Only 39% of Gencos’ Invoices Settled in 2025 as Unfunded Subsidies Hit N1.85tn

Emmanuel Addeh in Abuja 

Nigeria’s power Generation Companies (Gencos) recorded a weak cash recovery in 2025, with only 39.25 per cent of their total invoices settled, as unfunded government subsidies ballooned to N1.85 trillion in one year, weighing heavily on the liquidity of the electricity market.

Latest industry data seen by THISDAY showed that Gencos issued invoices totaling N3.16 trillion for electricity generated during the year. However, cumulative payments amounted to N1.24 trillion, while actual cash remittances stood at N1.17 trillion, reflecting a settlement rate of just 39.25 per cent.

The Nigerian Electricity Regulatory Commission (NERC) data underscored a persistent structural gap in the Nigerian Electricity Supply Industry (NESI), where revenues fall significantly short of invoiced amounts, largely due to the non-payment of tariff shortfalls by the federal government.

Out of the N1.92 trillion owed to Gencos in 2025, only N71.49 billion, or 3.7 per cent, was attributable to market shortfall linked to Distribution Companies (Discos). In contrast, N1.85 trillion, representing over 96 per cent of the outstanding amount, was due to unpaid subsidy obligations, highlighting the dominant role of government underfunding in the sector’s financial crisis.

The federal government had announced the ‘freezing’ of electricity tariffs for certain categories of consumers, in what was essentially a subsidy mechanism designed to cushion households and small users from rising power costs.

The policy became more pronounced after the introduction of Nigeria’s service-based tariff system, where customers were grouped into Bands A–E based on hours of supply. While higher-end users (especially Band A) saw tariff increases, most other consumers had their tariffs held constant, creating a huge burden for the authorities.

Besides, the data showed that the Distribution Remittance Obligation (DRO), which sets the expected payment threshold for Discos, averaged 39.07 per cent of total Gencos’ invoices in 2025. Within this framework, Discos achieved a remittance performance of 93.80 per cent relative to their obligated amount, indicating a high level of compliance with market expectations.

Further reinforcing this trend, Discos accounted for 93.80 per cent of total remittances recorded during the year, despite their obligation covering less than 40 per cent of total invoices, suggesting that while inefficiencies in collections remain an issue, they are not the primary driver of the sector’s liquidity shortfall.

A THISDAY review of the information indicated that Instead, the central pressure point remained the tariff gap, which is the difference between cost-reflective tariffs and regulated electricity prices, which necessitates government subsidy support. 

In 2025 alone, according to the data, total subsidy accrued reached N1.93 trillion, but only N76.95 billion, or approximately 4 per cent, was funded, leaving the bulk unpaid.

In the same vein, quarterly data reflected a consistent pattern of underpayment. In the first quarter, Gencos invoiced N861.72 billion but received only N310.90 billion in payments. The second quarter saw invoices of N816.62 billion, with payments of N287.51 billion, alongside the only recorded subsidy disbursement of N76.95 billion during the year.

In the third quarter, invoices stood at N740.87 billion, while payments totalled N266.66 billion, with no subsidy funding recorded. Similarly, in the fourth quarter, out of N745.73 billion billed, only N300.08 billion was paid, again with zero subsidy disbursement.

According to the data, although there was a marginal improvement in Discos’ remittance expectations in the fourth quarter, with the DRO rising to 43.84 per cent, this had limited impact on overall settlement levels due to the absence of subsidy payments.

By the end of 2025, the outstanding subsidy debt alone reached N1.85 trillion, forming the largest component of Gencos’ receivables and intensifying financial strain across the value chain, particularly for gas suppliers that depend on Gencos for payments.

Industry estimates indicate that when legacy arrears are combined with these new obligations, total debts owed to Gencos and gas suppliers are now in the region of over N6 trillion, with years of under-recovery and delayed payments. However, the federal government recently floated a bond of N500 billion to offset part of these debts.

Also, early data from 2026 suggests that the trend persists, with Gencos in January 2026 issuing invoices totaling N252.59 billion. With a higher DRO of 50 per cent, expected remittances improved, but actual payments were only N109.86 billion, leaving a N16.25 billion gap linked to Discos.

More significantly, the entire N126.48 billion subsidy accrued for the month remained unpaid, continuing the pattern observed throughout 2025 and adding to the sector’s growing financial burden.

With less than 40 per cent of invoices settled and over 96 per cent of outstanding obligations tied to unfunded subsidies, Gencos have been complaining of operating under sustained cash flow pressure.