adminThe Nigerian Minister of Power, Adebayo Adelabu, announced on Wednesday that the government is facing considerable challenges in maintaining subsidies on electricity, attributing the predicament to the increasing indebtedness of the power sector. Speaking at a press conference in Abuja, Mr. Adelabu revealed that the cumulative debt owed by the country’s power sector to electricity-generating companies (GenCos) and gas companies (GasCos) has surpassed N3 trillion.
Mr. Adelabu detailed the breakdown of the outstanding debts, stating, “Today, we are owing a total of N1.3 trillion to the power generating companies, out of which 60 per cent is owed to gas suppliers. We have a legacy debt, prior to 2014, to the gas companies of $1.3 billion; at today’s rate, that is close to N2 trillion.”
He emphasized that the inherited debt, combining the N2 trillion owed to gas companies and the N1.3 trillion owed to GenCos, amounts to over N3 trillion, raising concerns about the future viability of the sector. In response to the financial strain, Mr. Adelabu acknowledged ongoing efforts to address the issues and settle the debts, either through cash injections or guaranteed debt instruments.
Addressing the topic of electricity subsidies, the Minister pointed out that countries like Ghana, Togo, and Benin Republic pay significantly more than Nigeria for electricity. He expressed doubts about the government’s ability to sustain funding for electricity subsidies and highlighted the stark financial realities. “What we have made provision for in the 2024 budget for subsidy is N450 billion, and we will require N2.9 trillion for subsidy. Can we afford it? We must be realistic. Can we afford it?” he questioned.
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Mr. Adelabu clarified that the allocated N450 billion for subsidy constitutes less than 20 per cent of the almost N3 trillion required to sustain subsidies at the current electricity price. He urged the nation to make informed decisions regarding the subsidy’s continuation.
Further delving into the challenges within the electricity supply value chain, Mr. Adelabu cited issues ranging from liquidity problems to infrastructure funding and structural misalignment. Technical operational challenges were also identified, including inadequate gas supplies, aging generation machinery, power evacuation constraints, and fragile transmission lines.
The Minister emphasized the urgency of addressing these complex issues to ensure the stability and reliability of the nation’s power supply. As the government grapples with the financial burden, stakeholders and the public are left to consider the broader implications of the electricity subsidy dilemma on the country’s economic landscape.
