‘N1.92trn Subsidy Debt, Absence Of Funding Threaten Power Sector Stability’

PowerUp Nigeria, a power sector advocacy group, has said, Nigeria’s power sector hangs precariously at the edge of a huge crisis given the huge outstanding government subsidies, which is now in the region of N1.92 trillion.

According to a report, federal government subsidies to the Nigerian Electricity Supply Industry (NESI) is within the region of  N1.92 trillion as at last year with Electricity Distribution Companies (DisCos) struggling to improve revenue collection.Executive director, PowerUp Nigeria, Adetayo Adegbemle, while reacting to the debt also expressed concern about the federal government’s  failure to activate the Power Consumer Assistance Fund (PCAF) by the first quarter of 2025, calling it a major setback in resolving Nigeria’s electricity liquidity crisis.

Adegbemle explained that the delay in activating PCAF puts the sector deeper into a financial crisis.

According to him, “With subsidies ballooning to N200 billion monthly and GenCos receiving only 39 percent of their invoices by December 2024, the sector risks deeper instability. However, this delay need not spell collapse. A combination of adaptive policies, stakeholder collaboration, and accelerated reforms can still steer the sector toward recovery.

“To bridge the PCAF gap, the government must immediately establish an emergency liquidity facility backed by multilateral development partners or sovereign guarantees.

This fund could temporarily cover a portion of the subsidy burden while fast-tracking PCAF’s operationalisation. Simultaneously, NERC should mandate DisCos to ring-fence revenue from Band-A customers (who pay higher tariffs) exclusively for settling GenCos’ invoices, ensuring at least 50 per cent payment compliance. Such measures would prevent further erosion of investor confidence and keep gas suppliers engaged”.

A report by the Nigerian Electricity Regulatory Commission (NERC) in its Q4 2024 electricity sector review, showed that DisCos remitted only N336.6 billion out of the total N832.6 billion invoice from the Nigerian Bulk Electricity Trading Company (NBET). The DisCos’ Remittance Obligation (DRO) for the quarter stood at N360.9 billion.

The report also showed that foreign countries supplied electricity by power generation companies in Nigeria paid just 37 percent of the $14.05 million worth of power sent to them.

The NERC report, disclosed that six international bilateral customers being supplied by GenCos in NESI made a payment of $5.21 million against the cumulative invoice of $14.05 issued by the Market Operator, MO, for services rendered in Q4 2024.