In a bid to address persistent power outages in Nigeria, President Bola Tinubu has approved a phased payment plan for power sector debts, estimated at over N3.3 trillion.
The Federal Government has commenced settling these debts, starting with N1.3 trillion owed to power generating companies (Gencos). This amount will be paid through a combination of cash injections and promissory notes. Additionally, about $1.3 billion (equivalent to N1.994 trillion at the current exchange rate) owed to gas companies will be settled through cash payments and future royalties.
The Minister of Power, Chief Adebayo Adelabu, announced this development during the 8th Africa Energy Marketplace in Abuja. The event, themed “Towards Nigeria’s Sustainable Energy Future: Policy, Regulation and Investment,” focused on the National Integrated Electricity Policy and Strategic Implementation Plan.
Adelabu revealed that President Tinubu has directed the Minister of Finance to immediately release N130 billion from the Gas Stabilisation Fund to begin settling the debts owed to Gencos. The remaining debt will be settled over two to five years via promissory notes. Similarly, the $1.3 billion owed to gas producers will be repaid from future royalties and income streams within the gas sub-sector.
The Minister emphasized that this approach aims to encourage gas companies to enter firm supply contracts with power-generating companies, ensuring consistent power generation. He noted that the current model, which lacks firm contracts, allows gas companies to supply gas on a best-effort basis, with no penalties for non-supply.
Adelabu also addressed concerns about policy coordination in the power sector, assuring stakeholders that the current administration is committed to eliminating industry bottlenecks. He justified a recent tariff hike affecting 15% of Nigerians, explaining that proper billing is essential for achieving the administration’s power reform agenda.
The Minister highlighted a milestone in power generation, noting that the Nigerian Electricity Supply Industry has achieved a new peak of 5,000 MW, partly due to the Zungeru hydroelectric power plant’s 700 MW contribution.
Regarding the Gencos’ debts, Adelabu confirmed that the Federal Government has obtained President Tinubu’s consent to settle the reconciled debts through a mix of cash and promissory notes. This phased payment plan aims to incentivize Gencos to invest more in generation capacity, boosting Nigeria’s power output to meet local and cross-border demand.
The Federal Government’s strategy also includes maintaining subsidies for gas payments used in power generation. However, inconsistent payments over the years have led to significant debts to gas suppliers and Gencos, contributing to Nigeria’s power supply challenges.
In a related development, the African Development Bank (AfDB) is preparing to seek board approval for a $1 billion policy-based operation to support the reforms introduced by the new Electricity Act of 2023. This funding aims to attract sustainable investments and support the outcomes anticipated from Nigeria’s National Integrated Electricity Policy and Strategic Implementation Plan.
Dr. Kevin K. Kariuki, Vice President of the Power, Energy, Climate, and Green Growth Complex at AfDB, announced this initiative during the Africa Energy Marketplace. The special edition of AEMP focused on Nigeria’s ongoing power sector reforms, reflecting the Federal Government’s commitment to enhancing the sector’s effectiveness and productivity.
