The Federal Government has announced plans to pay N130 billion to settle part of the N1.3 trillion gas supply debts in the Nigerian Electricity Supply Industry (NESI).
This was disclosed by the Minister of Power, Mr. Adebayo Adelabu, during his address at the 2024 Eighth Africa Energy Marketplace held in Abuja on Thursday.
The event, which focused on Nigeria’s sustainable energy future through policy, regulation, and investment, was a collaborative effort by the African Development Bank (AfDB), the Ministry of Power, and the United Kingdom Nigeria Infrastructure Advisory Facility (UKNIAF).
According to Minister Adelabu, President Bola Tinubu has endorsed the proposal from the Minister of State for Petroleum Resources concerning gas, which is to clear the outstanding debts owed to gas suppliers by the power sector. He explained that the payments would be divided into two categories: the legacy debts and the current debts.
He stated, “For the current debt, approval has been given for a cash payment of about N130 billion from the Gas Stabilisation Fund which the Federal Ministry of Finance will pay.
“The payment for the legacy debt is actually going to be made but from future royalties and exchange of incomes in the gas sub-sector which is quite satisfactory to the gas supply companies.
“The last figure was about $1.3 billion and this payment, we believe, will go a long way to encouraging these gas companies to enter into firm supply contracts with the power generating companies.”
Adelabu said that the Federal Government intends to implement a model guaranteeing firm contracts between gas companies and most power-generating companies. He also noted that the total debt owed by these power-generating companies stands at N1.3 trillion.
Modalities for payment
Furthermore, the Minister explained that the Ministry has received presidential approval to proceed with payments, contingent upon the reconciliation of outstanding debts between the government and the power generating companies.
He said, “And this, we have successfully done, and are being signed off by both parties. Majority have signed off and we are actually engaging others, so we have 100 per cent sign-off from the power generating companies.”
“The modalities for paying this will be two ways; there will be immediate cash injection as the government is not buoyant enough to pay the N1.3 trillion at once. A fraction will be paid in cash, while the remaining fraction will be settled through a guaranteed debt instrument, preferably a promissory note.”
Financial difficulties hinder Discos from attracting investment
Mr. Sanusi Garba, Chairman of the Nigerian Electricity Regulatory Commission (NERC), commented on the financial difficulties faced by the Electricity Distribution Companies (DisCos). He stated that their poor financial condition has hindered their ability to raise the necessary capital for investment.
Garba further explained that the current challenges in the sector are the result of accumulated past inactions and missteps by those responsible for managing the sector at both the policy and operational levels.
