The Federal Government has announced plans to offset N2 trillion out of the N4 trillion debt owed to electricity generation companies (Gencos) before the end of 2025, in a bid to avert a potential shutdown of power plants due to a growing liquidity crisis in the sector.
Minister of Power, Adebayo Adelabu, disclosed the plan on Thursday during the sixth edition of the 2025 Ministerial Press Briefing Series in Abuja. He confirmed that the payment would be made through a combination of cash disbursements and promissory notes.
The move follows a warning issued by the Association of Power Generation Companies, which flagged the mounting debts—largely from unpaid subsidies—as a threat to continued electricity generation in the country.
“Let me first explain that these debts are unpaid subsidies of the Federal Government, which are due to the power-generating companies. Almost half of it was inherited, while the other half came from 2024 operations,” Adelabu said.
He acknowledged that while a full repayment of the N4tn debt was unlikely this year, the government was committed to disbursing close to N2tn through sub-budgetary allocations and debt instruments. The promissory notes, he said, would be “liquid enough” to be discounted by banks, providing immediate cash relief to the Gencos.
“I’ve had discussions with the Minister of Finance and Coordinating Minister of the Economy, who has assured me that work is ongoing on the promissory notes. Once we receive budget releases, cash payments will also follow,” Adelabu stated.
The minister further addressed public concerns over rising energy costs and recent tariff adjustments. He explained that the country had only achieved a 35 per cent reduction in subsidies despite the recent tariff hike for select users.
“Today, the average cost of energy stands at about N170 per kilowatt-hour, yet 85 per cent of customers are still paying N60. We’re restructuring—not eliminating—subsidies to ensure they reach low-income households,” he said.
He criticised the longstanding practice where government-owned power entities supplied electricity at almost no cost, with subsidies previously covering up to 80 per cent of actual supply expenses.
The minister defended the new cost-reflective tariff introduced for Band A customers, who receive a minimum of 20 hours of electricity daily, noting that only 15 per cent of consumers fall into this category and are charged N209 per kilowatt-hour.
According to him, the reform has significantly boosted market revenue. “Due to our transformative tariff reforms, the market has generated an additional N700 billion in revenue—an increase of 70 per cent. This pushed total market revenue from N1 trillion in 2023 to N1.7 trillion in 2024.”
Adelabu warned that distribution companies (DisCos) must meet their service delivery benchmarks or face penalties. “Any Disco charging Band A tariff but failing to provide 20 hours of electricity daily will be penalised,” he said.
He reiterated that government oversight in the power sector would remain firm to ensure improved service delivery and financial viability. “We are not on the side of the companies—we are on the side of Nigerians. But we must also face the reality that energy, like food, is expensive everywhere in the world,” Adelabu concluded.