Africa's largest economy has 12,500 megawatts of installed capacity but only produces about a quarter of that, forcing households and businesses, including manufacturers to resort to diesel and petrol generators.
Power Minister Adebayo Adelabu told reporters on Wednesday that outstanding debts, inadequate gas supplies and aging equipment were the key barriers hampering optimal power output. Adelabu said power generators are currently owed 1.3 trillion naira ($858.65 million), in addition to a $1.3 billion legacy debt from a decade ago.
"Part of preparation to turn around and transform the sector is the settlement of existing outstanding debt obligations to the gas supply and power generation companies using partly cash payments and guaranteed debt instruments," he said.
Last week, Adebalu proposed a naira payment for gas sales to power plants as a solution to solve dollar shortages as costs are expected to balloon after a second currency devaluation in less than a year.
Natural gas is sold in dollars to power plants because investments tied to building gas processors and pipelines are priced and paid for in dollars.
Grid power is erratic in Nigeria, Africa's most populous nation. The grid collapsed on February 4, causing a national blackout, and at least three times in 2023, which authorities blamed on technical problems.