In a decisive move to revive Nigeria’s struggling electricity sector, President Bola Ahmed Tinubu has approved a ₦4 trillion ($2.61 billion) phased debt refinancing plan aimed at clearing longstanding obligations owed to power generation companies (GenCos). The plan, announced by Finance Minister Olawale Edun after Wednesday’s Federal Executive Council meeting, is expected to be implemented within weeks and could mark a turning point in the nation’s energy reforms.
The debt, accumulated between 2015 and 2023, is primarily owed to 27 power generation firms for unpaid invoices. For nearly a decade, these arrears have crippled liquidity in the electricity market, deterred fresh investment, and contributed to chronic power outages in Africa’s most populous country.
“It is now fully approved, and we move to implementation,” Minister Edun told reporters in Abuja. He confirmed that the process would be completed in three to four weeks under the supervision of the Debt Management Office (DMO). The refinancing plan will likely involve the issuance of government bonds and other financial instruments to spread repayments over an extended period, easing immediate fiscal pressure.
Power generation companies have long complained about the mounting unpaid bills from the Nigerian Bulk Electricity Trading Company (NBET), the state-owned intermediary between producers and distribution companies. The non-payment has disrupted cash flow, limited maintenance capacity, and hampered expansion efforts.
An executive at one of the GenCos, who requested anonymity, described the debt clearance plan as “a critical lifeline for an industry that has been operating on the brink.”
“Our plants are running at less than optimal capacity because we can’t fund the necessary upgrades or even routine servicing without payment for energy we’ve already delivered,” the executive said. “If the government follows through, this could restore investor confidence.”
This debt refinancing is one element of the Tinubu administration’s wider strategy to reform Nigeria’s energy sector. In April, the government introduced a 35% cut in electricity subsidies and approved tariff hikes for urban consumers — a politically sensitive move that is projected to save the treasury ₦1.1 trillion ($718 million) annually.
The administration has argued that these measures will free up funds for infrastructure upgrades and attract foreign investment into the power sector.
Energy analyst Funmi Adeoye believes the timing of the debt clearance plan is crucial: “If the GenCos get paid, they can ramp up production and address some of the bottlenecks in the supply chain. But for lasting impact, payment discipline must be institutionalised to prevent the debt from piling up again,” she said.
Minister Edun explained that the repayment would not be made in a lump sum. Instead, the government plans to use a mix of bond issuances, promissory notes, and possibly syndicated loans to settle the arrears in phases. This approach will help manage fiscal risks while ensuring that the funds reach GenCos without delay. According to Edun, the debt verification process — completed earlier this year — confirmed that the amounts owed were legitimate and in line with contractual obligations. “The president’s directive was clear: settle verified debts to stabilise the sector, but do it in a fiscally responsible way,” he noted.
