By Otega Ogra
The Federal Government of Nigeria is implementing a structured and balanced reform programme to address longstanding financial challenges in the power sector. At the core of this effort is a market-based settlement mechanism designed to restore the sector, not reward accumulated claims that extend beyond verifiable service delivery. The objective is to ensure fairness to operators while also protecting the interest of the Nigerian public.
Between 2015 and 2025, the sector accumulated approximately ₦4.7 trillion in claims across the electricity value chain. Following a Presidential stakeholder meeting in July 2025 where the claims of N4.7trillion were presented, a thorough review was recommended by President Bola Tinubu. On August 15, 2025, a ₦4 trillion fiscal cap was approved by the Federal Executive Council following which a comprehensive verification process was undertaken to verify claims.
This resulted in a 30 percent reduction in claims, leading to a final negotiated settlement of ₦3.3 trillion, reflecting only valid and contract-backed obligations.
To ensure sustainability and avoid fiscal pressure, the settlement is being implemented through a phased, market-based financing framework.
• Total Series I Programme Size: approximately ₦1.23 trillion
• Series I, Phase I (January 2026): ₦501 billion raised from the domestic capital market
Disbursement is already underway:
• ₦223 billion has been disbursed to Generation Companies and gas suppliers.
• ₦197 billion is in process, largely for gas-related obligations
All disbursements are phased and conditional, based on verified claims, signed settlement agreements, and completed documentation.
Implementation Progress
• As at January 8, 2026:
Five (5) Generation Companies covering fourteen (14) power plants had signed settlement agreements valued at approximately ₦827 billion
• As at March 31, 2026:
Eight (8) Generation Companies (2 public and 6 private), covering seventeen (17) power plants, have signed their settlement agreements valued at approximately ₦2.28 trillion
This reflects growing alignment and participation across the sector.
The financial settlement is also being implemented alongside broader reforms designed to strengthen the sector, including targeted support to ensure affordability for poor and vulnerable households, and tariff reforms aligning higher service bands with cost-reflective pricing to support investment and improve service delivery
The programme is designed to restore liquidity, stabilise generation, improve reliability, and reposition the sector for long-term sustainability.
It also reflects a shift from unverified claims to disciplined, transparent, and market-backed obligations.
Note: This is not a one-off intervention but a structured effort to reset the financial and operational foundations of Nigeria’s power sector.
The Federal Government remains committed to ensuring that the reforms deliver a stable, reliable, and investable electricity market for the benefit of all Nigerians.
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