Liquidity crisis deepens as GenCo debt hits N6.5 trillion
Efforts by the Federal Government to resolve the chronic liquidity crisis in the Nigerian Electricity Supply Industry (NESI) are facing severe setbacks.
According to reports on Monday, January 19, 2026, the debt owed to Generation Companies (GenCos) surged by 62.5% over the past year. The total debt burden reached N6.5 trillion by the end of 2025, a sharp increase from the N4 trillion recorded at the start of that year.
This massive spike in liabilities is now casting a shadow over the government’s ambitious N1.2 trillion bond program. The bond was designed to improve system liquidity and provide a “strategic reset” for the struggling power sector. However, industry experts warn that the escalating debt could undermine the effectiveness of this financial intervention before it is fully deployed.
The Presidential Power Sector Debt Reduction Programme had already flagged off a N590 billion Series 1 bond in mid-December 2025. The plan aims to raise a total of N1.23 trillion by the end of the first quarter of 2026. Yet, with debt accumulating faster than the government can raise funds, many stakeholders fear the bond will only be a “drop in the ocean” compared to the total deficit.
GenCos receive only 35 percent of electricity invoices
The root of the ballooning debt lies in the consistent failure of the market to remit full payments for electricity supplied to the national grid. Data covering six payment cycles between May and October 2025 revealed that GenCos issued invoices totaling N1.531 trillion. Out of this amount, they received only N547.3 billion, representing a meager 35.74% remittance rate.
The remaining N984.3 billion is classified as electricity subsidies that the Federal Government is expected to cover. Stakeholders have blamed the government’s failure to back these subsidy policies with actual cash payments for the rapid rise in sector debt. Without this cash backing, GenCos struggle to pay gas suppliers, maintain aging turbines, and meet their own financial obligations to lenders.
Managing Director of Azura Power West Africa, Edu Okeke, noted that the fundamental issues of the sector remain unresolved despite the new bond. He warned that as long as generation companies are only receiving a fraction of their invoices, no new significant investment will flow into the sector. This lack of investment continues to hinder the goal of providing stable power to Nigerian homes and businesses.
Structure of power sector bond labeled high risk
The Association of Power Generation Companies (APGC) has raised serious concerns regarding the structure and mechanics of the proposed bond. An exclusive advisory document suggested that certain clauses in the bond documentation could be detrimental to the long-term survival of GenCos. The document criticized the lack of a “bankable structure” and warned that the bond relies too heavily on “verbal good faith” rather than solid financial guarantees.
Furthermore, the bond is being issued through NBET Finance Company, which has been described as an “orphan special purpose vehicle” (SPV). This structure makes the instrument extremely risky for investors and participating companies alike. Energy experts, including Professor Yemi Oke, have described the current subsidy regime as “unsustainable” and a major threat to national economic development.
The Nigerian Electricity Regulatory Commission (NERC) has acknowledged the revenue gap but insists that the transition toward cost-reflective tariffs is necessary for sector stability. While Band A customers have seen significant tariff hikes, many still do not receive the guaranteed 20 hours of daily supply. This disconnect between higher costs and poor service continues to erode public trust in the ongoing power sector reforms.
Cautious optimism remains for late 2026 reforms
Despite the grim debt figures, some industry leaders maintain a level of “cautious optimism” for the remainder of 2026. They believe that if the N1.23 trillion bond is deployed transparently, it could provide enough breathing room to stabilize balance sheets. This would ideally be coupled with the government’s N700 billion metering program, which aims to reduce collection losses across the country.
The successful resolution of gas-related arrears is also seen as a critical factor for improving fuel security for thermal power plants. If GenCos can pay gas suppliers on time, plant availability and grid reliability are expected to improve incrementally. However, these gains are entirely dependent on whether the government can finally break the cycle of “circular debt” that has plagued the industry for decades.
As the first quarter of 2026 progresses, the eyes of the financial community remain on the Debt Management Office (DMO). The success or failure of this bond issuance will likely determine the trajectory of Nigeria’s power supply for the next decade. For now, the “twin engines” of the Nigerian economy—reform and debt—continue to pull in opposite directions, leaving the nation’s energy future on a narrow ledge.
