Reported by: Ijeoma G | Edited by: Oravbiere Osayomore Promise.
Nigeria’s power sector is facing a severe and escalating crisis as electricity generation companies (GenCos) progressively shut down plants amid a mounting N6.8 trillion debt burden that has crippled operations, strained gas supplies, and threatened a wider collapse of the nation’s already fragile electricity system.
The crisis, which has been building for over a decade, has now reached a critical stage. Generation companies say they are unable to sustain their operations because they are owed vast sums for electricity already supplied to the national grid but not paid by intermediaries and distributors across the power value chain. As of February 2026, GenCos were owed about N6.8 trillion, a figure that has been accumulating since 2015 and continues to grow by roughly N200 billion monthly. This mounting debt reflects persistent liquidity challenges within Nigeria’s electricity market and has left many plants either idle or operating below capacity, as companies struggle to secure the funds needed for day-to-day running costs, maintenance, and critical fuel supplies.
Industry data released this month show that multiple power plants are offline, with over 15 generation stations reported to be out of operation as operators struggle to fund the procurement of gas and maintain essential infrastructure. Gas-fired plants, which account for about 70 percent of Nigeria’s electricity generation, are particularly hard hit because GenCos cannot pay gas suppliers who have signaled increasing reluctance to continue fuel deliveries without assurances of payment.
The gas supply constraint is a key dimension of the crisis. Analysts and industry executives point out that Nigeria’s thermal plants require substantial gas volumes to operate optimally, but actual supply levels have hovered below 700 million standard cubic feet per day — less than 43 percent of requirements. With gas suppliers demanding upfront payment before delivery, thermal generation has been severely curtailed, further reducing power supply to the grid.
The financial breakdown within the sector shows that a significant portion of the debt — an estimated N3.3 trillion — is owed directly to gas suppliers for fuel provided to power stations. This has exposed the intricate links between electricity generation and gas market economics, and highlighted that even if GenCos receive some payments for electricity, they remain unable to settle upstream obligations that keep power flowing.
GenCos say the liquidity crisis stems largely from structural problems in Nigeria’s electricity market, where the Nigerian Bulk Electricity Trading Plc is supposed to buy power from generators and sell it to distribution companies. However, these market participants have consistently failed to make full and timely payments for electricity, leaving winding liabilities that now exceed N6 trillion.
Generation companies warn that the current state of affairs is unsustainable. Without adequate revenue inflows, many GenCos are struggling to pay wages, sustain maintenance regimes, service loans obtained during the 2013 privatisation, and meet their obligations to suppliers. Increasing operational costs amid a weakened naira have also compounded financial pressures, leaving some companies reliant on expensive short-term financing or owner guarantees to continue operations.
The slowdown in generation output has clear ripple effects throughout the Nigerian economy. Grid data and market commentary indicate that average daily generation, which historically hovers around 4,000 megawatts, has been undermined by gas shortages and plant shutdowns. As generation levels continue to fall, distribution companies have resorted to increased load-shedding and rationing, with many states and regions experiencing extended power outages that disrupt business operations, inflate costs for households, and threaten economic productivity.
Businesses, particularly micro, small, and medium enterprises, are among the worst hit. Higher operating costs from prolonged generator use, reduced production capacity, and supply chain delays are squeezing margins and threatening the viability of many firms. At a time when Nigeria is seeking to rebound from broader economic challenges, the worsening power situation risks undermining investments and industrial competitiveness.
Government officials acknowledge the gravity of the sector’s problems and have said interventions are underway. Efforts to address the liquidity shortfall are being coordinated with the Ministry of State for Petroleum in hopes of securing more stable fuel supplies and resolving payment bottlenecks. However, detailed public plans have been sparse, and stakeholders in the sector remain cautious about the pace and scale of government action.
Discussions about solutions have included proposals for the federal government to raise funds through domestic markets to settle outstanding debts, with plans to issue government-backed bonds amounting to several trillion naira to clear verified arrears owed to GenCos and gas suppliers. While this proposal has been welcomed by some industry players, others remain concerned that debt-for-debt strategies without accompanying structural reforms may not address the root causes of the financial shortfall.
Experts argue that sustainable reform will require more than ad hoc financial settlements. They point to the need for tariff reforms that reflect true production costs, stronger commercial discipline among distribution companies, improved remittance rates across the value chain, clearer regulatory frameworks, and more competitive market arrangements that encourage direct bilateral contracting between generators and distributors. Such reforms could improve cash flows, reduce dependency on intermediary payments, and attract much-needed investment into the sector.
The broader structural challenges of Nigeria’s power industry are well documented. Although the country has installed capacity that could theoretically meet much higher demand, actual utilisation remains low due to a combination of gas supply constraints, infrastructure inefficiencies, transmission bottlenecks, and poor revenue collection. Nigeria’s electricity generation rarely exceeds about one-third of its installed potential, leaving significant gaps in supply despite repeated reform efforts over the years.
If left unaddressed, the cascading shutdown of power plants and the persistent liquidity crisis in the sector could push Nigeria’s electricity system into deeper instability, with far-reaching implications for economic growth, public services, and social welfare. For millions of Nigerians, the ongoing power shortages are both a symptom and a cause of broader systemic challenges, and resolving them will require coordinated action across government, private sector stakeholders, and international partners.
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