NIGERIA’s power sector is currently experiencing more liquidity problems as the federal government has confirmed its indebtedness to the electricity generation (GENCOs) and distribution companies (DisCos) to the tune of N4 trillion.
The government has also blamed the distribution companies over lack of investment in its distribution infrastructure which could have enabled it to migrate more customers to band A for increased revenue.
Minister of Power, Adebayo Adelabu, who confirmed the development said the federal government is owing electricity generation companies (GenCos) and electricity distribution companies (DisCos) over N4 trillion in electricity subsidy.
The minister disclosed this on Thursday, February 27, in Abuja at a public presentation of the National Integrated Electricity Policy (NIEP) and Nigeria Integrated Resource Plan (NIRP).
He remarked that the debt had posed a challenge in strengthening the power sector for optimum service delivery.
While giving a breakdown, the minister said N2 trillion is owed to GenCos as legacy debt while another N1.9 trillion is owed to them as part of electricity subsidy for 2024.
The DisCos, he said are owed N450 billion for 2024 electricity subsidy.
The minister said the government would not be able to continue the model of electricity subsidy payment, adding that a new model of intervention is in the works by identifying a segment of the population in need of it.
“How do you expect the GenCos to perform optimally? How do you expect them to pay for gas, service, and maintain their turbines and other infrastructure as well as pay their staff? If a total of N4 trillion is being owed to them.
“I do not deceive myself. The government cannot afford to continue to fund the level of subsidy that our consumption pattern is throwing up, because we have seen increasing consumption of electricity,” he emphasised.
The minister observed that the key issues are the market, liquidity, and sector reforms, noting that the government will continue to focus in addressing them.
“We’ll look at the tariff again. I am not saying that we’re going to increase the tariff but to look at the tariff and see how we can improve upon our modest achievement of last year,”he explained.
Noting that the lack of investment in the distribution networks of DisCos is hampering the progress of the sector, the minister observed that the government has not seen the migration of more customers to band A, attributing it to poor investments in network by DisCos.
“They have refused to invest in this sector. Fine, it can be explained in a way, but a lot of investment is required for us to achieve an accelerated migration of lower-band customers into Band A. It is taking a lot of time,” he said.
He added that the government was considering canceling some sections of electricity consumers’ classification to make it three – bands A, B, and C.
The minister said this is to reduce the tariff difference among them to enable those in the lower bands to enjoy more hours of electricity.
The ICIR reported that the World Bank has been supporting Nigeria’s power sector through the Power Sector Recovery Programme (PSRP), which has seen about $500 million lent to support the ailing sector.
Besides, a discussion on $1.5 billion loan is ongoing between the the global bank and the Nigerian government for the sector in addressing metering access and improving power infrastructure.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.