Tinubu Okays Payment of N3.3tn Power Sector Debts

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Tinubu

The initiative will see the federal government disburse approximately N1.3 trillion to power generating companies (Gencos) through a combination of cash payments and promissory notes.

Additionally, $1.3 billion (equivalent to N1.994 trillion at the current exchange rate) owed to gas companies will be settled using cash and future royalties, Punch reported.

The Minister of Power, Adebayo Adelabu, revealed these plans during the 8th Africa Energy Marketplace in Abuja, themed “Towards Nigeria’s Sustainable Energy Future: Policy, Regulation and Investment.”

The government’s role in subsidizing electricity has led to significant debts to gas suppliers and Gencos. To address this, Tinubu has directed the immediate release of N130 billion from the Gas Stabilisation Fund to begin repaying the Gencos, with the remainder to be settled via promissory notes over two to five years.

Adelabu emphasized that the legacy debts owed to gas producers will be paid from future royalties and income streams within the gas sector, a plan that has received positive feedback from the gas suppliers.

He stated, “President Tinubu has approved the finance minister’s proposal to clear outstanding debts to gas suppliers, ensuring a mix of immediate cash payments and future royalties.”

The minister highlighted the importance of moving towards firm contracts between gas suppliers and power-generating companies to ensure a stable power supply. He noted that the current “best endeavor” model lacks binding commitments, which has contributed to inconsistent gas supply and power generation.

Addressing the broader challenges in the power sector, Adelabu pointed to the administration’s commitment to resolving policy coordination issues and eliminating industry bottlenecks. He defended the recent Band A tariff increase, noting that it affects only 15% of Nigerians and is crucial for the sustainability of the power sector reforms.

The minister also announced a milestone achievement in the Nigerian Electricity Supply Industry with the addition of 700MW from the Zungeru hydroelectric power plant, raising total generation to 5,000MW.

Tinubu’s approval for immediate cash injections and promissory notes aims to encourage power-generating companies to invest further in capacity expansion. This strategy, coupled with regulatory reforms, is expected to improve power supply reliability and financial viability across the sector.

Adelabu reiterated the necessity of transitioning to a cost-effective tariff model, citing the current N1.3 trillion debt to electricity generating companies and the $1.3 billion debt to gas firms. In March 2024, it was earlier reported that a $120 million payment towards the gas debt, highlighting ongoing efforts to stabilize gas supply for power generation.

Meanwhile, the African Development Bank (AfDB) is poised to support Nigeria’s power sector reforms with a $1 billion policy-based operation, focusing on the outcomes expected from the National Integrated Electricity Policy and Strategic Implementation Plan (NIEP-SIP). Dr. Kevin K. Kariuki, AfDB’s VP for Power, Energy, Climate, and Green Growth, stressed the importance of the Electricity Act 2023 in transforming Nigeria’s power sector.

The AfDB’s initiatives, including the Nigeria Transmission Expansion Project and the Nigeria Electrification Project, aim to enhance transmission infrastructure, develop mini-grids, and explore battery energy storage systems. Additionally, Nigeria’s participation in the $20 billion Desert to Power initiative will contribute significantly to increasing the country’s renewable energy capacity.

Kariuki emphasized the critical role of reliable electricity in economic growth, industrialization, and competitiveness, highlighting the AfDB’s comprehensive support for Nigeria’s journey towards universal electricity access by 2030 and zero carbon emissions by 2060.

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