FG to Pay N2tn Out of N4tn Power Sector Debt by Year-End – Minister Adelabu

The Federal Government is set to pay off N2 trillion out of the N4 trillion debt owed to electricity generation companies (Gencos) before the end of 2025, according to the Minister of Power, Adebayo Adelabu.

The announcement came during the sixth edition of the 2025 Ministerial Press Briefing Series in Abuja, where the minister addressed concerns surrounding rising energy costs, unpaid subsidies, and recent electricity tariff adjustments.

Payment Plan: Cash and Promissory Notes

Adelabu revealed that the N2 trillion payment would be made through a combination of cash disbursements and promissory notes. He said discussions are ongoing with the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, who has committed to settling the debt via budgetary allocations or debt instruments.

“These promissory notes will be liquid enough to be used at banks for immediate cash needs,” Adelabu explained, adding that the aim is to stabilize the sector and prevent Gencos from shutting down their plants.

Gencos Threaten Shutdown Over N4tn Debt

The urgency comes amid growing pressure from power generation companies, who recently warned that the over N4 trillion debt owed by the government has left them on the verge of halting operations.

In a statement issued through the Association of Power Generation Companies (APGC), the Gencos expressed frustration over what they described as “inadequate payment for electricity generated and consumed on the national grid.”

Unpaid Subsidies Behind the Debt

The power minister explained that the accumulated debt is primarily from unpaid electricity subsidies, with about 50% being legacy debt and the rest incurred during the 2024 fiscal year.

“These debts are unpaid subsidies of the Federal Government owed to power generation companies. Almost half of it was inherited, while the rest came from operations in 2024,” Adelabu said.

Electricity Pricing: Only 15% Pay Cost-Reflective Tariffs

Adelabu also shed light on the electricity pricing gap that’s worsened the sector’s financial crisis. He revealed that while the true cost of power generation stands at N170 per kilowatt-hour, 85% of consumers pay only N60, with only 15% (Band A customers) paying the actual cost of N209/kWh.

“We’ve only managed to reduce the subsidy burden by 35% through recent tariff reforms,” he noted.

Restructuring, Not Eliminating Subsidies

Addressing concerns about affordability, the minister emphasized that the government is not eliminating subsidies, but is working to target them more effectively.

“In the past, subsidies mostly benefited high-consuming households. We are restructuring the system so that only low-income, low-consumption households enjoy subsidies going forward,” he stated.

Accountability for DisCos

The minister also vowed stronger oversight of electricity distribution companies (DisCos), warning that any DisCo charging Band A rates without delivering at least 20 hours of electricity daily will face penalties.

Tariff Reforms Boost Market Revenue by N700bn

Despite public discontent over the latest electricity tariff hike, Adelabu highlighted the financial gains achieved. Thanks to the cost-reflective tariffs for Band A customers, market revenue jumped by 70%, rising from N1 trillion in 2023 to N1.7 trillion in 2024.

“This demonstrates that financial viability and improved service delivery can coexist. The reforms are working,” he concluded.