Power generation companies (GenCos) have rejected the Federal Government’s offer to forfeit 50% of the N5 trillion debt owed to them for electricity supplied to the national grid.

The proposal, described as a 50% “haircut,” would have allowed the government to pay the GenCos about N2.4 trillion, representing roughly half of the total debt. Azura Power West Africa was reportedly the only exception.

Government debt to GenCos had exceeded N5 trillion by June 2025, prompting President Bola Tinubu to approve debt repayment through bond issuance. Following Federal Executive Council approval in August, government officials reportedly met with GenCo owners in October to agree on a repayment model.

On October 16, 2025, the government sent two contract documents—“NBET Deed of Settlement” and “Deed of Novation”—to the companies. The contracts sought to transfer the debt from Nigerian Bulk Electricity Trading Plc (NBET) to a new entity, NBET Bond Finance Company Plc, and required the GenCos to accept the settlement amount as full and final payment, extinguishing all claims including interest, true-ups, and deemed capacity payments.

The contracts also outlined that payment would come in phases from an FGN-backed public bond issuance, with the new Bond SPV assuming sole responsibility for the settlement.

However, sources within the GenCos described the proposal as bad faith, undermining President Tinubu’s pledge to resolve the financial crisis in the Nigerian Electricity Supply Industry (NESI). The companies reportedly presented alternative approaches, including:

1. Immediate payment of N2.4 trillion with the balance deferred.
2. A 10% haircut on interest while paying deemed capacity and true-up in full.

Despite the government’s deadline of October 21, all GenCos rejected the offer, insisting on full repayment.

Additional documents from the Presidential Power Sector Debt Reduction Plan Committee explained that waiving claims—including litigation, arbitration, or excessive interest—would ensure a “clean break” and restore confidence in the NESI value chain. Failure to settle, it noted, could worsen financial distress, reduce power generation, and erode investor confidence.

Energy market expert Lanre Elatuyi warned that the proposed haircut would send the wrong signal to investors, worsen liquidity challenges, increase generation costs, and threaten sector stability. He stressed that cost recovery uncertainties could further deter investment in Nigeria’s electricity sector.