SPECIAL REPORT: Why Shortfalls In Remittances To Nigerian Electricity Market Persist

The key driver of every market across the world is high liquidity rate, without which the market collapses. In fact, it is the lifeblood of any market; an ease with which assets are bought and sold, creating balance by attracting both speculators and investors.

This is not the case with the Nigerian electricity market. In the Nigerian electricity market, issues of liquidity, lack of investment in infrastructure, and shortfalls in remittances are well pronounced.

For instance, the Nigerian Electricity Regulatory Commission (NERC), in its Q3 2025 report revealed that out of the ₦854.53 billion total energy offtake by all the Distribution Companies (DisCos) in the country, only a total sum of ₦381.29 billion was remitted to the electricity market in that quarter. Leaving a huge unremitted sum of ₦473.24 billion, driven obviously by tariff shortfall with market shortfall accounting for the small difference.

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To be more precise, the report revealed that although the total energy received by all the DisCos in 2025/Q3 was 7,348.95GWh, the energy billed to end-use customers was only 6,158.54GWh. This translates to an overall energy accounting efficiency of 83.80% and represents a 1.37pp increase compared to 2025/Q2 (82.43%).

It said the naira value of the total energy offtake by all the DisCos in 2025/Q3 was ₦854.53 billion, and the total energy billed was ₦706.61 billion, which translates to a billing efficiency of 82.69%. Out of this amount, the DisCos remitted a total sum of ₦381.29billion in the Third Quarter (Q3) of 2025.

These shortfalls in remittances are often due to high technical and commercial losses in the market. A large hunk of the energy billed to the DisCos are often lost due to aging infrastructure, poor maintenance, and inadequate distribution networks.

Also, according to NERC, out of the 12,163,412 active electricity customers in Nigeria, only about 6,966,584 are metered by the DisCos, combined with illegal connections, theft, and meter bypass, the results is huge percentage of electricity being consumed without being paid for.

The DisCos, even at this age of technological advancement and Artificial Intelligence (AI) still struggle with revenue collection from customers, with a significant amount of energy billed remaining unrecovered. They also hold back more than their fair share of the market funds.

Other challenges causing losses in the electricity market include the refusal of consumers, including government Ministries, Departments and Agencies (MDAs), and military units, to pay their electricity bills, inability to implement cost reflective tariffs, limited gas supply for generation and transmission bottlenecks.

This cycle of unremitted revenue due to tariff and market shortfalls has not only retarded the progress that should have been made in the power sector, but is gradually collapsing the nation’s electricity value chain. Growth is now impaired due to illiquidity.

For many years, there is inadequate risk protection for the Generation Companies (GenCos) and low remittances have kept the sector at about 4,000MW of average grid generation, not withstanding an installed capacity of 15,500MW.

This is grossly inadequate for the nation’s electricity demand which currently stands at 30,000MW.

At the moment, the GenCos in the country have six (6) Hydro-power plants and twenty-six (25) Thermal power plants, with a generating capacity of 15,500MW. The privatisation of the assets was completed in 2013, with fresh capital injected to ensure efficiency and cost-effectiveness.

With the huge capital invested, the GenCos increased generation, and improved the operational performance of the companies. Unfortunately, the power they generate could not be fully evacuated or distributed, and the little distributed is consumed and not paid for.

For instance, the debts owed to the GenCos is over N6.2 trillion. These debts continue to accumulate because GenCos are not fully paid for their output, despite incurring high costs for gas supply, plant maintenance, foreign exchange exposure, and financial obligations.

The persistent non-payment has rendered most of the GenCos technically insolvent, and has severely constrained their ability to invest in capacity maintenance and expansion.

Nigeria currently depends on the thermal power plants, which account for about 75% of the electricity generated and consumed in the country.

Since the beginning of this year, these thermal power plants which depend on gas supply to operate optimally are hit by gas constraints, consequently, leading to drop in electricity generation and supply to homes and businesses in Nigeria.

Some power operators say the problem may persist till April or May when the Hydro-power plants are expected to come on stream.

With gas reserves of about 210 trillion cubic feet, the power sector is not supposed to face gas constraints. However, market inefficiencies and low remittances to the electricity market are some of the challenges bedeviling the sector.

Just recently, the Nigerian Independent System Operator (NISO) reported a drop in the electricity generation in the country nationwide due to gas constraints.

NISO said as at 05:00 hours of Thursday, 5th March 2026, total generation on the national grid stood at 3,940.53 MW, which was already below the expected capacity due to existing gas supply limitations impacting a number of generating stations.

It said between 06:00 hours and 08:00 hours, several generating units were forced to shut down as a result of inadequate gas supply to the plants.

This, accordingto the System Operator,  resulted in a cumulative reduction of approximately 292 MW in available generation on the grid during the period.

NISO said the operational data as of 04 March 2026 indicate that thermal power plants require approximately 1,588.61 million standard cubic feet (MMSCF) of gas per day to operate at optimal capacity. However, actual gas supply to these stations was approximately 652.92MMSCF, representing about 40% of the gas required for optimal generation.

Noting that these developments further reduced the total generation available for dispatch to the national grid and have contributed to the current generation inadequacy being experienced across the system.

GOVERNMENT PLEDGED TO OFFSET GENCOS’ DEBTS

In April last year, the Federal Government announced plans to settle a substantial portion of the N4 Trillion debt owed to the GenCos which has now increased to N6.2trillion.

Minister of Power, Chief Adebayo Adelabu, while speaking at the 2025 Ministerial Press Briefing Series in Abuja, said plans are in top gears with the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, to clear the debt through either budgetary allocation or guaranteed instruments such as promissory notes.

Adelabu assured that the promissory notes would be strong enough to be taken to banks to meet immediate cash needs.

In October last year, in response to the call for intervention to defray the debts, stabilise the electricity market and restore investor confidence, President Bola Tinubu approved a N4trillion bond to settle verified debts owed to the GenCos.

Also in October last year, the Federal Government and the GenCos finalised the implementation framework for the Presidential Power Sector Debt Reduction Plan. The Presidential Power Sector Debt Reduction Plan was a landmark initiative approved by President Bola Tinubu to address structural bottlenecks and lay the groundwork for large-scale private sector-led investment and sustained economic growth.

On Tuesday, 7 October 2025, in Abuja, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, the Minister of Power, Chief Bayo Adelabu, and the Special Adviser to the President on Energy, Mrs.Olu Verheijen, met with senior executives of Nigeria’s electricity generation companies (GenCos) to review settlement modalities for the outstanding debt.

The meeting concluded with a consensus on the way forward, which includes conducting bilateral negotiations to finalise full and final settlement agreements that balance fiscal realities with the financial constraints of the GenCos.

Approved by President Tinubu and endorsed by the Federal Executive Council (FEC) in August 2025, the plan authorises the issuance of up to N4trillion in government-backed bonds to settle verified arrears owed to generation companies and gas suppliers.

This intervention, the largest in over a decade, addresses the legacy debt overhang that has constrained investment, weakened utility balancesheets, and hindered reliable power delivery across the country.

In January this year (2026), the Nigerian Bulk Electricity Trading Plc (NBET) announced the successful close of the first tranche under the N4,000,000,000,000 Power Sector Multi-Instrument Issuance Programme, marking a critical milestone in the implementation of the Programme and reflects strong market confidence in the Government’s reform agenda for the power sector.

Recall that the inaugural bond issue of N501,021,000,000 comprises a fully subscribed N300,000,000,000 bond issuance to the market (Asset Managers, Banks, Pension Funds and Retail Investors) andN201,021,000,000 bond issued to Power Generation Companies (GenCos) that have signed the Settlement Agreement.

The 7-year bonds which were issued by NBET Finance Company PLC (a Special Purpose Vehicle established for this transaction) are fully guaranteed by the full faith and credit of the Federal Government of Nigeria.

NBET said the successful close of the ₦501billion bond represents a major step forward in resolving the long-standing challenge that has constrained the power sector for years.  

It said the intervention would significantly improve liquidity across the value chain, enable operators to stabilise their operations and support renewed investment in the Nigerian Power Sector.

However, Industry experts advocate suatianable solutions to multifaceted challenges in the sector. They believe that with adequate investment, cost reflective tariffs, proper metering of customers, and improved revenue collection, the sector would be in a better position for quality service delivery to Nigerians.