Joseph Bakare
Gas suppliers and Power Generation Companies whose debt has climbed to about N1.3 trillion would now be paid after Federal Government gave directive the Ministry of Finance to begin the payment of the first tranche of the money.
The N1.3 trillion debt represents gas supply owed power Generation Companies (Gencos) as well as gas suppliers.
The debt portfolio is compounded Electricity Distribution Companies (DisCos) technical insolvency who finds it difficult to run their businesses optimally.
Minister of Power, Chief Adebayo Adelabu, stated that a liquidation plan had been approved by President Bola Tinubu, beginning with the payment of about N130 billion in the first instalment.
Adelabu, spoke at the 8th African Energy Market Place themed: “Towards Nigeria‘s Sustainable Energy Future: Policy, Regulation and Investment – A Policy Dialogue for the National Integrated Electricity Policy and Strategic Implementation Plan (NIEP-SIP).”
The Minister explained that the government was working to get the DisCos solvent and effective by unbundling their operations along state boundaries, insisting that their areas of coverage were too large for them compared to the Discos’ capacities.
“Mr. President has approved the submission made by the Minister of State Petroleum (Gas) to defray the outstanding debts owed to the gas supply companies to power generation companies.
“The payments are in two parts, the legacy debts and the current debts. For the current debt, approval has been given to pay about N130 billion from the gas stabilisation fund which the Federal Ministry of Finance will pay.
“The payment of the legacy debt will be made from future royalties in exchange for incomes in the gas subsector which is quite satisfactory to the gas suppliers. This will allow the companies to enter into firm contracts with power generation companies.
“For the power generation companies, the debt is about N1.3 trillion and I can also tell you that we have the consent of the president to pay, on the condition that the actual figures are reconciled between the government and the companies.
“ This we have successfully done and it is being signed off by both parties now. Majority has signed off and we are engaging to ensure that we have 100 per cent sign off.
“The debt will be paid in two ways, immediate cash injection and through a guaranteed debt instrument, preferably a promissory note. This assures the companies that in the next three to five years, the government is ready to defray these debts,” the minister stated.
Adelabu, explained that the recent ‘Band A’ electricity tariff that came to force on April 3, 2024 had also succeeded in reducing the cost of production by manufacturers by 40 per cent.
He dismissed claims that the recent electricity tariff increase for Band A customers had increased the cost of production for manufacturers, leading to the high cost of goods and services was not entirely true.
“The electricity tariff was not targeted at worsening the already bad economic situation of high inflation rate and naira losing value but targeted at resolving or reducing the hardship of the people.
“Those on Band A, if they should do their arithmetic properly, to compare what they have been spending on energy provision from grid supply and energy generators put together, before the review of tariff, they have achieved nothing less than 30 to 40 percent reduction in their total cost. That is the truth.
“We are also electricity consumers, so we can attest to this fact. It is true that if you are in Band A, your bill would have doubled if not more. But check out what you have been spending on your generator, including servicing, diesel and petroleum procurement, it would have come down considerably.
“So the argument of this new tariff having the capacity of increasing the cost of production and raising the prices of goods and services is not logical.
“Manufacturers under Band A should have a lower energy cost by now, thereby, reducing their cost of production. Except those that have not been paying for electricity in the past. We can also come together to compare notes with practical example. But how this new tariff regime will increase the cost of production is not valid because I am in that industry too,” he stated.
He also said that with the generation of 700MW from Zungeru hydroelectric power plant, the Nigerian Electricity Supply Industry (NESI) has now recorded a new feat of 5,000MW.
He maintained that the supply of electricity had increased due to the implementation of the Electricity Act 2023 and the band A tariff, adding that the Discos were requesting more load for onward distribution to the customers.
In his speech titled: “The Journey So Far”, Adelabu said that the NIEP-SIP will serve as a guiding blueprint for Nigeria’s energy development, addressing areas such as rural electrification, public-private partnerships for universal electricity access, power-source specific policies, bulk power purchase, and management of local distribution in rural areas.
Adelabu said that the government remains steadfast in its determination to forge ahead, knowing that the journey to sustainable energy access is not one without its hurdles.