Key Points

• Federal Government debt left power producers cash-strapped and unable to invest.

• States moved into electricity regulation, exposing gaps in capacity and coordination.

• Consumers saw little improvement as liquidity and infrastructure problems persisted.

For most Nigerians, 2025 felt like another long year of power outages. The lights flickered. The generators roared. Bills came, but they were often not tied to the real supply.

Inside the power sector, two forces quietly shaped almost every major decision. A crushing debt owed to power generation companies, and the growing ambition of state governments to run their own electricity markets.

Together, they exposed how fragile Nigeria’s electricity system remains, even after years of reform.

A debt that keeps piling up

At the heart of the sector’s problems is money that never get paid.

Power generation companies reported that the Federal Government owes them close to ₦6 trillion, largely from unpaid subsidies. The figure grew steadily, year after year, until it became impossible to ignore.

The impact has been severe. Many GenCos struggle to maintain plants, pay gas suppliers, or service bank loans. Investment plans have been shelved. Confidence has thinned.

In March, Power Minister Adebayo Adelabu admitted the debts were real and largely government-created.

He said roughly half were inherited, while the rest came from recent operations. His promise was partial relief.

About ₦3 trillion would be paid down gradually, through cash and promissory notes that companies could discount at banks.

That announcement raised expectations. GenCo owners met President Bola Tinubu in July. The Federal Executive Council later approved a repayment framework. More meetings followed in October.

Then came the shock. Industry sources say draft agreements sent to GenCos asked them to accept just half of what they were owed as full and final settlement.

The proposal landed badly. Power producers pushed back, arguing that such a cut would worsen losses and scare off future investors.

By December, the government shifted tone, announcing plans to issue a ₦1.23 trillion bond to address part of the legacy debt. It helped calm nerves, but few believe it ends the problem.

States step into the electricity business

While federal debts dominated conversations in Abuja, a quieter shift was happening across the states.

The Electricity Act 2023 moved power regulation onto the concurrent legislative list, giving states legal room to act. In 2025, several did.

About 11 states received approval from the Nigerian Electricity Regulatory Commission to establish their own electricity regulators.

Enugu, Ekiti, Ondo, and Imo formally took over regulatory control within their territories.

The message was clear. States want more authority over how power is generated, priced, and distributed locally.

But the transition has been uneasy. In Enugu, the state regulator announced a tariff reduction that immediately unsettled operators and the national regulator.

NERC argued the state lacked the full legal framework to fix tariffs without a functioning state electricity market.

The episode exposed a wider concern. Many states have the authority but not the systems, expertise, or funding to run complex power markets.

A new grid operator, same old constraints

The Federal Government also pushed ahead with grid reforms in 2025, splitting the Transmission Company of Nigeria into two parts.

The Nigerian Independent System Operator began operations in September, taking charge of system and market coordination. The Transmission Service Provider retained physical infrastructure.

On paper, the move should improve transparency and grid management. In practice, industry players say it changes little if the sector remains starved of cash.

Consumers see little change

For electricity users, the numbers and reforms brought little relief.

Generation levels barely moved. Transmission losses stayed high. Distribution networks remained weak. Industry losses continued to hover around 40 percent.

Azura Power West Africa Managing Director Edu Okeke summed it up bluntly in comments to Vanguard.

GenCos, he said, still receive less than 40 percent of their invoices. Until that changes, nothing else really will.

He warned that without fixing collections and remittances, new bonds will simply delay the next crisis.

Okeke estimates the sector needs about $10 billion every year to reach its potential, money investors won’t commit without credible returns.

Looking ahead to 2026

There is cautious hope for 2026, but it comes with conditions.

Industry leaders say debt settlement must be real, not cosmetic. Distribution companies need restructuring. Gas supply must stabilise. Tariffs must reflect costs, even if gradually.

The Association of Power Generation Companies says 2025 showed GenCos still have technical capacity. Liquidity, not competence, remains the core problem.

Analysts also say clarity is needed on subsidies and on how state-regulated markets will fit into a national wholesale electricity system.

Nigeria’s power sector is no longer standing still. It is shifting, fragmenting, and searching for balance.

Whether that movement leads to light or more darkness will depend on choices made now, not promises made later.