Nigeria’s electricity industry is facing renewed financial pressure as the Federal Government’s failure to settle tariff shortfalls in 2025 has pushed outstanding obligations to electricity generating companies (Gencos) to an estimated N800 billion, according to the Senate Committee on Power.
Speaking during a regulatory retreat organised by the Nigerian Electricity Regulatory Commission (NERC) in Ikot-Ekpene, Akwa Ibom State, the Chairman of the Committee, Senator Enyinnaya Abaribe, disclosed that the Federal Government has not made any payment to Gencos since the start of the year.
He warned that this has compounded an already strained financial environment in the sector, with cumulative debts to the generating companies now exceeding N3.8 trillion.
“There’s a liquidity crisis in the power sector. The generating companies are owed so much, the distribution companies are also owed so much,” Abaribe said. “The tariff shortfall that we have means that every month the government owes N200 billion of payments, and for 2025, no payment has been made.”
The tariff shortfall arises from the difference between the cost-reflective electricity tariffs approved by NERC and the subsidised rates paid by consumers.
In the absence of timely government intervention to cover these gaps, the financial burden is transferred to power generation and distribution companies, disrupting operations across the electricity value chain.
The committee chairman further explained that the persistent shortfall continues to limit the ability of Gencos to pay gas suppliers, resulting in constrained generation output and threatening the sustainability of the sector.
“The gas suppliers cannot continue to supply gas indefinitely without being paid,” Abaribe warned.
The current situation adds to longstanding debts in the sector, with the Federal Government previously acknowledging obligations of over N3 trillion to various market participants.
The mounting arrears risk further undermining investor confidence, especially in light of ongoing power sector reforms.
Minister of Power, Adebayo Adelabu, who also addressed the retreat, reiterated the government’s commitment to reforming the electricity market.
He cited improvements in generation capacity under the Tinubu administration but admitted that funding shortfalls and vandalism remain critical challenges to achieving nationwide energy stability.
“Only in this country are energy infrastructure and equipment vandalised at such a magnitude,” Adelabu stated, noting that substantial investments are needed to safeguard assets and boost transmission and distribution capacity.
The retreat brought together senior stakeholders to deliberate on regulatory alignment and sustainable market reforms. State governments, now empowered to participate in electricity markets following the 2023 constitutional amendment, were urged to collaborate with the Federal Government to develop coordinated funding strategies and clearly defined subsidy frameworks.
Governor Umo Eno of Akwa Ibom, represented by Deputy Governor Senator Akon Eyakenyi, stressed the importance of electricity in supporting small and medium-sized enterprises (SMEs), which remain critical drivers of economic growth.
He expressed optimism that the retreat would generate practical outcomes to strengthen the power sector’s financial and operational performance.
Analysts have repeatedly warned that without targeted intervention to address tariff shortfalls and settle market debts, the viability of Nigeria’s power sector may be further eroded.
Sector players have advocated for the implementation of a fully cost-reflective tariff regime or a sustainable subsidy model that avoids periodic accumulation of government debts.
As discussions continue, stakeholders expect clear policy direction from the Federal Government to avert further financial instability and ensure uninterrupted gas supply to Gencos, which remains a prerequisite for consistent electricity generation.
