Sopuruchi Onwuka

The Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, recently announced that the federal government is preparing to pay about $128 million (roughly N185 billion) in gas debts tied to the gas-to-power program. It’s another reminder of the costly and recurring financial interventions in the Nigerian Electricity Supply Industry (NESI) since the Electric Power Sector Reform Act came into force in 2005.

Experts say the sector’s commercial failures will continue until regulators enforce clear accountability, credible billing, grid stability, and transparent remittance systems that all stakeholders can see.

Minister of Power, Adelabu

The latest payment is meant to settle longstanding debts owed to gas producers who supply fuel to power plants. It’s one of several measures aimed at preventing a collapse of the gas-to-power chain, which has attracted large investments in gas supply, generation, and network infrastructure.

The gas-to-power program links gas suppliers, power producers, grid operators, market operators, and distribution companies. But the entire system depends on discos that have consistently underperformed, failed to remit revenue, and delivered poor service to customers, even after privatization.

These gas debts are separate from the debts owed to power generation companies, though both flow through the power producers whose thermal plants run on natural gas. Generation companies, whether hydro or thermal, continue to complain of unpaid invoices because discos don’t return enough revenue to the market.

The build-up of arrears has discouraged investment across the energy sector. The government hopes this round of payments will help restore confidence. Nearly half of Nigeria’s 220 million people still lack access to grid power, one of the largest electricity gaps in the world.

Despite installed capacity of about 12,000–13,500 MW, Nigeria produces roughly 4,500 MW on average for a population of more than 200 million. By comparison, South Africa operates over 40,000 MW and Ethiopia now supplies about 11,500 MW.

The gas-to-power initiative was designed to draw private investment into the electricity market by leveraging Nigeria’s abundant natural gas. Gas supply to the power sector is now an obligation for upstream producers, but returns from the power market have repeatedly fallen short, creating a cycle of debt and bailouts over the past two decades.

The African Development Bank’s 2024 Electricity Regulatory Index notes that Nigeria’s legal and policy reforms look strong on paper, but real-world results still lag. The report highlights regulatory gaps, weak transparency, and poor enforcement. Key regulatory documents and decisions are not published consistently, and utilities remain neither transparent nor financially sustainable.

With more than 32 outages a month, Nigeria ranks among the least reliable electricity markets globally. This forces households and businesses to rely on petrol and diesel generators, raising operating costs, slowing production, and discouraging investment.

Government has repeatedly overlooked two core causes of the liquidity crisis: poor metering, which fuels billing disputes and revenue losses, and weak transparency in disco revenue accounting. As a result, distribution companies routinely declare revenue shortfalls and rely on government to clear their debts to upstream suppliers.

Although the reform law provides a sound governance framework, market players have failed to deliver improved service to paying customers. Regulatory enforcement is seen as weak, often due to political interference. This encourages impunity, poor operations, low consumer protection, and estimated billing practices that lead to endless disputes and collection losses.

Most distribution companies have also avoided implementing the metering programs mandated by the regulator to resolve billing issues and improve transparency.

Two decades after the reform act, expectations that regulatory frameworks would translate into reliable electricity remain unmet. Policy inconsistency, political motives, subsidies, and continuous financial interventions have undermined competition and enabled inefficiency across the market.

This has left gas suppliers trapped in debt, generation companies with idle capacity, and transmission and distribution companies unwilling to invest in upgrades or roll out robust metering systems. The result is a sector weighed down by debt, underutilized capacity, and weak accountability. And all the malaise deters new investment.

While the planned debt repayment may offer short-term relief to gas producers, it does little to encourage the level of investment needed to raise gas output from today’s 7 billion cubic feet per day to 12 Bcf/d by 2030.

To attract new investment and strengthen the entire value chain, government needs to enforce financial accountability through advanced metering systems that make billing and remittances visible to all players on a centralized dashboard. The technology already exists and is widely used in the financial services industry, where every transaction passes through shared, auditable platforms.

If Nigeria hopes to build a sustainable, consumer-focused electricity market, credible and accountable distribution operations can no longer wait.