Nigeria’s Power Sector Financial Reforms: Setting the Facts Straight

Abuja, Nigeria | April 9, 2026

The Federal Government of Nigeria has reaffirmed its commitment to implementing a structured and balanced reform programme aimed at addressing longstanding financial challenges in the nation’s power sector. Central to this initiative is the introduction of a market-based settlement mechanism designed to restore financial stability across the electricity value chain, while ensuring that only verified and contract-backed obligations are honoured.

The reform programme seeks to strike a balance between fairness to operators and the protection of the Nigerian public interest. It is not intended to reward unverified or inflated claims but to ensure accountability and transparency in settling genuine liabilities.

Between 2015 and 2025, the power sector accumulated approximately ₦4.7 trillion in claims. At a Presidential stakeholder meeting held in July 2025, these claims were presented and subsequently subjected to a comprehensive review as directed by President Bola Ahmed Tinubu. Following this directive, the Federal Executive Council approved a fiscal cap of ₦4 trillion on August 15, 2025, paving the way for a detailed verification exercise.

The verification process resulted in a 30 percent reduction in the initial claims, bringing the final negotiated settlement down to ₦3.3 trillion. This figure reflects only valid obligations supported by contractual agreements and verifiable service delivery.

To ensure sustainability and minimise fiscal strain, the government adopted a phased, market-based financing framework for the settlement. Under this arrangement, the total Series I programme is valued at approximately ₦1.23 trillion, with ₦501 billion successfully raised from the domestic capital market in January 2026 under Phase I.

Disbursement of funds is already underway in line with strict conditions. So far, ₦223 billion has been disbursed to Generation Companies and gas suppliers, while an additional ₦197 billion is currently being processed, largely to address gas-related obligations. All payments are being executed in phases and are contingent on verified claims, signed settlement agreements, and complete documentation.

Progress in implementation has been notable. As of January 8, 2026, five Generation Companies, covering fourteen power plants, had signed settlement agreements valued at approximately ₦827 billion. By March 31, 2026, participation had increased significantly, with eight Generation Companies—comprising two public and six private firms—covering seventeen power plants, signing agreements worth about ₦2.28 trillion. This development reflects growing confidence and alignment among stakeholders within the sector.

Beyond financial settlements, the reform programme is complemented by broader policy measures aimed at strengthening the power sector. These include targeted interventions to ensure affordability for vulnerable households, as well as tariff reforms that align higher service bands with cost-reflective pricing. Such measures are expected to encourage investment and enhance service delivery across the industry.

Overall, the initiative is designed to restore liquidity, stabilise electricity generation, improve reliability, and reposition the sector for long-term sustainability. It also marks a significant shift from a system burdened by unverified claims to one grounded in discipline, transparency, and market-driven principles.

The Federal Government emphasises that this is not a one-off intervention but a comprehensive and ongoing effort to reset both the financial and operational foundations of Nigeria’s power sector. With these reforms, the government remains focused on delivering a stable, reliable, and investable electricity market for the benefit of all Nigerians.