Only 35% Paid Since 2015: Power Producers Raise Alarm Over Industry Crisis
By NINI NDUONOFIT-AKOH
Mounting Debts Push Nigeria’s Power Industry to Edge
NIGERIA’S electricity generation companies have raised fresh concerns over the health of the country’s power sector, warning that persistent unpaid obligations and weak market enforcement mechanisms could trigger systemic collapse.
The warning came from the Association of Power Generation Companies, which revealed that more than ₦6.2 trillion is owed to generation companies for electricity already produced and consumed. The group said that since 2015, only 35 percent of the cumulative amount has been settled.
In a statement issued by its Chief Executive Officer, Joy Ogaji, the association described the situation as unsustainable, noting that liquidity constraints have severely limited operational efficiency.
Investment Disincentives and Idle Capacity
Nigeria’s installed generation capacity stands at approximately 15,500 megawatts, yet actual grid output hovers around 4,000MW. According to GenCos, the disparity reflects deeper financial and structural problems.
They criticised the practice of compensating only “called-up” capacity — power actually transmitted and distributed — while ignoring capacity made available but not utilised due to transmission or distribution limitations.
The group argued that this system undermines investor confidence and discourages reinvestment in generation assets. An estimated 7,000MW of mechanically unavailable capacity, they said, could potentially be restored if viable financial incentives were in place.
Electricity generation, they stressed, operates under unique conditions: power must be consumed instantly upon production, leaving no room for storage buffers. Without guaranteed returns backed by enforceable contracts, investors face high risks.
Market Design Under Scrutiny
The association further blamed the sector’s challenges on weak Power Purchase Agreements, inefficient transmission infrastructure, and distribution bottlenecks. These issues, they said, have created a “vicious cycle” of underperformance.
Despite complying with privatisation terms and contractual commitments since assuming control of assets in November 2013, GenCos claim they have encountered mounting liquidity shortfalls, regulatory uncertainties, and contractual breaches.
Demand for Contract Sanctity
Calling for urgent government intervention, the association emphasised the need to establish a transparent, contract-based electricity market anchored on enforceable agreements and performance-driven incentives.
“The sector’s sustainability is at stake,” the statement concluded, urging authorities to act swiftly to prevent further deterioration in Nigeria’s already fragile power supply system.
