The indebtedness of Nigeria’s power sector to electricity generating companies and gas producers has risen to about N3.3tn, the Federal Government declared on Wednesday.
It also revealed that subsidy on electricity for 2024 would gulp about N3tn, whereas only N450bn was budgeted for this purpose in this year’s budget, adding that it was now very difficult to sustain power subsidy.
Adebayo Adelabu, Minister of Power, stated that Nigeria must begin to move toward a cost-effective tariff model, revealing that the country is currently in debt to electricity generating companies to the tune of N1.3 trillion, with a debt to gas companies of $1.3 billion.
The minister, speaking at a press conference in Abuja attended by the heads of all agencies under the Federal Ministry of Power, insisted that he would not resign as power minister in response to calls for his resignation.
Despite stating that the ministries of power, finance, and petroleum were working to address the sector’s crisis, Adelabu revealed that the Federal Government had yet to pay the electricity subsidy for January 2024.
He also revealed that the January power outage and subsequent poor supply were caused by gas suppliers ceasing to supply gas for electricity generation due to the sector’s indebtedness to gas producers.
Adelabu stated, “Today, we owe a total of N1.3 trillion to power generation companies, with 60 percent owed to gas suppliers. Prior to2014, we owed the gas companies $1.3 billion; at today’s rates, that is close to N2tn.
“Now, if you add N2tn legacy debt owed gas companies and the N1.3tn being owed the Gencos, we have an inherited debt of over N3tn in this sector. How will the sector move forward? Nigerians deserve the right to know this.
“However, we are working underground to make sure that we resolve these issues and pay these debts either through cash injections or through guaranteed debt instruments to ensure the continuity in the generation of power.”
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Regarding the power crisis at the start of the year, he stated, “So what happened in January was that the gas companies that had been supplying gas to generating companies decided to ask for their money by saying ‘we are not supplying gas until you pay your debts.'” “If I were in their shoes, wouldn’t I do the same thing?”
To emphasize the issue of subsidies, the minister stated that countries such as Ghana, Togo, and Benin Republic pay much more for electricity than Nigeria, implying that the government may be unable to continue funding subsidies.
“What we have made provision for in the 2024 budget for subsidy is N450bn and we will require N2.9tn for subsidy. So can we afford it? We must be realistic. Can we afford it?
“N450bn is less than 20 per cent of the almost N3tn that is required for subsidy if we must continue at the current price (for electricity). So these are things that we need to decide on as a nation.”
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