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February 15, 2024

FG expresses concern as electricity market debt tops N4trn

FG expresses concern as electricity market debt tops N4trn

Electricity

•Considers issuance of debt instruments  

By Obas Esiedesa, Abuja  

The Federal Government yesterday expressed concerns over liquidity challenges facing the Nigerian Electricity Supply Industry, NESI, admitting that the debt in the sector has risen to over N4 trillion.  

The Minister of Power, Chief Adebayo Adelabu, told journalists in Abuja that resolving the liquidity challenges in the sector was critical to ensuring regular power supply to Nigerians.  

He pointed out that with a legacy debt of N2 trillion, N1.3 trillion existing debt owed to generation companies and $1.3 billion gas supply debt, the sector was struggling to survive

.  

He noted that the government will have to decide on how electricity is paid for in the country either through a cost reflective tariff or subsidies.

He highlighted “The persistent liquidity issues coming from inappropriate tariff regime, poor collections and inadequate funding of government subsidies leading to huge debts owed to the transmission, generation and gas supply companies.  

“This has restricted investments required for sustaining supply flow, capacity expansion and infrastructural improvements. It has also not only discouraged lending to the sector by financial institutions as the sectoral activities are not bankable, but has also made the sector unattractive to new investors”.

He added that some of the solutions being considered by the government include “settlement of existing sectoral outstanding debt obligations to the gas supply and power generation companies using partly cash payment and guaranteed debt instruments. N1.3 trillion is current debts to the GenCos and $1.3 billion legacy debts to the GenCos.

“A national discourse on the nation’s perspective to Electricity supply, commercial product or social service. There must be an agreement acrossdivides on how we define electricity.

Depending on the outcome of the above, either implementation of a cost reflective tariff or a cashed backed Federal Government guaranteed subsidy funding regime to inject liquidity into the sector.