generation companies (GenCos) to scale down or shut operations, intensifying concerns over energy security and economic productivity.
According to a recent report by Bloomberg, the growing financial crisis has left many generation companies unable to sustain basic operations, including equipment maintenance, gas procurement and staff payments, further weakening an already underperforming power system.
The debt burden, which has been accumulating since 2015, continues to expand at an estimated N200 billion monthly, reflecting deep-rooted liquidity challenges across Nigeria’s electricity value chain. Industry data indicate that generation companies are owed N6.8 trillion as of February 2026, a figure that has significantly affected their operational capacity.
Joy Ogaji, chief executive officer of the Association of Power Generation Companies, described the situation as critical, noting that operators are struggling to maintain generating units due to cash flow constraints.
“We cannot maintain the machines,” Ogaji said, highlighting the severity of the funding gap. Without adequate liquidity, routine servicing of power plants has become increasingly difficult, raising the risk of further breakdowns and supply disruptions.
The crisis is also reverberating through the broader energy supply chain. Generation companies reportedly owe gas suppliers and transport service providers nearly 60 per cent of their obligations, creating a cascading effect that threatens fuel availability for power plants.
Gas-fired plants account for about 70 per cent of Nigeria’s electricity generation, making reliable gas supply essential. However, suppliers are becoming increasingly unwilling to continue deliveries without guaranteed payments, worsening generation shortfalls.
Nigeria’s average electricity generation has hovered around 4,000 megawatts for years; a level widely considered inadequate for a country of over 200 million people. In comparison, smaller economies produce significantly higher output, underscoring the scale of Nigeria’s infrastructure deficit.
Despite its status as Africa’s fourth largest economy, access to electricity remains limited. Only slightly more than half of the population is connected to the national grid, and even those connected face frequent outages that disrupt businesses and households alike.
For many operators, survival has come at a steep cost. Some generation companies have resorted to bank borrowing to keep their plants running, while others struggle to meet salary obligations. In extreme cases, company owners have pledged personal assets as collateral to secure financing, highlighting the desperation within the sector.
Rising operational costs, combined with persistent non-payment of invoices, have compounded the financial stress. Limited access to affordable financing has further constrained the ability of GenCos to stabilise operations or invest in capacity expansion.
In response to the growing crisis, the federal government has announced plans to raise ₦4 trillion from domestic capital markets to partially offset outstanding debts owed to power companies. The initiative is designed to address legacy obligations dating back over a decade and restore liquidity to the sector.
The plan builds on an earlier framework concluded in October 2025 for the issuance of government-backed bonds aimed at settling verified arrears owed to both generation companies and gas suppliers. However, progress has been slow, with only a fraction of the targeted funds raised so far. The balance is expected to be mobilised through phased bond issuances.
While stakeholders have welcomed the intervention, concerns persist over its effectiveness. Industry players question whether the proposed funding will be sufficient to halt the rapid accumulation of debt or restore financial stability across the value chain.
Adding to the uncertainty, generation companies have pushed back against reports suggesting that N2.8 trillion represents a final settlement figure, describing such claims as inaccurate and misleading.
