DEBTS owed by various ministries departments and agencies of government (MDAs) running into about N500 billion have exposed how the federal government jeopardises its own reforms in the power sector.
Many government agencies are indebted to operators in the power sector, a situation the operators claim is negatively impacting their liquidity flow and operational growth.
Most of the support commiments to the Nigerian power sector from the World Bank and the African Development Bank are largely hinged on addressing liquidity concerns and efficient market reforms.
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Since 2020, the World Bank has been working on series of market reforms, meeting with the Central Bank of Nigeria (CBN) and power sector stakeholders, efforts that birthed a $1.5 billion facility for the sector.
A first tranche of $750 million from the facility is expected to speed up the metering process and address issues bedevelling the sector.
The support came with conditions of addressing liquidity issues, ensuring market efficiency via a cost-reflective tarriff and investment in network infrastructure.
“The government has met severally with the World Bank and the $750m support came with the condition of market reforms. With this level of support from the World Bank, we expect the government to lead the way in market discipline by offsetting MDAs debts,” a power sector consultant with insider knowledge about the sector, Chuks Nwani, told The ICIR.
Nwani stressed the importance of the government enforcing market discipline, beginning from its own agencies.
“We cannot be talking about market discipline if the government fails to drive the process through clearance of its debts owed the sector. The incoming government must watch this development closely and ensure market discipline in order to pull the sector out of the doldrums,” he said.
Expressing a similar concern, a former chairman of the Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, told THE ICIR that government agencies had no reason to owe the sector.
Amadi suggested to the Federal government to use executive orders and deduct the debts owed the sector from MDAs budget allocations through the ministry of finance.
This, he said, would enforce market confidence in the sector.
He said, “MDAs should also be metered to ensure enforcement of the pay-as-you-go regime. The DisCos should enforce metering of the MDAs.”
The ICIR found that Federal, state and local government MDAs were owing the discos about N202bn up till July 2021. The MDAs debts were classified into verified and unverified categories.
According to the Association of Nigerian Electricity Distributors (ANED), the Federal government had verified N48bn as MDAs’ debts, while N61bn was yet to be confirmed. This did not include the estimated N93bn owed by the armed forces and security agencies in Nigeria.
On a comparative scale, these debt figures exceeded the total amount released by the Federal government to the Ministry of Health in five years (2015-2019), which was almost N158bn.
Records obtained by The ICIR from ANED showed that the Nigerian Army was owing an estimated sum of N48.9bn in electricity charges.
The Nigerian Navy was owing N11bn, the Nigerian Police Force was owing almost N6.6bn and the Nigerian Correctional Service (NCoS) was owing N1.1bn between 2015 and 2020.
Other MDAs owing the discos included the Ministry of Interior, with a debt of almost N3bn; the Ministry of Education, N2.4bn; the Ministry of Health, N855m; the Ministry of Finance; N443m; and the Ministry of Justice, N112m.
Besides the debts owed by the numerous government agencies, the power sector suffers from some legacy debts carried over from the privatisation exercise.
The Nigeria Electricity Regulatory Commission (NERC) chairman, Sanusi Garba, said the legacy debts, currently put at N247bn, were mostly as a result of tariff shortfalls and non-enforcement of the appropriate tariff regime since privatisation.
Garba, however, said the government was working to offset the debts by December this year.
Although the Federal government has promised to address the debt concerns, industry watchers remain worried that the compounding debts were causing problems in growing liquidity in the sector.
For instance, the rising debts had stunted financial growth in post-privatisation operations in the sector, with serial threats of shutdown by gas companies.
The concerns had also whittled down investors’ interest, with analysts calling for a review of the sector.
Currently, Nigerians are paying for a market reflective tariff price since the Minister of Finance, Zainab Ahmed, announced government’s withdrawal of subsidy in the power sector.
Industry watchers say government and other ancillary legacy debts must be cleared to ensure efficient reforms in the sector.
“We will get it right once the Federal government enforces market discipline and takes the lead by doing the right thing. That is the way to go, and that is our expectations from the incoming President and his cabinet,” they chorused.
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.