Persistent uncertainty over the Federal Government’s ₦4 trillion power-sector legacy debt has continued to strain liquidity and investor confidence across Nigeria’s electricity market.
Generation companies (GenCos) maintain that discussions with government agencies are still ongoing, raising questions about the actual progress of the debt-resolution plan previously announced by authorities.
The debt represents long-standing obligations owed to power producers and gas suppliers for electricity generated and delivered to the national grid but not fully paid for through market settlements.
The shortfall has weakened the balance sheets of operators and limited their capacity to invest in maintenance, expansion, and energy-efficiency projects.
While government officials have described the Presidential Power Sector Debt Reduction initiative as a decisive step toward restoring stability, operators insist that no binding payment framework has been concluded.
The prolonged negotiations underscore the complexity of reconciling verified arrears with available fiscal resources amid competing budget priorities.
Market analysts note that clearing the ₦4 trillion backlog remains essential to restoring liquidity in the electricity value chain. Without a structured repayment programme and consistent market-clearing mechanism, GenCos face mounting operational pressure, gas-supply disruptions, and reduced generation output—conditions that ultimately undermine grid reliability and power supply to consumers.
The planned issuance of government-backed bonds to offset verified arrears has been touted as the largest single intervention in Nigeria’s power industry in more than a decade.
If executed transparently, it could ease financing constraints, attract fresh private investment, and pave the way for tariff reform.
However, delays in finalising the framework risk further eroding investor trust at a time when the sector requires substantial capital to meet growing demand.
Industry leaders have expressed cautious optimism about the government’s renewed focus on liquidity and reform but emphasised that timely implementation is critical. They warn that unresolved debts will continue to deter capital inflows and could stall ongoing efforts to expand generation capacity and modernise transmission infrastructure.
Analysts believe the outcome of these negotiations will define the near-term direction of Nigeria’s electricity market. A credible debt-settlement process would strengthen confidence in power-sector reforms, while prolonged indecision could deepen financial instability and prolong the cycle of underinvestment that has constrained the sector for years.