Electricity grid instability worsens as GenCos gas debts mount

Nigeria’s fragile electricity supply chain is once again under strain as financial and contractual disputes between Generation Companies (GenCos) and gas producers disrupt fuel deliveries to power plants, worsening grid instability and intensifying blackouts across the country.

This is according to industry insights shared with Nairametrics and operational data from across Nigeria’s power value chain.

At the core of the crisis are mounting debts, foreign exchange challenges, and infrastructure vulnerabilities, all of which continue to undermine the reliability of gas-fired power plants that generate the bulk of Nigeria’s electricity.

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What they are saying

Nigeria’s power generation system remains heavily dependent on natural gas, with thermal plants producing more than 70%—and in some seasons over 80%—of total electricity output. However, persistent liquidity challenges within the sector have created financial strain, affecting gas supply to power plants.

• When asked about the dispute between GenCos and gas suppliers, a GenCo executive simply replied, “Payment,” explaining that outstanding debts are the primary reason suppliers are reducing gas deliveries.
• He added, “For every N100 invoiced by a thermal GenCo, between N60 and N70 goes directly to gas suppliers.”
• “The grid is not stable. Up and down — that consumes about 15 to 25 percent gas that nobody is paying for but must be paid by the GenCos.”
• _“Gas is priced in dollars. But we pay in naira… the difference between the CBN rate and the black market rate is our loss.” _

The Association of Power Generation Companies (APGC), through an earlier statement by its CEO Joy Ogaji, also dismissed claims that N2.8 trillion represents a finalized settlement of legacy debts, reinforcing concerns around unresolved financial obligations in the sector.

Expert views

Experts say the ongoing crisis reflects deeper structural imbalances within Nigeria’s electricity market, particularly around payment security and cost recovery. They warn that unless these issues are addressed, gas supply disruptions will persist.

• “GenCos are owed billions in arrears by downstream players, and that shortfall ripples to gas producers,” said Dr. Aisha Bello.
• “We’ve seen suppliers insist on partial upfront payments before confirming gas deliveries,” said Samuel Eze, a petroleum engineering specialist at the University of Abuja.
• “We are actively reviewing tariff structures… but reform takes time and coordinated effort,” a senior NERC official who requested anonymity noted.

Data from the Nigerian Independent System Operator (NISO) further shows that generation fluctuations are directly linked to gas supply shortfalls, limiting the ability of power plants to operate at full capacity.

More Insights

Gas supply disruptions have immediate consequences for the national grid, often triggering widespread instability and reduced electricity output. When supply drops, power plants are forced to scale down or shut operations entirely.

• “We have seen multiple voltage dips and plant outages directly linked to lower gas deliveries,” a senior NERC staff said.
• _“When thermal plants falter, we have limited redundancy to stabilize the grid.” _
• “Some days we can only run one or two shifts… it dents productivity and inflates costs,” said Abuja-based manufacturer Funke Adeyemi.

Beyond financial constraints, pipeline vandalism and crude theft in the Niger Delta also disrupt gas flows, compounding supply challenges and exposing the grid to both economic and security risks.

What you should know

The Federal Government has taken steps to address the liquidity crisis and stabilize the power sector through financial interventions and policy measures. These efforts are aimed at clearing debts and restoring confidence across the electricity value chain.

• In December 2025, the federal government approved the settlement of N185 billion owed to natural gas producers.
• In June 2025, it concluded implementation frameworks for a N4 trillion bond to settle arrears owed to GenCos and gas suppliers.
• Stakeholders continue to push for cost-reflective tariffs and improved forex access for power sector operators.

Despite these interventions, experts warn that without comprehensive reforms addressing pricing, liquidity, and infrastructure security, the crisis may persist.

Nigeria’s gas supply challenges highlight the deep interconnection between finance, policy, and infrastructure within the energy sector. As the country seeks to boost industrial growth and attract investment, resolving these systemic issues remains critical to ensuring a stable and reliable electricity supply.

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