Hot SourceBy Ugo Inyama
Nigeria’s approval of a ₦4 trillion ($2.61 billion) debt refinancing plan for its troubled electricity sector is both bold and necessary. The intervention seeks to clear nearly a decade of arrears owed to 27 power generation companies—debts that have crippled liquidity and discouraged investment since 2015 (Reuters, 2025a). By issuing bonds through the Debt Management Office, the government hopes to ease immediate pressure and restore confidence. Yet the deeper question is whether this bailout signals genuine reform or simply extends a recurring cycle of debt and rescue.
The electricity sector’s challenges go far beyond unpaid bills. Eleven years after privatisation, generation remains stuck at an average of 4,000 megawatts daily—barely enough to power a mid-sized city, let alone a nation of over 220 million people. Gas shortages, grid collapses, and vandalism persist. Distribution companies, expected to be the commercial backbone of the sector, are financially distressed, with more than half currently under receivership (Reuters, 2025b). For businesses, the outcome is an overreliance on costly diesel generators; for households, it is erratic supply that undermines quality of life.
The government has presented this bailout as part of a broader reform package. Alongside the refinancing comes a 35% reduction in subsidies and tariff adjustments for urban consumers. These measures are projected to save more than ₦1.1 trillion annually and create conditions for financial sustainability (Reuters, 2025c). The logic is straightforward: a sector dependent on subsidies cannot attract serious private capital. Yet the risks are evident. Nigerians, already squeezed by inflation, currency depreciation, and high living costs, will expect tangible improvements in electricity supply as we move towards cost-reflective tariffs, without progress, reforms risk being viewed as added hardship rather than meaningful solutions.
History also tempers optimism.
• In 2017, the ₦701 billion Payment Assurance Facility (PAF) was launched to cover GenCo debts.
• In 2019, another ₦600 billion intervention followed.
• In 2020, a ₦1.5 trillion CBN power sector intervention was rolled out during the COVID-19 recovery programme.
• In 2021, an additional ₦140 billion loan was announced, targeted at mass metering.
Each of these efforts provided temporary relief but failed to address fundamental weaknesses: weak regulation, policy inconsistency, and poor enforcement. The Association of Nigerian Electricity Distributors (ANED) reports that ministries, departments, and agencies (MDAs) owe distribution companies over ₦200 billion in unpaid electricity charges, undermining liquidity and weakening reform efforts (ANED, 2023; Punch, 2024). The result was predictable—arrears piled up again, dragging the sector back into crisis. This culture of MDAs and other politically protected entities failing to pay their electricity bills sends the wrong signal to consumers and discourages compliance across the system. Unless today’s much larger bailout is anchored by credible reforms and stronger governance, it risks becoming yet another temporary patch.
The broader development stakes make success imperative. Reliable electricity is not simply a utility but the backbone of growth. It powers factories, drives innovation, and keeps hospitals and schools functioning. Every blackout inflates the cost of production and undermines competitiveness. The World Bank (2021) estimates that Nigeria loses $29 billion annually due to unreliable power. No serious diversification or industrialisation agenda can succeed under such conditions. For Nigeria’s economy to grow beyond oil, stabilising the power sector is indispensable.
For the Federal Government, this bailout is both opportunity and test. It signals seriousness in addressing a long-standing obstacle, but it also raises expectations among citizens, investors, and international partners. Success could unlock long-delayed investment and mark a turning point in Nigeria’s reform trajectory. Failure, however, would deepen public cynicism and reinforce the perception that the power sector is trapped in cycles of bailout and relapse.
Ultimately, the ₦4 trillion bailout should be seen as both lifeline and warning. It offers critical relief, but it cannot be mistaken for a solution in itself. Nigeria must pair this intervention with stronger governance, stricter regulation, and transparent accountability. Without these, the cycle of crisis and rescue will persist. What the country needs is not another patch, but a sustainable path forward that finally delivers the electricity to power its economy and transform lives.
- Ugo Inyama writes from the African Digital Governance Centre, Manchester, UK
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