Navigating Nigeria’s power sector liquidity crisis: Beyond the missed PCAF deadline
By Adetayo Adegbemle
The failure to activate the Power Consumer Assistance Fund (PCAF) by the first quarter of 2025 represents a significant setback in resolving Nigeria’s electricity liquidity crisis. With subsidies ballooning to N200 billion monthly and GenCos receiving only 39% of their invoices by December 2024, the sector risks deeper instability. However, this delay need not spell collapse. A combination of adaptive policies, stakeholder collaboration, and accelerated reforms can still steer the sector toward recovery.
Interim relief through emergency funding mechanisms
To bridge the PCAF gap, the government must immediately establish an emergency liquidity facility backed by multilateral development partners or sovereign guarantees. This fund could temporarily cover a portion of the subsidy burden while fast-tracking PCAF’s operationalization. Simultaneously, NERC should mandate DisCos to ring-fence revenue from Band A customers (who pay higher tariffs) exclusively for settling GenCos’ invoices, ensuring at least 50% payment compliance. Such measures would prevent further erosion of investor confidence and keep gas suppliers engaged.
Accelerated PCAF activation with modified terms
While delays are regrettable, they offer an opportunity to refine PCAF’s design. Contributions from government and eligible customers (per the Electricity Act) should be frontloaded, with NERC publishing a clear, shortened timeline for rollout. To incentivize participation, industrial customers could receive tax rebates for timely PCAF contributions, while low-income households gain priority access to the N5,000 monthly support. Public campaigns explaining PCAF’s benefits—such as stabilized tariffs and direct bill relief—would mitigate resistance and foster buy-in.
Tariff rationalization with safety nets
Even without PCAF, phased tariff adjustments remain critical. NERC could introduce sub-band categorizations within Band A, linking tariffs more granularly to exchange rates and inflation. For instance, industries with dedicated supply lines might pay closer to cost-reflective rates, while residential Band A users benefit from temporary caps. Concurrently, a lifeline tariff buffer—funded by a levy on high-energy commercial users—could shield vulnerable households from abrupt hikes. This balances revenue generation with social equity.
Strengthened accountability for DisCos
Persistent underperformance by DisCos exacerbates liquidity gaps. NERC must enforce stricter penalties for failures in metering, supply hours, or revenue remittance. Performance bonds could be required, with forfeited funds channeled into PCAF. Additionally, leveraging technology for real-time monitoring of DisCos’ collections and infrastructure investments would enhance transparency. Partial privatization or concessioning of poorly managed DisCos to technically competent firms should also be explored to unlock efficiency.
Addressing structural economic challenges
Macroeconomic volatility remains a root cause of tariff instability. The Central Bank of Nigeria (CBN) and Ministry of Finance must prioritize stabilizing the naira and curbing inflation through coordinated fiscal-monetary policies. A dedicated FX window for gas purchases and GenCos’ debt settlements would reduce pricing distortions. Meanwhile, accelerating the transition to renewable energy and decentralized grids can lessen reliance on imported gas, insulating the sector from external shocks.
Crisis communication and stakeholder mobilization
Public distrust and industrial resistance will intensify post-deadline. A national dialogue involving labor unions, manufacturers, and civil society is essential to rebuild consensus. NERC and DisCos should publish monthly “scorecards” detailing subsidy reductions, PCAF progress, and service improvements. For industries, negotiated energy conservation agreements could lower bills without compromising productivity, while public institutions might adopt solar hybrid systems to reduce grid dependence.
Conclusion: Turning setbacks into momentum
Missing the PCAF deadline is a wake-up call, not a death knell. By adopting agile, equity-focused measures—backed by political will and robust oversight—Nigeria can still stabilize the NESI. The path forward demands urgency, creativity, and inclusivity, ensuring that short-term fixes align with long-term goals of affordability, reliability, and sustainability. The electricity crisis is a microcosm of broader economic challenges; solving it will require not just sectoral reforms, but a renewed commitment to systemic transformation.
Adetayo Adegbemle is the Executive Director, PowerUp Nigeria
