The Nigerian Federal Government has made a firm decision to pay down a sizeable chunk of its N2 trillion debt to gas providers, which is essential to maintaining the nation’s ability to produce energy. The Minister of Power, Adebayo Adelabu, made plans public to pay off N130 billion of this debt, indicating his unwavering dedication to bringing stability and advancement to the electricity industry.
At the Africa Energy Market Place (AEMP) conference in Abuja, this news was made. Minister Adelabu claims that President Bola Tinubu approved the decision based on suggestions made by the Minister of State for Petroleum (Gas). It is anticipated that this calculated financial move will considerably lessen the strain on gas supply firms and guarantee a more dependable power supply throughout Nigeria.
Minister Adelabu explained that the payment arrangement is split into two parts: the legacy debt and the current debt. “For the current debt, approval has been given for cash payments of about N130 billion from the gas and stabilization fund, managed by the federal ministry of finance,” he noted. The method for settling the legacy debt will involve future royalties and revenue streams from the gas subsector, which is a resolution welcomed by the gas companies.
In a detailed breakdown shared earlier in February 2024, Adelabu stated that the power generating companies are owed a total of N1.3 trillion, with 60% of this amount due to gas suppliers. The accumulated legacy debt to these companies stands at N2 trillion.
The government intends to introduce a new contract model in order to significantly boost the dependability of the gas supply to power plants. Gas suppliers will be required by this model to provide a steady supply to power generating firms, which is essential for the continuous production of electricity.
Adelabu also emphasized the government’s attempts to resolve arrears with enterprises that provide electricity. “We have President Tinubu’s approval to move on, provided that the government and the electricity producing firms reconcile their debts,” he declared. The majority of electricity producers have consented to this plan, and the administration is striving to secure universal consent.
The payment to power generating companies will be handled in two phases. While the government cannot afford to settle the entire N1.3 trillion immediately due to budget constraints, a portion will be paid in cash, and the remainder will be covered by guaranteed debt instruments, like promissory notes, offering a timeline of 2 to 5 years for full payment.
These measures are expected to motivate power companies to increase investment in generation capacity, potentially enhancing Nigeria’s power output to meet both domestic demand and generate revenue through exports.
Speaking on more general power sector concerns, Minister Adelabu criticized the emphasis placed throughout the industry’s privatization process on purchase capital, pointing out that operational, maintenance, and expansion capitals were disregarded. Distribution businesses’ operating efficiency has been hindered by these oversights. In order to increase infrastructure investment, he suggested franchising a portion of the distribution network and called for a thorough assessment of capitalisation levels.
Adelabu also discussed the most recent revisions to electricity rates, which have been made in an efficient manner to lower customer expenses while guaranteeing a daily supply of electricity for more than 20 hours. In order to improve service delivery to Band A subscribers and expand the network after repairs and upgrades, more feeders have been permitted. To safeguard consumers from overcharging, feeders that do not fulfill technical standards for constant service have been degraded; this highlights the government’s emphasis on consumer protection in the power industry.
