Gas cuts, mounting debts and Nigeria's power crisis: Why electricity generators say the lights could dim further

• Electricity generation companies (GenCos) say mounting debts have forced some gas suppliers to cut fuel supplies, reducing power generation and threatening electricity supply across Nigeria.

• The Federal Government is rolling out a ₦729 billion bond under its Power Sector Debt Reduction Programme, but operators say new debts continue to accumulate every month despite efforts to clear legacy obligations.

• GenCos blame the crisis on poor market liquidity, saying DisCos and the Nigerian Bulk Electricity Trading Plc (NBET) consistently fail to remit full payments, leaving power producers unable to pay gas suppliers.

• Operators warn that unless structural issues such as poor revenue collection, inadequate subsidy funding and delayed payments are addressed, Nigerians could face longer blackouts, higher energy costs and a worsening power crisis.

Nigeria's electricity generation companies are warning that the country's fragile power sector is edging closer to another crisis as mounting debts force gas suppliers to cut fuel supplies to power plants, threatening electricity generation and exposing deeper structural problems in the market.

The immediate concern is not simply the over ₦4 trillion in legacy debts owed to electricity generation companies (GenCos), but the fact that new liabilities continue to pile up every month. Operators say unless the underlying liquidity crisis is addressed, the Federal Government's latest debt repayment initiative may provide only temporary relief while the sector sinks deeper into financial distress.

Nigeria generates the bulk of its grid electricity from gas-fired power plants, making reliable gas supply essential to keeping the lights on. However, electricity producers say many generating companies can no longer pay their gas suppliers because they have not received full payments for electricity already supplied to the national grid.

According to the Chief Executive Officer of the Association of Power Generation Companies (APGC), Joy Ogaji, the consequence is already evident.

She disclosed that some gas suppliers have stopped supplying indebted GenCos, forcing several plants to reduce operations or shut down entirely. She cited Ibom Power as an example, saying the plant has not generated electricity since 2025 after its gas supply was cut off due to unpaid debts. According to her, several other generating companies are facing similar challenges, while some have also struggled to pay workers' salaries for months.

As of March 17, 16 out of 33 power plants were not supplying electricity, dragging generation down to just 3,705 megawatts. 

For a country where gas accounts for the majority of grid electricity generation, prolonged fuel supply disruptions could worsen electricity shortages, increase load shedding and raise operating costs for businesses and households already relying heavily on self-generation.

READ ALSO: FG announced it paid ₦3.3tn power debt in April, GenCos say no money has arrived till now

At the centre of the crisis is a long-standing liquidity shortfall across the Nigerian Electricity Supply Industry (NESI).

Under the current market structure, electricity generated by GenCos is purchased through the market and supplied to electricity distribution companies (DisCos), which collect revenue from customers. Ideally, the revenue collected should flow back through the value chain, allowing GenCos to pay gas suppliers and maintain their operations.

However, the market has consistently failed to recover enough revenue to settle invoices in full.

According to APGC, electricity distribution companies and the Nigerian Bulk Electricity Trading Plc (NBET) continue to remit less than 100 per cent of what is owed each month, leaving generation companies with growing unpaid invoices. As these shortfalls accumulate, GenCos struggle to pay gas suppliers, service loans, maintain equipment and invest in plant upgrades.

Ogaji argues that this is the structural problem policymakers must solve.

"Every month, the DisCos are not paying 100 per cent. NBET is not paying 100 per cent," she said, warning that even while the government settles historical obligations, fresh debts continue to accumulate monthly.

To improve liquidity, the Federal Government is proceeding with a second bond issuance worth about ₦729 billion under the Presidential Power Sector Debt Reduction Programme.

The proposed Series II bond follows an earlier ₦501 billion issuance completed in January 2026. According to the government, the first tranche helped settle part of the verified legacy debts owed to electricity generation companies while also demonstrating its commitment to honouring financial obligations after paying the first coupon on schedule.

Speaking at the NBET Finance Company Plc Series II Bond Investors' Forum in Abuja, Special Adviser to the President on Energy, Olu Verheijen, said approximately ₦333 billion had already been paid to eight participating GenCos covering 17 power plants. She said successfully servicing the first bond had strengthened investor confidence and justified returning to the capital market for another issuance.

The broader programme seeks to settle verified legacy obligations estimated at about ₦4 trillion, restoring confidence across Nigeria's electricity market and improving liquidity within the value chain.

Despite welcoming efforts to clear outstanding obligations, power producers insist the bond programme addresses only one side of the problem.

Their concern is that while historical debts are being repaid gradually over several years, new liabilities continue to accumulate because the market still fails to generate enough revenue to meet monthly payment obligations.

Ogaji questioned whether a seven-year repayment programme for historical debts could succeed if billions of naira continue to be added to outstanding obligations every month.

She warned that by the time the current debt programme is completed, several trillions of naira in additional liabilities may already have accumulated unless fundamental reforms restore financial discipline across the electricity market.

Her argument reflects concerns shared by many energy analysts: resolving historical debts without fixing the underlying revenue gap risks repeating the same cycle.

Another issue raised by power producers is electricity subsidy funding.

According to APGC, government subsidy commitments have often not translated into timely cash payments, leaving market participants to absorb the resulting funding gaps.

Ogaji argued that if the government intends to continue subsidising electricity tariffs, adequate budgetary provisions must accompany those commitments. Otherwise, she said, operators continue bearing costs they cannot recover.

This debate has become increasingly significant as the government attempts to balance affordable electricity with the financial sustainability of the power sector.

Although operators have warned of worsening supply disruptions, there is currently no evidence of an imminent nationwide grid collapse solely because of the debt crisis.

However, if more gas suppliers suspend deliveries to indebted generation companies, available generation capacity could decline, increasing pressure on an already constrained electricity system.

For consumers, this could translate into longer hours without power, greater dependence on diesel and petrol generators, higher operating costs for businesses and potentially increased pressure for further electricity tariff reforms.

The situation also raises broader concerns about investor confidence. Without a financially sustainable electricity market, attracting new investments into generation, gas infrastructure and transmission may become increasingly difficult.

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The Federal Government maintains that the debt repayment programme demonstrates its commitment to restoring confidence in the electricity market and honouring obligations to investors. The successful execution of the first bond tranche has been presented as evidence that reforms are gaining traction.

Generation companies, however, insist that debt repayment alone will not solve the sector's problems.

Their message is straightforward: unless the structural liquidity crisis is addressed, including improved market collections, realistic subsidy funding and timely payments across the electricity value chain, fresh debts will continue to accumulate, gas suppliers may continue restricting fuel supplies and electricity generation will remain vulnerable.

The latest dispute therefore highlights a familiar challenge in Nigeria's power sector: fixing yesterday's debts without preventing tomorrow's may only postpone, rather than resolve, the country's electricity crisis.