The Federal Government has budgeted N40 billion to settle the electricity bill debts of ministries, departments, and agencies (MDAs) in 2024.
The item listed as ‘Settlement of MDAs’ electricity debts’, was in the sectoral allocation details released by the Chairman, Senate Committee on Appropriations, Solomon Adeola, and seen by Nairametrics.
The amount is the same as what was budgeted for 2023 but higher than what was budgeted in 2022 (N27 billion).
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There are about 11 power distribution companies in Nigeria. The companies were formed when the Power Holding Company of Nigeria (PHCN) was broken up into successor generation, transmission, and distribution companies in November 2013.
The Transmission Company of Nigeria (TCN) transfers electricity created by power generation companies to the 11 Discos, who then sell the electricity to end users to generate income for the power value chain.
However, over time, the Discos have been complaining that some end users, especially MDAs of the Federal Government, have not paid their energy bills.
Earlier in January 2022, the Executive Director of, the Association of Nigerian Electricity Distributors, Sunday Oduntan, disclosed that all the Federal Government MDAs and the military owed the electricity distribution companies over N90bn.
He noted that despite ongoing discussions on settlement, the debt had continued to pile up over the years since the power sector was privatized in November 2013.
He said:
- “All MDAs’ debt is more than N90bn and the military is part of that. We came on board in 2013 and since then, how much has been paid by the MDAs?
- “There was a time when a former minister of power said they (the government) had concluded arrangements on how to settle the debt, but as I speak with you, the bills are still unpaid. Since privatization, there have been issues around the MDAs’ debt.”
Also, in January 2023, the Managing Director of Eko Electricity Distribution Company (EKEDC), Miss Tinuade Sanda, disclosed that MDAs owed the Disco N40bn as of December 2022.
In October 2023, the Nigerian Electricity Regulatory Commission (NERC) warned the Federal Government that failure to settle its electricity bills totalling N25bn may result in the disconnection of its facility, Ajaokuta Steel Co. Ltd, from the national grid.
The debt occurred despite the provision of electricity subsidy by the Federal Government.
The Federal Government in Q2 2023, paid about N135.23 billion for electricity subsidy, a 275% Q/Q increase from N36.02 billion paid in Q1 2023, according to information obtained from NERC.
Also, the World Bank, in its Nigeria Public Finance Review report, noted that the failure of many federal, state, and local government MDAs to pay their electricity bills is one of the reasons the government pays electricity subsidies.
It added that the Federal Government has been financing electricity costs through public subsidy since the privatization of the sector, and the subsidy is one of the reasons for the underperformance of the power sector.