Nigeria’s already troubled electricity sector has come under renewed pressure as power generation, transmission and distribution companies accumulated a staggering N2.21tn debt owed to Deposit Money Banks by the end of December 2025.
Fresh figures obtained from the latest quarterly statistical bulletin released by the Central Bank of Nigeria revealed that the banking sector’s exposure to the power industry increased sharply within one year, highlighting worsening financial instability across the country’s electricity market.
The report showed that total loans and credit facilities granted to electricity-related companies rose from N1.78tn in December 2024 to N2.21tn by December 2025.
The increase represents an additional N431.11bn borrowed within one year, translating to a 24.25 per cent rise in the sector’s debt burden.
Power Generation Firms Responsible for Majority of Debt
According to the data, companies operating within the electricity generation segment, including independent power producers, accounted for the largest share of the debt profile.
The figures showed that firms classified under the industry segment owed banks approximately N1.49tn as of December 2025.
This amount represented over 67 per cent of the total banking sector exposure to Nigeria’s electricity industry.
Further analysis indicated that the debt owed by generation companies increased significantly from N1.13tn recorded in December 2024.
The latest figure reflected an increase of N354.58bn within one year, representing a 31.29 per cent rise.
Analysts believe the development reflects the enormous financial burden currently facing power generation companies as they struggle with rising operational costs, poor liquidity, and delayed payments within the electricity market.
Transmission and Distribution Companies Owe N721bn
The report also showed that electricity transmission and distribution firms operating under the services category owed banks N721.73bn by the end of 2025.
This accounted for roughly 32.67 per cent of the total debt exposure in the power sector.
The debt owed by these firms rose from N645.19bn in December 2024, indicating an increase of N76.54bn or 11.86 per cent year-on-year.
The rising obligations among distribution and transmission operators have been linked to worsening operational inefficiencies, poor revenue recovery, infrastructure decay, and mounting market debts.
Electricity Sector Debt Crossed N2tn for First Time in July 2025
A breakdown of the monthly figures revealed that the power sector’s debt profile fluctuated during the first half of 2025 before escalating sharply in the second half of the year.
The banking sector’s exposure initially declined slightly from N1.78tn in December 2024 to N1.72tn in January 2025.
However, the debt later climbed gradually to N1.79tn in February before recording a slight drop in March.
By April and May, total exposure rose further to N1.85tn and N1.83tn respectively.
The figure eventually increased to N1.89tn in June before witnessing its sharpest jump in July 2025.
Industry data showed that total debt exposure crossed the N2tn threshold for the first time in July, rising dramatically to N2.01tn.
The sharp increase was driven largely by electricity transmission and distribution companies whose debt obligations surged massively within one month.
Their combined debt reportedly jumped from N657.96bn in June to N976.64bn in July, signalling severe financial stress among electricity distribution operators.
Although the debt profile for the services segment later reduced slightly, overall sector exposure continued its upward trend throughout the remaining months of 2025.
The debt reached N2.08tn in August, N2.05tn in September, N2.16tn in October, and N2.13tn in November before peaking at N2.21tn in December.
High Interest Rates Worsened Financial Pressure on Power Firms
The rising debt burden occurred amid Nigeria’s high-interest-rate environment following the aggressive monetary tightening measures introduced by the Central Bank of Nigeria in 2025.
The apex bank maintained the Monetary Policy Rate at 27.50 per cent during several Monetary Policy Committee meetings held in February, May, and July 2025.
The benchmark interest rate was later reduced slightly to 27 per cent in September before being retained again in November.
Economic analysts say the elevated borrowing costs significantly increased financing pressure on electricity companies, particularly because the sector is highly capital-intensive.
Operators in the electricity industry already face weak cash flows, poor cost recovery mechanisms, and mounting operational expenses, making loan repayment increasingly difficult.
Liquidity Crisis Continues to Threaten Nigeria’s Power Sector
The worsening debt profile also coincided with repeated warnings from industry operators about a severe liquidity crisis threatening the survival of Nigeria’s electricity market.
Power generation companies had repeatedly raised concerns throughout 2025 over unpaid invoices, subsidy shortfalls, and longstanding legacy debts allegedly owed by the government and other market participants.
Industry stakeholders estimated that generation companies alone were owed more than N6tn in accumulated debts and unpaid obligations.
Experts warned that unless urgent interventions were introduced, many operators could struggle to sustain operations, thereby worsening electricity shortages nationwide.
National Grid Collapses Added to Sector Challenges
Nigeria’s electricity industry also suffered multiple national grid collapses and disturbances during 2025 despite repeated assurances from the Federal Government regarding ongoing improvements in transmission infrastructure.
The recurring grid failures contributed to widespread blackouts across several parts of the country, further exposing the fragility of Nigeria’s power infrastructure.
The instability created additional financial strain for electricity companies already battling inadequate revenue generation and operational inefficiencies.
Presidency Confirms Repayment Process Has Begun
In response to the mounting concerns, the administration of President Bola Ahmed Tinubu reportedly initiated steps toward settling part of the debts owed to electricity generation companies.
A statement issued by the Special Adviser to the President on Information and Strategy, Bayo Onanuga, disclosed that implementation of the repayment arrangement had already commenced.
According to the presidency, the move forms part of broader efforts aimed at stabilising the electricity market, improving liquidity, and restoring investor confidence within the sector.
Transcorp Boss Speaks on Challenges Facing Power Sector
The President and Group Chief Executive Officer of Transnational Corporation Plc, Owen Omogiafo, also acknowledged the deep-rooted problems affecting Nigeria’s power industry.
She explained that operators in the sector continue to battle serious challenges linked to gas supply shortages and weaknesses in transmission infrastructure.
According to her, these persistent operational obstacles have continued to affect electricity generation and overall sector performance.
Omogiafo further confirmed that the Federal Government had started repaying long-standing obligations owed to generation companies.
She described the development as one of the most significant breakthroughs recorded so far in addressing the liquidity crisis crippling Nigeria’s electricity market.
Industry experts believe that while the repayment initiative may offer temporary relief, broader structural reforms, improved infrastructure investment, and stronger market discipline will still be required to achieve long-term stability in Nigeria’s electricity sector.
Many stakeholders also warned that unless the underlying financial and operational problems are addressed urgently, the country could continue to experience persistent blackouts, rising tariffs, and worsening power supply challenges despite the growing debt burden on operators.
