President Bola Ahmed Tinubu
Olamilekan Abayomi
President Bola Tinubu has approved a N3.3 trillion settlement plan to clear power sector debts accumulated over more than ten years, aiming to rescue Nigeria’s struggling power grid. This move is part of a broader structural overhaul to restore confidence in the power sector, ensuring gas suppliers are paid, power plants can keep running, and the system works more reliably.
The settlement targets legacy obligations piled up between February 2015 and March 2025, spanning three administrations. About 15 power plants have already signed settlement agreements totaling N2.3 trillion. The federal government has raised N501 billion toward funding these commitments, with N223 billion already disbursed.
The N3.3 trillion figure is a “full and final settlement” arrived at following independent verification, intended to foreclose future disputes over legacy obligations. By clearing verified legacy claims, Nigeria aims to restore cash flow, allowing generators to procure gas and run turbines closer to capacity, attracting private capital to the sector.
The power sector has been plagued by chronic underinvestment, disputed tariffs, and unpaid obligations across generators, gas suppliers, and distribution networks. This settlement aims to break that cycle. Analysts note that previous debt-relief announcements produced limited impact when funding fell short, so execution speed and sustained disbursements are crucial.
Nigeria operates one of the world’s most underperforming power sectors, generating less than 4,500 megawatts for over 220 million people, forcing businesses to spend billions on diesel generators. The government prioritizes electricity supply to industrial and commercial consumers, expecting quicker economic returns.
Parallel reforms include expanded metering and service-reflective tariffs, linking consumer billing to supply quality, a longstanding demand from multilateral lenders and investors. The goal is to make the sector commercially viable.
The settlement is seen as a decisive intervention, but its success depends on implementation and addressing underlying issues. The government aims to extend the settlement framework to remaining outstanding claims within the verified N3.3 trillion envelope.
