…As debt go GenCos hits N6.4tn
…Worse days in power sector coming, GenCos warn
By Dickson Pat
Power Generation Companies, GenCos, and Electricity Distribution Companies, DisCos, have criticised the Federal Government’s announcement that it would stop bearing electricity subsidy costs alone beginning from this year and instead share the burden among federal, state, and local governments. The power sector liabilities stood at about N4tn at the end of 2025.
Recall that the Director-General of the Budget Office of the Federation, Tanimu Yakubu, had last week announced that President Bola Ahmed Tinubu wants electricity subsidy costs to be explicit, practical, and transparent.
He warned that no level of government should carry hidden or unpaid obligations.
The DG noted that this new directive is not a punishment but rather an alignment, adding that it could act as an incentive for the different levels of government to support cost-reflective efficiency as well as have a power market that can deliver. He noted that the President has instructed that the existing electricity sector legal framework be invoked to ensure that subsidy sharing is practical, transparent, and enforceable.
Speaking on the development, the Managing Director and Chief Executive Officer of the Association of Power Generation Companies, Dr Joy Ogaji, described the move as misleading and unsupported by any formal documentation or fiscal provision.
She said that for investors, the subsidy could only be established through verifiable fiscal commitments, not assumptions.
“When you say subsidy, where is the evidence to show that there is a subsidy in the sector other than the fact that GenCos are consistently paid less than 35% of their invoice monthly? Does subsidy exist in the power sector, or is it just a lip service?
“For any investor in the power sector, the only way you can see that the government is subsidising the sector is to look at the budget. Is the subsidy in the air? Is it a smokescreen? Somebody has to see it somewhere, or is it just a political pronouncement that is not cash-backed”, she queried.
According to her, the long-standing claim that the government subsidises electricity masks the reality that generation companies have been funding the shortfall for more than a decade.
“The story has been going around that the government is subsidising electricity. The true story is that generation companies are the ones subsidising the sector. From the beginning, 2013 until the present, they’ve not received 100% of their invoiced amount. So, when we actually say subsidy, who is paying the subsidy? Where is it recorded?” she said.
Ogaji pointed to budget figures to underline her argument, noting that government allocations fell far short of market needs and had translated into mounting debts owed to GenCos.
“For example, this year, the government only provided N1.09tn for the power sector, and there’s a monthly shortfall of N200bn that is not budgeted for. You need to analyse the budget side by side with how much the shortfall is every month”, she said.
She continued, “As of December 2025, the Federal Government debt to the GenCos via the Nigeria Electricity Trading Plc is already N6.4tn. You also need to look at how much of that has been provided for, just a N501bn bond”.
She further revealed that she had sought clarifications from the Nigerian Electricity Regulatory Commission on whether any official approval existed for the assumed subsidy embedded in tariff calculations.
“I spoke with NERC. I asked them if they received any letter from the Federal Government, whether from the Ministry of Finance, the Debt Management Office, or the Presidency, any document, or any minutes of meetings where it is recorded that the Federal Government approved that there is a subsidy in the market. NERC said no, there is no such official document that shows that there is a subsidy”, Ogaji noted.
She warned that extending the same assumption to states and local governments could worsen the crisis in the sector.
“The same way the Federal Government has been living in denial when it comes to the 65 per cent assumed in the tariff is the same way the states and the local governments will handle this. So, there are worse days in the power sector coming”, she warned.
…GenCos Paid Under 35% Of Invoices, Trillions Owed
She stated that GenCos are paid less than 35% of their monthly invoices, a situation she described as unsustainable.
She cited budget figures to support her position, saying that while the federal government provided N1.09 trillion for the power sector in the current year, monthly shortfalls of about N200 billion remain unfunded.
According to her, outstanding debts owed to GenCos through the Nigerian Electricity Trading Plc had risen to about N6.4 trillion by December 2025, with only a N501 billion bond issued to address historical liabilities.
Ogaji also disclosed that the Nigerian Electricity Regulatory Commission ,NERC, confirmed there was no official approval or documentation showing that the federal government formally recognised or funded a subsidy in tariff calculations.
She warned that extending the same unfunded assumptions to state and local governments could deepen the sector’s financial crisis unless the shortfall is formally acknowledged and financed.
…Background – Electricity payment to be paid from FAAC
Federal government recently proposed that electricity subsidy payments be deducted directly from statutory allocations shared through the Federation Account Allocation Committee ,FAAC, a move that could remove up to N3.6 trillion from the federation account between 2026 and 2028.
The policy is part of the current electricity reforms of the federal government, which uphold the total decentralisation of the electricity market and regulation in the country.
The policy direction was disclosed by the Director-General of the Budget Office of the Federation, Tanimu Yakubu, during a training and sensitisation workshop in Abuja on the 2026 post-budget preparation process.
Yakubu said the initiative followed a directive by President Bola Tinubu to prevent the buildup of hidden liabilities in the electricity market and ensure that all subsidy-related costs are clearly identified and funded.
He explained that keeping electricity tariffs below cost creates a financial gap that must be paid for, adding that the Federal Government would no longer carry this responsibility alone, where policy benefits cut across all tiers of government.
Yakubu noted that the 2026 budget proposal currently before the National Assembly made no provision for monthly electricity subsidies, despite persistent tariff shortfalls in the sector.
…DisCos welcome sharing of subsidy among govts
While GenCos have challenged the long-standing claim that electricity is currently subsidised, warning that the policy could worsen the sector’s liquidity challenges, electricity distribution companies ,DisCos, have welcomed the plan as fair and workable. The Chief Executive Officer of the Association of Nigerian Electricity Distributors, Sunday Oduntan, expressed support for the Federal Government’s plan, describing it as fair and achievable. Oduntan said the government could implement the policy through deductions at source from states’ FAAC allocations, adding that while states’ capacity to absorb the costs may differ, the approach remains feasible.
However, he cautioned against a blanket removal of subsidies, arguing instead for targeted support for vulnerable electricity consumers based on reliable data.
…Electricity debt: FG raises N501bn bonds
Recall that AljazirahNigeria had earlier reported that the Federal Government raised N501 billion through bonds to address historic debts in the electricity sector.
The bond, issued under the Presidential Power Sector Debt Reduction Programme, achieved full subscription and marks the most concrete step yet by the Bola Tinubu administration to resolve payment arrears that have crippled electricity generation for more than a decade.
The settlement programme could improve electricity service delivery for over 12 million customers.
