Debt owed to electricity generation companies (GenCos) climbed sharply in 2025, rising by 62.5 per cent to N6.5 trillion, from N4 trillion at the start of the year, threatening the Federal Government’s N1.23 trillion power sector bond plan.
The increase has raised concerns about liquidity in the Nigerian Electricity Supply Industry (NESI) and the government’s ability to meet its financial obligations.
The Federal Government began a funding programme in December 2025 through a Series 1 Power Sector Bond worth N590 billion. The aim is to raise N1.23 trillion by the end of March 2026 to improve cash flow in the power sector.
The Series 1 bond has two tranches: N300 billion Tranche A and N290 billion Tranche B.
Despite this effort, debt in the electricity sector continued to grow. The rising debt level has sparked questions about transparency in how bond proceeds are structured and whether the funds will effectively address the sector’s long-standing financial challenges.
Data obtained by Financial Vanguard showed that, from May to October 2025, Nigeria’s GenCos issued invoices totalling N1.531 trillion for electricity supplied to the national grid. However, they received only N547.369 billion, about 35.7 per cent of the total, leaving a balance of roughly N984.3 billion in expected arrears that the government would need to cover as subsidies.
The low payment rate for power supplied continues to strain the sector’s liquidity. The shortfalls make it harder for GenCos to invest in operations, maintain infrastructure, or expand capacity, according to the data.
Some GenCos have expressed concern over the power bond’s structure and contractual arrangements. They have called for greater transparency around how the bond will be administered and how payments will be made from the proceeds.
An advisory document obtained by Financial Vanguard described portions of the bond terms as potentially harmful to generation companies if broader financial issues in the sector are not resolved.
Liquidity in the power sector: Continued high debt and low payments weaken the ability of GenCos to sustain operations and attract investment.
Government finances: Growth in sector debt complicates the Federal Government’s plan to raise funds via bonds and support electricity reforms.
Electricity supply: Cash flow problems may slow improvements to power generation and affect reliability of supply nationwide.
Nigeria’s electricity sector has long faced financial struggles marked by large debts and low collections. Recent data indicate that unpaid bills, heavy subsidies and limited investment have contributed to persistent challenges in improving consistent power supply across the country.
The Federal Government will continue its bond issuance strategy as planned through the first quarter of 2026, while GenCos and regulators press for clearer terms and better liquidity management. Ongoing dialogue between the government and industry stakeholders is expected to shape future steps to stabilise the sector.
