Nigeria Faces US$4.91 Billion Power Generation Debt Crisis
Nigeria's US$4.91 billion debt + ISDB's US$63.5 million investment + FSD Africa US$50 million funding + Startsight energy secures US$15m + regulation updates and upcoming events
Last week we released a deep dive on the commercial performance of Nigerian Electricity Distribution Companies (DisCos) in 2024, revealing a market that is improving but remains fundamentally unstable. Despite gains in billing and collection efficiencies following the 2023 Electricity Act, the sector saw over US$361 million (₦536 billion) in billed revenue go uncollected last year. Read it here
The Nigerian power sector currently carries a cumulative debt of US$4.91 billion owed to Generation Companies (GenCos) for electricity supplied to the national grid. A critical subset of this liability is a US$2.38 billion debt owed specifically to gas suppliers for fuel already consumed. To address this liquidity gap, the federal government has deployed a US$362 million bond. While this provides immediate cash flow, it covers only 15% of the outstanding gas suppliers’ debt, leaving most of the sector’s financial obligations unresolved.
Accumulation of US$4.91 billion in sector debt
The current debt levels are a result of the Nigerian Bulk Electricity Trading (NBET) PLC failing to settle GenCo invoices in full. As the bulk trader, NBET purchases power from GenCos and sells it to Distribution Companies (DisCos).
This payment gap has accumulated for over a decade. By 2026, the total arrears to GenCos reached US$4.91 billion, growing at an average rate of US$144 million (N200 billion) per month. The US$2.38 billion owed to gas producers is a subset of this total. Because GenCos are not paid by NBET, they lack the liquidity to pay for the fuel required to run thermal plants.
The Presidential Debt Reduction program and NBET Bond
The Presidential Power Sector Debt Reduction Programme (PPSDRP) is the framework designed to address these liabilities. The primary mechanism is the US$362 million (N501 billion) NBET bond issued in early 2026. This bond is supposed to provide participating GenCos with a financial instrument to settle their own bank debts and pay a portion of their gas invoices.
While the bond provides immediate liquidity, it does not clear the total liability. The US$362 million covers roughly 15% of the US$2.38 billion gas debt and less than 10% of the total US$4.91 billion GenCo debt. The government has indicated that this is the first tranche of a larger US$2.89 billion (N4 trillion) program intended to stabilize the market’s balance sheet over time.
Impact on Grid Stability and Load Shedding
The debt owed to gas suppliers has a direct impact on national power generation. Gas producers have restricted fuel supply to thermal plants, and this fuel shortage limits the grid to a range well below its operating capacity.
To prevent a total system collapse, the National Control Centre has implemented load shedding. Distribution Companies must now cut power to specific regions for extended periods to balance the limited supply. This instability increases operational costs for industrial and commercial users who must rely on alternative energy sources.
Private Capital Mobilization through the GAMCO Strategy
The government is shifting from sovereign borrowing to private capital mobilization via the Grid Asset Management Company (GAMCO). GAMCO was established in March 2026, and acts as a project developer and financing platform designed to transform underperforming National Integrated Power Project (NIPP) plants into bankable infrastructure assets. Its mandate is to attract domestic and international private investment through project-finance structures rather than relying on government guarantees.
Through an asset-packaging model, GAMCO is expected to isolate the revenue streams of the Omotosho, Olorunsogo, and Ihovbor thermal plants to facilitate capital raises via expected receivables. This model includes the construction of Nigeria’s first privately financed independent power transmission line along the Benin-Lagos corridor. The project seeks to recover 1,600MW in transmission-related constraints by addressing infrastructure bottlenecks, thereby stabilizing the sector’s financial outlook.
The Takeaway
The US$362 million bond and the GAMCO strategy represent an effort to resolve the US$4.91 billion power sector debt. While the bond provides an immediate liquidity injection to address the US$2.38 billion owed to gas suppliers, GAMCO targets the recovery of 1,600MW of power to improve the sector’s technical and financial throughput. The success of the Presidential Debt Reduction Program will depend on whether these interventions can stabilize the grid and restore fuel supply fast enough to outpace the US$144 million in new debt accumulating every month.
Deals and Investment
- Islamic Development Bank announces a US$63.5 million investment to support the Mauritania- Mali electricity interconnection project. ISDB
- FSD Africa Investments and Allied Climate Partners commit US$50 million in catalytic capital to anchor the African Transition Acceleration Fund. FSD
- Proparco announces a US$15 million investment in the African Transition Acceleration Fund (ATAF) Proparco
- Mirova Backs Solar-Powered Telecom Towers in Africa With US$15 Million Investment Mirova
- Starsight secures US$15 million funding from British International Investment to accelerate clean energy in West Africa Starsight
- Voltalia has been selected by the Tunisian government for a new 132 MW Solar project in the Gabe’s region of Tunisia. Voltalia
- Nigeria Issues First Article 6 Carbon Credit Authorisation for Clean Cooking NCCC
- DRC’s Mwinda Fund Opens Call for Solar Home System Projects to Boost Off-Grid Electrification Mwinda
- Solad Power Group announces the successful sale of its first international renewable energy certificates Solad Power Group
Regulatory and Policy Updates
- NERSA Sets March 31 Deadline for Municipal Electricity Tariff Applications Ahead of 2026/27 Financial Year NERSA
- Nigeria’s NERC Issues Order to Regulate Grid-Connected Private Transmission Substations NERC
- Ghana Reduces Electricity and Water Tariffs, Launches First-Ever Commercial EV Charging Tariff PURC
The Radar