At the 111th edition of Nextier Power Dialogue, energy experts identified weak enforcement, policy inconsistency, and unreliable customer data as key barriers to progress. They urged the government to implement the approved bond repayment plan, enforce market discipline, and adopt reforms that attract credible investors rather than deter them.
The session, hosted by The Electricity Hub on Wednesday, October 29, was titled: “Building a Sustainable Power Market: Balancing Debt Recovery, Liquidity, and Investment.”
The panel, moderated by Osa Imoukhuede, Director of Infrastructure and Investment at Nextier, featured notable speakers, including Dr Joy Ogaji, Chief Executive Officer/Executive Secretary of the Association of Power Generation Companies; Itohan Ehiede, General Manager, Guarantees and Risk Management Department at the Nigerian Bulk Electricity Trading Plc; and Abdulaziz Faghi, Lead Energy Specialist at The World Bank.
Financial Strain
Dr Joy Ogaji, in her opening remark, stated that several generation companies (GenCos) are currently struggling financially, with many unable to pay staff salaries or carry out mandatory maintenance activities, as such maintenance requires foreign exchange, particularly U.S. dollars, which has become increasingly difficult to access.
Dr Ogaji expressed concern that most Gencos did not attend the Association of Power Generation Companies’ (APGC) tenth anniversary, marked on October 27, 2025. She noted that the workshop held to commemorate the milestone revealed that only five GenCos had paid their annual dues — a situation that, according to her, was unprecedented.
The APGC CEO highlighted the worsening financial state of GenCo investors, explaining that despite the President’s approval in July of a ₦4 trillion bond to address sector liquidity challenges, bureaucratic and political bottlenecks have stalled its implementation. She clarified that the ₦4 trillion bond was intended to cover outstanding debts accumulated between 2015 and 2024; however, since the issue remains unresolved, debts for 2025 are already accumulating.
Dr Ogaji pointed to reports from the Nigerian Electricity Regulatory Commission (NERC) that document these growing financial obligations.
Responding to a question on what reforms or financial instruments could help improve payment discipline and cash flow along the electricity value chain, Dr Ogaji emphasised the need for a comprehensive reassessment of the sector.
She remarked that as the twelfth anniversary of power sector privatisation approaches, stakeholders must ask themselves whether the fundamental structures of the industry are truly sound. She disclosed that several investors had initially shown interest in investing in Nigeria’s power sector, but after reviewing NERC’s quarterly reports and seeing the extent of the debts, many withdrew their interest.
Dr Ogaji further observed that under the current Power Purchase Agreement (PPA) arrangements, only an investor seeking to launder money would likely invest, as genuine investors conducting a proper cost-benefit analysis would be deterred by the market’s opacity.
She lamented that twelve years after privatisation, there is still no accurate data on the number of electricity customers, the number being billed, or the validity of the figures available, which, according to her, “are not numbers one can take to the bank.”
The APGC Executive Secretary described Nigeria’s power sector as “a beautiful bride with many suitors,” recalling that during the 2011 privatisation roadshows held in six global cities, including Washington D.C., 170 consortia had expressed interest and purchased bid documents. However, when the challenges in the sector became apparent, all but the local investors withdrew.
She commended patriotic Nigerian investors who stepped in to prevent the government from facing embarrassment, but stressed that the same issues that had driven away foreign investors in 2011 must now be investigated and resolved.
In addition, Dr Ogaji explained that contracting remains a significant conundrum in Nigeria’s energy sector. She noted that the legacy power plants, or GenCos, were given a template Power Purchase Agreement (PPA) at the time of privatisation, with the assurance that they would later negotiate detailed terms with NBET. However, she stated that this negotiation window has never been opened to the GenCos, leaving them bound by the provisions unilaterally determined by NBET.
According to her, effective contracting operates like a circle, with NBET as the offtaker expected to issue a Letter of Credit (LoC) to the GenCos, who in turn would post a corresponding LoC to their gas suppliers to make the Gas Supply Agreements (GSAs) effective. She observed that when NBET declares a GenCo’s contract ineffective, NBET itself is often the cause of such ineffectiveness but is not penalised for it, whereas GenCos are.
The APGC CEO added that the bond instrument being considered is a discountable one and noted that GenCos are heavily indebted to gas suppliers. “Out of every one hundred naira in a GenCo’s invoice, seventy naira belongs to the gas suppliers,” she explained, warning that the proposed bond alone will not be sufficient to address the liquidity crisis facing the generation companies.
Dr Ogaji further emphasised that the much-discussed bond repayment plan remains inconclusive from the perspective of the GenCos. She recalled that since the meeting with the President on July 25, there have been repeated assurances that action would be taken “in a few weeks,” yet as of October, no concrete step has been taken.
She questioned how “few” those weeks truly are, stressing that the delay has financial implications as creditors lose confidence and some banks have begun taking over GenCos due to defaults on acquisition loan repayments.
Investment Safeguard
From NBET’s Lens, Ehiede explained that the bulk trader was established to guarantee new investments in Nigeria’s power sector. She noted that for this to happen, the company needed to be adequately capitalised.
Initially, NBET was capitalised with $850 million, part of which was deployed for the Azura project. Ehiede clarified, however, that such capitalisation is meant to be a revolving fund, not one to be spent outright. Over time, she said, the fund has been eroded due to non-cost-reflective tariffs and the failure to adhere to contractual obligations.
According to Ehiede, the challenge facing the sector is not about the market model itself, but rather about the effectiveness of commercial contracts. She pointed out that while a contract may appear sound on paper, it can prove unrealistic in practice. For the sector to function efficiently, she emphasised, Nigeria must ensure that contracts are both effective and aligned with market realities.
Ehiede stated that the successful implementation of contracts depends largely on regulation. While she acknowledged that Nigeria has strong regulatory frameworks, she identified poor enforcement as a major challenge.
Speaking on the debt situation, the NBET General Manager acknowledged that GenCos are owed about ₦4 trillion, a figure that emerged after reconciliation between GenCos, gas suppliers, and NBET.
She explained that following a presentation to the President, approval was granted for settling these debts. However, given the current state of the economy, it was determined that ₦4 trillion could not be disbursed at once. Instead, Ehiede said, payment will be made in tranches, beginning with the first tranche of ₦1.23 trillion, which has already been approved.
She disclosed that NBET is preparing to raise funds from the market in the coming weeks, adding that the approval includes provisions for GenCos to receive bonds or promissory notes if sufficient cash is not immediately available.
Ehiede acknowledged the bureaucratic hurdles but expressed optimism, describing the development as a potential “record-breaking achievement.” She added that NBET will soon launch its prospectus, and by mid-November, tangible progress is expected in the bond issuance process.
Ehiede further revealed that $350 million of NBET’s capitalisation was sourced through a Eurobond loan, which had to be repaid after five years. She clarified that the company did not fully utilise the $350 million allocation, which was part of a larger $1 billion Eurobond facility, and had to return the unused portion with interest. Despite the debt component, she said, the repayment obligations were met in full.
She explained that part of NBET’s funds had been used to backstop payments in the electricity market, particularly to cover shortfalls arising when distribution companies (DisCos) fail to remit full payments. These shortfall payments, she said, were critical to ensuring that GenCos received the tariff differentials owed to them.
When asked what Nigeria must do to restore the confidence of lenders and development finance institutions (DFIs), Ehiede underscored the importance of policy consistency. She said investors are primarily looking for predictable policies, the clearance of existing debts, the plugging of financial leakages, and the establishment of a tariff structure that can sustain the electricity market.
Systemic Reform
Furthermore, Faghi addressed the question of how the Bank’s new financing initiatives are designed to support systemic reforms and strengthen governance in Nigeria’s power sector. He explained that the World Bank’s approach is always guided by the best interests of each country, considering both global perspectives and local contexts.
Faghi noted that reforms are often perceived negatively, but in reality, systems that do not evolve become obsolete. He emphasised the need for a change in mindset, stating that while specific policies or models may have made sense in the past, changing contexts require new approaches and continuous adaptation.
According to the World Bank’s Lead Energy Specialist, the institution’s work is firmly grounded in investment strategies that reinforce sector fundamentals and ensure a conducive environment for sustainable investments.
He clarified that the goal is not necessarily for the World Bank itself to fund all investments, but rather to create conditions that attract private capital. “All our programmes with governments are designed to strengthen the sector’s fundamentals,” Faghi said, adding that public financing is used strategically where it makes sense, but always with a clear plan to enable private-sector participation.
Faghi highlighted that one of the major achievements, as earlier mentioned by Ehiede, is the establishment of a structured plan to settle arrears owed to generation companies. He explained that the World Bank has long advocated for such measures, as paying arrears is crucial to restoring investor confidence in the power sector.
He added that beyond clearing existing arrears, the focus must also be on preventing the accumulation of new ones. To this end, the Bank is working closely with sector counterparts to design and implement a methodical, results-driven approach that addresses the underlying issues causing arrears, while also ensuring a gradual reduction in the sector’s debt trajectory.
The World Bank specialist further observed that eliminating debt overnight is unrealistic due to structural issues within the sector, including losses in physical infrastructure and operational inefficiencies.
However, Faghi expressed optimism that with the right frameworks in place, these challenges can be reduced to near zero over time. He emphasised the importance of establishing sustainable financing structures based on robust sector fundamentals and high-performing institutions across generation, transmission, and distribution.
According to him, these measures are integral to the World Bank’s ongoing dialogue and engagement with Nigeria’s energy sector.
Additionally, Imoukhuede, who moderated the session, stated that the discussion addressed one of the most pressing challenges in Nigeria’s power sector. This massive debt burden weighs down the entire value chain. He explained that from GenCos and gas suppliers to NBET and other service providers, the financial overhang continues to stifle liquidity and discourage new investments in the sector.
Experts also called on Investors, regulators, and development partners to collaborate in creating a predictable policy environment, clearing existing debts, and establishing sustainable financing structures. Only through decisive reforms and disciplined execution can liquidity be restored, investor confidence renewed, and a resilient, investment-ready power market be built for Nigeria’s future.