Nigeria’s electricity generation companies have warned that fresh liabilities estimated at more than N7tn could accumulate and undermine efforts by the Federal Government to resolve the power sector’s long-standing liquidity crisis.
The warning was issued by power producers under the Association of Power Generation Companies as the Federal Government moves forward with its Presidential Power Sector Debt Reduction Programme.
The Federal Government’s programme is estimated at N4tn and is designed to address outstanding obligations within the electricity supply industry.
However, the generation companies argue that settling existing debts without addressing the continuous accumulation of new liabilities may not provide a lasting solution to the sector’s financial challenges.
The Chief Executive Officer of the Association of Power Generation Companies, Joy Ogaji, raised the concern in an interview while reacting to plans by the Federal Government to issue a second bond worth approximately N729bn.
The proposed bond is expected to be used to settle verified legacy debts owed to electricity generation companies.
While the power producers are not opposed to the Federal Government’s plan to raise bonds to address outstanding obligations, they believe the approach must be accompanied by measures that prevent new debts from accumulating.
The concern reflects one of the most persistent challenges facing Nigeria’s electricity sector.
The industry has struggled with inadequate liquidity, unpaid invoices and financial obligations across the power value chain.
Generation companies require timely payments to maintain operations, purchase gas and sustain electricity production. However, when payments are delayed, financial pressures can affect their ability to operate efficiently.
The GenCos therefore argue that the government’s debt settlement programme should be accompanied by reforms that address the structural causes of the sector’s financial problems.
According to the association, otherwise, the industry could find itself in a cycle where old debts are cleared only for new liabilities to emerge.
The proposed N729bn bond represents the Federal Government’s latest effort to address verified legacy obligations to power generators.
However, the concerns raised by GenCos suggest that debt settlement alone may not be enough to restore long-term financial stability.
Stakeholders have repeatedly called for reforms that will improve revenue collection, strengthen market liquidity and ensure that participants across the electricity value chain are able to meet their financial obligations.
The warning also highlights the broader importance of resolving Nigeria’s electricity crisis.
A financially stable power sector is critical to industrial productivity, business growth and household welfare.
For the Federal Government, the challenge will be to balance the immediate need to settle outstanding debts with the longer-term objective of creating a commercially sustainable electricity market.
The success of the debt reduction programme may ultimately depend on whether it can prevent the recurrence of the financial problems that created the debt burden in the first place.
