Nigeria slashes power sector claims by 30%, rolls out N3.3tn phased settlement

Abdullateef Fowewe

The Federal Government of Nigeria has unveiled details of a major financial overhaul in the power sector, confirming a negotiated settlement of ₦3.3 trillion after verifying longstanding claims.

According to a statement from the Presidency released on Thursday, the reforms address accumulated debts totaling approximately ₦4.7 trillion across the electricity value chain from 2015 to 2025.

Following a Presidential stakeholder meeting in July 2025 and a thorough review recommended by President Bola Tinubu, the Federal Executive Council approved a ₦4 trillion fiscal cap on August 15, 2025.

This led to a 30% reduction in claims, settling on only “valid and contract-backed obligations,” the statement said.

Implementation is underway through a market-based financing framework to ensure sustainability. It includes:

• Series I Programme Size: Approximately ₦1.23 trillion.

• Series I, Phase I (January 2026): ₦501 billion raised from the domestic capital market.

Disbursements have begun, with ₦223 billion already paid to Generation Companies and gas suppliers, and ₦197 billion in process, primarily for gas obligations. All payments are “phased and conditional, based on verified claims, signed settlement agreements, and completed documentation.”

Progress has accelerated: As of January 8, 2026, five Generation Companies covering 14 power plants signed agreements worth ₦827 billion. By March 31, 2026, eight companies (two public, six private) covering 17 plants had signed for approximately ₦2.28 trillion, showing “growing alignment and participation across the sector.”

The initiative pairs financial relief with broader reforms, such as tariff adjustments for higher service bands to reflect costs, while protecting affordability for poor households.

“The programme is designed to restore liquidity, stabilise generation, improve reliability, and reposition the sector for long-term sustainability,” the statement emphasised.

It marks “a shift from unverified claims to disciplined, transparent, and market-backed obligations,” and is positioned as “not a one-off intervention but a structured effort to reset the financial and operational foundations of Nigeria’s power sector.”

The government reaffirmed its commitment to delivering “a stable, reliable, and investable electricity market for the benefit of all Nigerians.”