By John Umeh
Nigeria’s electricity sector is sliding deeper into financial turmoil, with government liabilities in the power market projected to balloon to N6.2 trillion before the end of 2025, following the mass exodus of premium customers from the national grid.
The Federal Government is already weighed down by a N4 trillion legacy debt owed to generation companies (GenCos). To this, fresh arrears of about N1.6 trillion have been added, with figures expected to rise to N2.2 trillion by December. Industry insiders warn the situation is fast becoming unsustainable, as confidence in the grid system dwindles.
Shrinking Customer Base and Rising Costs
Only 13 percent of commercial customers now rely on the national grid, down from 20 percent, according to Nigerian Electricity Regulatory Commission (NERC) officials. This sharp decline is attributed to unreliable supply and skyrocketing costs, pushing manufacturers and high-end households toward solar and other self-generation options.
In 2024 alone, Nigerian manufacturers spent an unprecedented N1 trillion generating their own power. Meanwhile, NERC issued licenses to 46 bulk consumers and off-grid projects, collectively adding almost 300 megawatts of capacity outside the national grid.
This migration of premium customers—once the financial backbone of the grid—means the Federal Government now faces monthly shortfalls of nearly N200 billion.
Cracks in Government Strategy
Despite repeated interventions, including high-level meetings convened by President Bola Tinubu, stakeholders say the government still lacks a credible repayment and recovery framework.
The proposed use of promissory notes has raised skepticism, as the Debt Management Office (DMO) allocated only N800 billion for all government creditors in 2025—far below what is needed to clear power sector debts. Similarly, the N900 billion budgeted for electricity subsidies this year falls drastically short of the N2 trillion annual subsidy burden.
Attempts to extract clear answers from the Ministry of Finance have met with vague responses. Industry leaders, including Dr. Joy Ogaji, Executive Secretary of the Association of Power Generation Companies, have warned that without transparency, invoice reconciliation, and timely payments, the market risks a full-scale collapse.
Looming Collapse Without Free Governor Control
The crisis is compounded by the Nigerian Electricity Regulatory Commission’s new order mandating Free Governor Control (FGC)—a system that allows power plants to automatically stabilize frequency fluctuations.
While FGC is essential for integrating Nigeria’s grid into the West African Power Pool (WAPP), operators argue that implementing it could add N1.059 trillion annually to market liabilities. Plants that switch to FGC lose revenue under the current payment structure, discouraging compliance.
As Azura Power’s Managing Director, Edu Okeke, explained: “Nigeria’s grid fragility is more financial than technical. If GenCos were fully paid for available capacity, they would run FGC. Instead, they disable it to avoid losses, pushing the grid closer to collapse.”
The Bigger Picture
Currently, Nigeria generates about 4,500MW at a cost of N2.9 trillion annually. Adding 2,500MW of utilized capacity under FGC could push yearly costs up by 35 percent. Without spinning reserves and better compensation frameworks, GenCos face mounting operational risks, including higher fuel use, tripled maintenance costs, and shortened turbine lifespans.
Stakeholders caution that the exodus of commercial and premium users leaves the national grid serving mainly low-income households who lack alternatives. This risks locking the grid into a “poverty trap”, where supply declines, revenue collapses, and investment dries up.
As Nigeria edges closer to syncing with WAPP, experts insist that only a transparent repayment plan, subsidy reform, and market-driven tariffs can avert a historic breakdown.
For now, the country’s most critical infrastructure remains on life support, as debts mount and faith in the grid continues to erode.
