The Federal Government has announced plans to settle a $2.6 billion (N4 trillion) debt owed to electricity generation companies, aiming to stabilize Nigeria’s power sector and attract much-needed investment.
Finance Minister Olawale Edun disclosed on Wednesday that President Bola Tinubu approved a phased payment strategy following the verification of outstanding invoices accumulated since 2015. The debt, primarily owed to 27 power generation firms, has long stifled investment and contributed to persistent blackouts across the country.
According to Edun, the Debt Management Office (DMO) will oversee the repayment process within the next three to four weeks, utilizing bonds and other financing mechanisms to minimize strain on government finances.
This initiative forms part of broader reforms, including subsidy reductions and tariff adjustments, which officials estimate will save the government $718 million (N1.1 trillion) yearly. The measures are also designed to reassure investors of Nigeria’s commitment to a sustainable and market-driven power sector.
The debt clearance comes as Nigeria grapples with severe electricity shortages that have disrupted businesses, forced factory closures, and left households dependent on expensive backup generators.
“This settlement is a critical step toward reviving the power sector and ensuring reliable electricity supply,” Edun stated, emphasizing the administration’s focus on long-term solutions to the energy crisis.
Analysts say resolving the debt burden could unlock new investments in generation and distribution, potentially easing the financial strain on power producers and improving grid stability. However, some industry experts caution that broader structural reforms will still be needed to achieve lasting improvements in power supply.
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