Enugu Band A Tariff Cut Sparks Power Sector Debt Concerns: Gencos Warn of Mounting Crisis

As Nigeria navigates the complex transition towards a more decentralized electricity market, a fresh storm is brewing in the nation’s power sector.

The Association of Power Generation Companies (APGC) has raised alarm over a recent tariff reduction announced by the Enugu Electricity Regulatory Commission (EERC), warning that the move could worsen the sector’s already critical debt situation.

The EERC recently announced a downward review of the Band A tariff for MainPower Electricity Distribution Limited, reducing the rate from ₦209 per kilowatt-hour (kWh) to ₦160/kWh.

The new rate, set to take effect on August 1, is being touted as “cost-reflective,” supposedly taking into account the federal government’s ongoing power subsidy. According to EERC, the ₦160/kWh charge includes only ₦45 of the actual ₦112 generation cost, with the rest expected to be covered by government subsidy.

But the generation companies — the entities that actually produce the electricity that distribution companies sell — are not buying the logic.

“This is not subsidy. It is debt accumulation — plain and simple,” said Dr. Joy Ogaji, CEO of APGC, in a sharply worded response issued on Monday.

“If anyone has the proposed subsidy policy document, please kindly share it publicly,” Ogaji challenged.

According to Ogaji, the Band A tariff revision sets a dangerous precedent for other state regulators that may be considering similar moves. She stressed that the EERC’s decision underscores deeper structural issues in Nigeria’s move toward decentralized power systems, particularly regarding who will bear the burden of legacy debts and ongoing market liabilities.

“This portends a bigger issue in the decentralisation of power to the states,” she said.

“Are the EERC and other state regulators expecting the Federal Government to continue subsidising their electricity? Shouldn’t they be designing tariffs that are attractive to investors and sustainable for their local markets?”

The numbers paint a sobering picture.

The federal government has earmarked ₦900 billion in the 2025 budget for electricity sector support. However, the average monthly invoice for electricity generation in Nigeria stands at approximately ₦250 billion — which translates to ₦3 trillion annually. That means the current budgetary allocation covers only about 30% of the sector’s yearly financial needs, and even that figure is not cash-backed as of now.

“EERC’s tariff only captures ₦45 out of the ₦112 actual cost of generation — that’s just 40%,” Ogaji noted. “The remaining 60% is being presumed as a federal subsidy, which simply does not exist in liquid or structured form.”

The APGC chief further revealed that power generation companies are collectively owed over ₦4 trillion — a staggering debt pile with no feasible repayment mechanism in sight. Neither cash payments, debt swaps, nor financial instruments have been offered as credible resolutions.

“This is a contagion that needs to be addressed at the level of the Presidency,” she warned.

As Nigeria pursues ambitious reforms in the energy sector, including decentralization and increased private sector participation, the unresolved crisis of legacy debt and unsustainable tariffs could paralyze progress.

Without urgent intervention and clear policy direction — including a properly documented and funded subsidy framework — the sector risks sliding deeper into insolvency, with far-reaching implications for national development, investment confidence, and electricity access for millions of Nigerians.