Expert: Why Nigeria’s Power Sector Liquidity Crisis Will Persist in 2026 

Peter Uzoho 

The Nigerian power sector is bracing for another challenging year in 2026, with more debts, commercial losses, system collapse, and policy halt expected to continue as political campaigns begin ahead of the 2027 general election.

Energy expert and Chief Executive Officer of New Hampshire Capital Limited, an energy investment and finance firm, Mr. Odion Omonfoman, gave the warning during an exclusive chat with THISDAY, on the projections for the electricity sector for 2026.

Omonfoman noted that Nigerians will need power supply but will not accept any increase in tariff, and that the government in power will not want to attempt any upward adjustment to the electricity tariff at this time to avoid losing reelection.

Nigeria’s power sector has been facing significant challenges since the privatisation of the generation and distribution chains of the sector in 2023.

Apart from the technical issues such as weak/inadequate infrastructure, persistent grid collapses, and outages, inadequate metering, and stranded power, the sector has been hampered by huge indebtedness to the operators and the non-compliance of a cost-reflective tariff model. 

Minister of Power, Adebayo Adelabu had in November last year diclosed that the indebtedness in the sector would hit N6 trillion by end of December, up from the existing N4 trillion as of 2024.

“As at December 2024, we had N4 trillion in indebtedness hanging. By December this year, it will be N6 trillion, because it’s an average of N200 billion per month. For 12 months, it’s N2.4 trillion every year. So that is the destination,” the minister stated at an event in Lagos.

Out of Nigeria’s total installed generation capacity of around 13,000MW, just about  4,000 MW struggle to get to the endusers.

This abysmal performance has been attributed to a number of factors including the huge debt to generation companies (Gencos) and distribution companies (Discos), non-cost-reflective tariff, inadequate investment in infrastructure, wide metering gap, and the lack of the right political will and policy actions to rescue the sector. Omonfoman observed that the sector’s problems were rooted in poor implementation of reforms, lack of capital investment, weak regulation, and undue political interference. 

He said: “The liquidity crisis will continue unless the government finally does what it needs to do, which is to allow tariffs to be market reflective. But at the end of the day, we will see more debts build up because the political campaigns will  start, so people will want energy. 

“I don’t see the government allowing tariffs to become market reflective. So we are going to see a lot of liability in this sector as well. All the same, it is expected that we will move forward slightly. I don’t see a very huge leap in the sector, but at least, there will be progress.”

When reminded of the N500 billion bond the government recently issued to clear the legacy debts, Omonfoman faulted the government for fixated on settling old debts while allowing the cause (non cost-reflective tariff) to continue hurting the market.

He argued that the best approach was to first tackle what is causing the debt and then come back to settle the debt later. 

Omonfoman explained: “Yes, I read about the bond issuance to settle legacy debts. What I can say is that it makes no sense to be extinguishing old legacy debt and then you are creating new debt. So I don’t see the rationale in that. Maybe you want to first stop the bleeding and then attend to the wound later.  So I don’t really see the sense in addressing legacy issues meanwhile the current debt is piling up.

“So maybe the critical thing is that let’s quickly address what the challenges are in terms of what is creating this debt. There are operational issues, there are market issues, some of which can be addressed to reduce the debt. I think it should be done. However, I also believe that legacy debt needs to be settled. So as much as possible, the government should give it a shot to settle it. But I see that in the area of these tariffs.”

To address political interference in tariff matters, he advised the government to cut its influence on the sector regulatory – the Nigerian Electricity Regulatory Commission (NERC) to enable it discharge its duty of tariff adjustment whenever necessary. 

He suggested that states now taking charge of their power markets could be a step forward, but execution remains a challenge.

The energy expert highlighted the impact of subnational electricity markets, metering initiatives, and renewable energy investments. According to Omonfoman, more states are expected to take charge of their electricity markets, with some already seeing the impact of subnational electricity markets.

He said the presidential metering initiative was also expected to gain momentum, with increased injection of meters into the market, but insisted that the liquidity crisis was likely to persist unless the government addressed tariff issues.

On the renewable energy front, Omonfoman projected significant activity in 2026, with projects from the World Bank, Rural Electrification Agency (REA), among others expected to come on line this year.

According to him, a lot of states are looking at renewable energy, and more mini-grid activities are going to pick up.

He mentioned that New Hampshire Capital Limited, an energy finance and investment company, is investing in distribution and renewable energy spaces. 

Omonfoman expressed confidence that their investments will yield returns, thanks to new commercial models and state electricity market regulations.

“We’re making a lot more investment in the distribution space, and we’re also in the renewable energy space. We’re working with states to implement their state electricity markets, and we’re quite sure that once these models are approved, we’ll be able to recover our investments,” he stressed.