Nigeria's power sector is facing a significant financial crisis, with the federal government owing over N4 trillion to electricity generation (GenCos) and distribution companies (DisCos).
This debt has severely impacted the
sector's operations, leading to threats of shutdowns and widespread criticism
of the government's handling of the situation.
A Breakdown of the N4 Trillion Debt
The Minister of Power, Adebayo
Adelabu, disclosed that the federal government owes GenCos and DisCos over N4
trillion. This includes N2 trillion in legacy debts to GenCos, N1.97 trillion
in unpaid subsidies for 2024, and N450 billion owed to DisCos for the same
period.
These debts have crippled the sector,
making it challenging for GenCos to maintain operations and invest in
infrastructure.
GenCos Threaten Shutdown
The GenCos have expressed deep
concern over the chronic underpayment for power already delivered into the
grid. They warn that without immediate government intervention, the entire
electricity supply chain is at risk of systemic failure.
The liquidity crisis is undermining
their ability to meet obligations and threatens to unravel the entire
electricity value chain.
Impact on Power Generation
Despite a recent peak in power
generation reaching 5,713.60 megawatts, the GenCos lament that the financial
strain has not eased.
They report that the federal
government's failure to pay the N4.7 trillion debt has hindered their
operations, making it difficult to sustain and improve power generation.
Government's Response
In response to the crisis, President
Bola Tinubu has approved the gradual payment of over N3.3 trillion in power
sector debts.
This includes N1.3 trillion owed to GenCos and
$1.3 billion to gas companies, to be settled through cash injections and
promissory notes over a two to five-year period.
Public Outcry Over Tariff Hikes
The government's decision to increase
electricity tariffs, particularly for Band A customers, has sparked public
outrage. Human rights lawyer Femi Falana criticized the move, stating that the
tariff hike was imposed without proper legal procedures, violating Section 116
of the Electricity Act 2023. He also accused the government of failing to
deliver on promises of improved power supply.
The Road Ahead
The Nigerian power sector stands at a
crossroads. While the government's commitment to settling debts is a positive
step, the sector requires comprehensive reforms to ensure sustainable
operations.
This includes addressing
infrastructure challenges, ensuring transparent regulatory practices, and
fostering private sector investment.
As President Tinubu prepares to meet
with GenCos leaders, the nation watches closely, hoping for decisive actions
that will revitalize the power sector and provide reliable electricity to
millions of Nigerians.
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