GenCos threaten shutdown over N4tr debt as Band A customers protest

• Demand immediate payment of N4tr debt
• Manufacturers may continue to desert grid over collapse, seek fresh subsidies 
• Metering gap, payment for wire, transformers worsen service delivery 

One year after increase in electricity tariff for band A customers, businesses and homes yesterday, decried poor service delivery by electricity firms as generation companies insist on shutdown of power plants as a result of over N4 trillion liquidity crises.  

Yesterday, electricity generation on the grid remained below 5,000 megawatts as sources at the Nigerian Electricity Regulatory Commission (NERC) told The Guardian that the commission, which had last week sanctioned some distribution companies (DisCos), confirmed below-par service delivery. 

Some manufacturers also told The Guardian that more operators are deserting the grid over reliability issues, insisting that the current bills being paid by businesses remain unsustainable for production and may not lead to employment generation.  

Stakeholders are also raising concerns about the slow pace of metering, adding that transparency in billing remained a challenge amidst rising energy theft and compromise by electricity workers. 

On Monday, the Association of Power Generation Companies (APGC), in a statement signed by its Chairman, Board of Trustees, Sani Bello, said ongoing liquidity crisis in Nigeria’s power generation sub-sector is on the brink of collapsing the plants as mounting unpaid invoices, totalling over N4 trillion threaten their operations.

Bello said the operators are considering shutting down their operations, a development that may throw the nation into deeper darkness.  Stressing that their plants may no longer be able to generate power if urgent financial interventions are not implemented, Bello said: Power generated by GenCos continues to be consumed in full without corresponding payment.”

 “We are owed 4 trillion; N2 trillion from 2024 operations and N1.9 trillion in legacy debt, with no bankable financing plan in sight. This situation is unsustainable.”

The operators said despite partial contract activation and new market regulations since July 2022, GenCos only received between nine per cent and eleven per cent of their market invoices due to the controversial ‘payment waterfall’ system, which prioritises 100 per cent payment to government institutions such as the Nigerian Bulk Electricity Trading Plc (NBET), Market Operator (MO), and the Nigerian Electricity Regulatory Commission (NERC).

“GenCos have continued to ramp up capacity as contractually agreed. But system constraints, forex volatility, and regulatory inconsistencies, compounded by inadequate market remittances, are rendering the sector commercially unviable,” Bello said.  

In April last year, NERC introduced over 300 per cent increase in electricity tariff, especially for band A customers and has since drastically increased the number of customers under the band but end users told The Guardian that services remained relatively poor as the cost of energy affects production costs and deprives workers off substantial part of their income.  

 A former Chairperson of the Manufacturers Association of Nigeria (MAN), Rivers/Bayelsa States Chapter, Emelia Ekama Akpan, raised alarm over the growing exodus of manufacturers from the national power grid, citing unreliable electricity supply and rising tariffs as key reasons for the shift.

Akpan, who is also the Founder and Chief Executive Officer of Shower Group, described the current electricity situation as a major threat to industrial growth, warning that many manufacturers are now opting for off-grid solutions, particularly solar energy, to remain in business.

“Most manufacturers are asking to be removed from the grid. Businesses are going off-grid, especially solar, because the grid is not reliable,” Akpan said.  

Since NERC introduced the tariff increase, the grid has witnessed more 12 grid collapses which has thrown home and industry into darkness. 

Akpan, however, admitted that there has been some improvement in supply but that the cost has gone up. 

“In developed countries, electricity is subsidised for production. But here, we are living at the mercy of government.”  She lamented that the erratic supply and skyrocketing electricity bills are crippling industrial productivity, adding that the current environment is neither sustainable for manufacturers nor attractive for investment.

Akpan decried what consumers go through before a meter, which is also expensive as she suggests subsidies for industrial hubs or soft loans that would enable more people meet affordable electricity in manufacturing hubs. 

 A source at the Nigerian Electricity Regulatory Commission (NERC) admitted that the recent electricity tariff hike has not significantly improved service delivery, despite temporarily boosting liquidity in the power sector.

Speaking to The Guardian on condition of anonymity, the source said, “Delivered capacity to DisCos hasn’t changed much since the last review, so the impact on service delivery can’t be validated.”

The official, however, noted that the policy initially raised payments to generation companies (GenCos) from about 15–19 per cent of market invoices to 40 per cent but said the gain is now declining, due to reduced payments by Band A customers.

“You may argue it didn’t solve the liquidity crisis, and it wasn’t intended to, but settling just 20 per cent of invoices wasn’t sustainable. Without that intervention, the market would have been in chaos, especially with the federal government failing to cover shortfalls,” the source said.

They urged journalists to probe why the federal government has yet to provide promised subsidies. “Start by confirming how much was budgeted for 2024 and 2025 versus what is required and how much has been disbursed since May 2023. That’s where the real issue lies.”

One year after the electricity tariff hike under the band system, former president of the Chartered Institute of Bankers of Nigeria, Prof. Segun Ajibola, said Nigeria’s power sector remains plagued by deep-rooted problems, says.

Ajibola, an economics professor at Babcock University, said the increase barely scratched the surface of Nigeria’s power crisis. “The low level of metering, electricity theft, abuse of estimated billing, and failure to meet band-specific supply promises make revenue boost difficult,” he noted.

He called for a complete overhaul of the sector, warning that pushing tariffs without addressing structural and institutional failures in generation, transmission, and distribution leaves consumers paying more for unreliable power.

Energy expert, Emeka Ojoko said electricity distribution companies (DisCos) are failing to meet the minimum 20-hour daily supply promised to Band A customers, yet NERC continues upgrading feeders without enforcing compliance.

Ojoko linked the worsening power supply to rising debts. With power costs quadrupling, many homeowners now rely on solar, while manufacturers are abandoning the grid, a shift Ojoko warns could severely undermine the sector’s financial stability.

Electricity analyst, Lanre Elatuyi said removing subsidies for Band A customers has eased the federal government’s burden and boosted DisCos’ revenue, but the policy remains unfair to those not receiving the promised 20-hour supply.

While grid power remains cheaper than self-generation, Elatuyi noted that complaints persist due to poor service and weak oversight.   He urged better monitoring and timely complaint resolution to ensure fairness and sustain gains in sector liquidity.

A market analyst and founder of Empower Consult Africa, Dr. Abubakar Ibrahim, noted that most electricity distribution companies (DisCos) have made commendable efforts to deliver the minimum 20-hour supply to Band A feeders, resulting in improved reliability for some consumers. 

However, he pointed out persistent issues with feeder mapping, consistency, and fault resolution.

“The tariff hike has boosted revenue collection marginally, aiding the settlement of market operator bills to NBET and GenCos,” he said.  While many businesses have welcomed the improved power supply and reduced reliance on diesel and petrol, Ibrahim said the burden of higher bills has been tough on residential users already struggling with inflation and economic hardship. He called for better oversight and targeted support to ensure fairness and sustainability in the electricity market.

SOURCE: Guardian Nigeria