Home Analysis Here Is Confirmation That Nigeria's Power Industry Is Near Bankruptcy

Here Is Confirmation That Nigeria’s Power Industry Is Near Bankruptcy


Nigeria may be in darkness in the next few weeks as cash strapped power companies, owed as much as N219 billion by the  Federal Government, are unable  to settle loans borrowed from banks while future expansions are in dare jeopardy.

Operators are in a precarious situation because inadequate cash flows have hindered them from purchasing raw materials, pay for repairs of machinery and pay staff salaries. 

A liquidity squeeze means these firms may be unable to meet their short term obligations, resulting in negative working capital and thus threatening their ability to continue to exist in the foreseeable future. 

There are possibilities that shareholders may lose money when they invest in a company that has too much debt in its capital structure and worse still, if the company’s cash flow proves inadequate to meet its financial obligations. 

Generating Companies (Gencos) in the power sector put the money owed to them by Ministries, Departments and Agencies (MDAs) for energy consumption at N213 billion while Distributions companies are owed N78.7 billion. 

 Dallas Peavey, Jr., the managing director and CEO of Egbin Power Plc, in an interview with Punch Newspaper said his company is owing banks $325 million and paying the principal or interest is practically impossible because there no cash flows. 

“We have never made a profit. We are owed N86bn and we have lost $300m in the last three years directly out of our pocket because we haven’t been paid and because we have invested that money and we have got no returns,” said Peavey, Jr.

More than two years after the Federal Government sold power assets to private companies, power generation is still less than 4000 megawatt for a population of 180 million people. South Africa, Africa’s most developed country with a population of one third of Nigeria, generates 40000 mega watt of electricity. 

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A militant attack on oil facilities in the Niger Delta oil producing region resulted in gas supply shortages and further worsened power situation, the ripple effects of the attacks was that manufacturers incurred huge production cost thus undermining profit margin. 

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Nigeria needs a whopping sum of $40 billion to generate, transmit and distribute about 20000 megawatts of electricity in the medium term, according to operators in the sector. 

Many Nigerian dailies have reported that the House of Represent has called for the cancellation of Federal Government plans to secure a N309 billion bond, to finance the short fall in the Nigerian electricity market.  

“We can’t continue to operate simply because we don’t have the money to pay for materials. We don’t have the money to pay for repairs and we can’t continue to pay our employers simply because we are owed so much money. We have gone out to banks and different financial entities to borrow the money to continue to do maintenance. You know for banks, the limit is only so much and we have reached that limit,” said Peavey, Jr.


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