FG Unveils N3.3trn Power Debt Settlement Plan

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President Bola Ahmed Tinubu has approved a N3.3 trillion payment plan to settle longstanding debts in Nigeria’s power sector under the Presidential Power Sector Financial Reforms Programme, in a move aimed at restoring liquidity, stabilising electricity generation, and improving service delivery across the country.

The approval was disclosed in a statement signed by Bayo Onanuga, Special Adviser on Information and Strategy to the President, who said the initiative followed a comprehensive review and verification of legacy obligations accumulated over more than a decade.

The debts, which built up between February 2015 and March 2025, cut across the entire electricity value chain, including generation companies, gas suppliers, and other market participants. The prolonged accumulation of unpaid obligations has been widely identified as a major constraint on the performance of Nigeria’s power sector, contributing to weak generation output, liquidity shortfalls, and limited investment inflows.

According to the presidency, the N3.3 trillion figure represents a “full and final settlement” of verified legacy debts, following an independent reconciliation process aimed at resolving longstanding disputes over the size and structure of outstanding liabilities.

Implementation of the payment plan has already commenced, with several stakeholders beginning to receive disbursements under the phased settlement framework.

Under the current phase of the programme, approximately 15 power generation companies have signed settlement agreements valued at N2.3 trillion. These agreements form a significant portion of the overall debt resolution plan and are expected to provide immediate liquidity relief to key operators within the sector.

To support the settlement process, the Federal Government has raised N501 billion, out of which N223 billion has already been disbursed. Additional payments are ongoing and are expected to continue in tranches as part of the structured implementation plan.

Officials said the phased approach is designed to ensure transparency, accountability, and fiscal sustainability, while also enabling a steady injection of funds into the power value chain.

The Nigerian electricity sector has long been characterised by structural inefficiencies, including revenue shortfalls, tariff distortions, and weak payment discipline across the market. Distribution companies have struggled to recover sufficient revenue from consumers, resulting in an accumulation of unpaid invoices to generation companies. In turn, generation companies have faced difficulties meeting their obligations to gas suppliers, creating a cycle of debt that has constrained operations and investment.

The settlement plan is expected to address these challenges by restoring cash flow across the value chain, enabling market participants to meet financial obligations and improve operational efficiency.

Nigeria currently generates less than 4,500 megawatts of electricity for a population exceeding 220 million people, highlighting a significant supply deficit relative to demand. The shortfall has forced households and businesses to rely heavily on self-generation through diesel and petrol-powered generators, increasing energy costs and reducing productivity.

Authorities said the injection of funds into the sector is expected to improve generation capacity by enabling power plants to secure more reliable gas supply, carry out maintenance, and operate closer to installed capacity.

The presidency emphasised that the initiative goes beyond debt settlement and forms part of a broader reform agenda aimed at strengthening the electricity market and improving service delivery.

Olu Arowolo-Verheijen, Special Adviser on Energy to the President, said the programme is designed to restore confidence across the sector and ensure more reliable electricity supply.

“This programme is not just about settling legacy debts. It is about restoring confidence across the power sector — ensuring gas suppliers are paid, power plants can keep running, and the system begins to work more reliably,” she said.

She noted that the settlement plan is being implemented alongside other structural reforms, including improvements in metering and the introduction of service-based tariffs.

“It is part of a broader set of reforms already underway — including better metering and service-based tariffs that link what you pay to the quality of electricity you receive,” she said.

The introduction of service-reflective tariffs is expected to improve cost recovery within the sector by aligning electricity pricing with the level of service provided. Industry stakeholders have consistently argued that the existing tariff structure does not reflect the true cost of electricity supply, limiting the financial viability of operators and discouraging investment.

Arowolo-Verheijen also highlighted the government’s focus on improving electricity supply to productive sectors of the economy, including businesses, industries, and small enterprises.

“The government is also prioritising power supply to businesses, industries, and small enterprises — because reliable electricity is critical to creating jobs, supporting livelihoods, and growing the economy,” she said.

She added that the overall objective of the reform programme is to deliver more reliable power supply while strengthening the financial sustainability of the sector.

“The goal is simple: more reliable power for homes, stronger support for businesses, and a system that works better for all Nigerians,” she said.

The government said the reforms are designed to ensure long-term sustainability and efficiency within the power sector, addressing both financial and operational challenges that have hindered performance over the years.

The settlement framework is being implemented in phases to ensure orderly disbursement of funds and effective monitoring of outcomes. Authorities noted that the phased approach allows for better oversight and reduces the risk of misallocation of resources.

The inflow of funds into the electricity value chain is expected to have a multiplier effect on the sector, improving liquidity, enhancing operational capacity, and supporting increased electricity generation.

Industry analysts have identified liquidity constraints as one of the most significant barriers to improved power supply in Nigeria. The inability of generation companies to access sufficient funds has limited their capacity to procure gas, maintain infrastructure, and expand operations.

Gas supply remains a critical component of electricity generation in Nigeria, as the majority of power plants rely on gas-fired turbines. Ensuring timely payment to gas suppliers is therefore essential for sustaining generation output and reducing downtime.

The settlement plan is expected to improve the financial position of generation companies, enabling them to meet obligations to gas suppliers and maintain steady fuel supply. This, in turn, is expected to enhance generation stability and reduce fluctuations in power output.

The programme is also expected to improve investor confidence in the power sector by demonstrating the government’s commitment to addressing legacy challenges and implementing reforms. Analysts note that predictable revenue streams and improved liquidity are key factors in attracting private capital to the sector.

Nigeria’s power sector has historically struggled to attract sufficient investment, partly due to concerns over payment risks, regulatory uncertainty, and weak financial performance. By resolving outstanding debts and improving market conditions, the government aims to create a more conducive environment for investment.

The presidency indicated that the current phase of the programme will be followed by additional reforms under the Presidential Power Sector Financial Reforms Programme. These reforms are expected to build on the progress achieved through the settlement plan and further strengthen the sector.

Market participants are expected to monitor the impact of the disbursements on generation capacity, electricity supply, and overall market performance in the coming months. Key indicators will include improvements in generation output, reduction in outages, and increased reliability of supply.

The success of the initiative will depend on effective implementation, sustained funding, and alignment with broader policy objectives. Analysts have cautioned that previous interventions in the power sector have yielded limited results when funding commitments were not fully realised or when reforms were not sustained.

Nigeria’s fiscal environment remains under pressure from competing priorities, including subsidy reforms and currency challenges, which could affect the pace of disbursements. However, authorities have reiterated their commitment to ensuring the success of the programme.

The N3.3 trillion settlement plan represents one of the largest financial interventions in Nigeria’s power sector and underscores the scale of accumulated liabilities within the industry. The resolution of these debts is expected to lay the foundation for improved performance and long-term sustainability.

Authorities expressed optimism that the programme will lead to tangible improvements in electricity supply, supporting economic growth and enhancing the quality of life for Nigerians.

As implementation continues, attention will remain on the efficiency of fund disbursement, the responsiveness of market participants, and the overall impact on power generation and distribution across the country.