Why power supply remains at 4,000MW despite 15,000MW capacity — GenCos

2026-02-23 - 16:16

By Obas Esiedesa, Abuja ABUJA — Power Generation Companies (GenCos) have attributed Nigeria’s persistent average electricity generation of about 4,000 megawatts (MW), despite an installed capacity of 15,500MW, to liquidity challenges, weak contract enforcement and structural bottlenecks in the Nigerian Electricity Supply Industry (NESI). The Association of Power Generation Companies (APGC), in a statement issued in Abuja by its Chief Executive Officer, Dr. Joy Ogaji, said the current market design discourages investment in capacity recovery and expansion, leaving about 7,000MW of mechanically unavailable capacity unrepaired. According to the association, the failure to recognise and pay for available generation capacity under existing commercial arrangements has removed a key incentive for power producers to restore idle equipment. “This singular reason has kept the sector at about 4,000MW of average grid generation for many years, notwithstanding an installed capacity of 15,500MW. This is a clear anomaly in the market,” the group stated. The GenCos explained that electricity generation requires significant upfront investments and long-term cost recovery, but operators are paid only for power that transmission and distribution networks can absorb, rather than for capacity already made available for dispatch. They noted that under standard Power Purchase Agreements (PPAs), generators are expected to receive payments for available capacity, nominated capacity and metered energy. However, the current practice of recognising only called-up power has weakened investor confidence and undermined the financial viability of power plants. The association further disclosed that many power plants currently operate without active PPAs, describing the situation as a major risk for both local and international investors. It added that the absence of firm contractual backing has also made it difficult for generation companies to secure Gas Supply Agreements (GSAs), worsening fuel constraints across the sector. GenCos also identified operational bottlenecks outside their control as major contributors to low power supply. These include the inability of the Transmission Company of Nigeria (TCN) to efficiently wheel available power, frequent load rejection by distribution companies (DisCos), and poor revenue collection across the value chain. “The structure of the sector is such that poor performance is contagious,” the group said, noting that when DisCos fail to collect sufficient revenue, they are unable to settle energy invoices, further deepening liquidity problems. The association revealed that generation companies are currently owed over ₦6.2 trillion, with only about 35 per cent of their invoices settled since 2015. It warned that persistent non-payment has rendered many GenCos technically insolvent and severely constrained their ability to invest in capacity maintenance and expansion. According to the group, contrary to public perception, generation companies are not beneficiaries of electricity subsidies but are “the biggest victims” of the current system. The GenCos stressed that the situation contradicts the objectives of the Multi-Year Tariff Order (MYTO) and the Federal Government’s Power Sector Recovery Programme, both designed to support a contract-based and financially sustainable electricity market. They called for restoration of contract sanctity, full payment for available capacity and stronger enforcement of market rules, warning that failure to address these issues will continue to constrain electricity supply to consumers. “Security of supply is strongly dependent on how quickly the electricity market can debottleneck the constraints imposed by other critical stakeholders,” the GenCos stated. The association maintained that increased generation capacity would not translate into improved power supply unless financial and operational weaknesses across the electricity value chain are urgently addressed.