Power Crisis: Gencos Decry N6.2 Trillion Debt as Grid Utilization Collapses to 25%

ABUJA — Nigeria’s power generation companies (Gencos) have linked the nation’s chronic electricity shortage to ₦6.2 trillion in unpaid debts and severe regulatory distortions. Despite an installed capacity of 15,500 megawatts, the national grid currently utilizes a meager 4,000MW on average. This represents a dismal 25.8 percent capacity utilization, a figure the Association of Power Generation Companies (APGC) describes as a national anomaly. In a clarifying statement issued yesterday, February 23, 2026, the APGC warned that the Nigerian Electricity Supply Industry (NESI) is effectively bankrupt. Consequently, investors lack the commercial justification to rehabilitate equipment when 7,000MW of mechanically available power remains stranded. While it is true that the government seeks to expand the grid, the current liquidity crisis threatens to derail all short-term expansion goals.

The APGC Chief Executive Officer, Dr. Joy Ogaji, argued that the market has abandoned the principle of “capacity payment.” Under international best practices, generators receive compensation for making power available, regardless of whether the grid actually wheels it. Furthermore, the Gencos incur fixed costs for labor, debt servicing, and maintenance to keep turbines in a state of readiness. In a related development, the System Operator frequently instructs plants to “ramp down” to maintain grid stability due to transmission weaknesses. Indeed, the current framework only pays for “called-up” energy, leaving generators to bear the massive costs of idle machinery. For this reason, many Gencos are now technically insolvent, struggling to manage foreign exchange exposure and soaring gas costs.

The absence of firm Power Purchase Agreements (PPAs) makes securing gas supply almost impossible for most operators. Gas suppliers demand contractual backstops before committing volumes, yet only a handful of active PPAs exist in the current market. Similarly, the Multi-Year Tariff Order (MYTO) appears to have failed in its core objective of ensuring full cost recovery. Granted, the government has attempted several interventions, but only 35 percent of recent invoices have been settled. Notably, the APGC insisted that their ₦6.2 trillion debt claim is verified by rigorous meter data and market operators. Above all, the association maintains that the industry is shielding downstream inefficiencies at the expense of those who actually generate the power.

Significantly, the inability to store electricity means that generation planning depends entirely on the health of the transmission and distribution networks. Subsequently, the Gencos warned that poor performance has become contagious across the entire energy value chain. Although the 2023 Electricity Act allows for decentralization, the legacy debts of the central grid remain a significant barrier to new investment. Therefore, the Federal Government must restore contract sanctity and incentivize available capacity to bridge the widening energy gap. As a result of this ₦6.2 trillion debt, the risk of a total system collapse remains uncomfortably high.