Power generation companies in Nigeria have warned that their operations are under threat due to mounting debts totaling N3.7 trillion. The Association of Power Generation Companies highlighted the urgency of addressing the inadequate payments for electricity generated and consumed on the national grid, as detailed in a statement by the Board Chairman, Col. Sani Bello (rtd).
According to the statement, Gencos are currently owed over N2 trillion for electricity already provided, with an additional N1.7 trillion funding gap stemming from the recent supplementary Multi-Year Tariff Order (MYTO) 2024. This significant debt is hindering Gencos’ ability to meet financial obligations, including maintenance, procurement of spare parts, and employee commitments.
The companies also noted that hopes for settlement through external support, such as the World Bank Power Sector Recovery Programme, have been diminished due to other market participants’ failures to meet distribution-related indicators.
Access to foreign exchange remains a critical issue, as major operational and maintenance needs are dollar-denominated. Gencos emphasized the necessity of a specialized forex window or stable dollar allocation.
To address these challenges, Gencos called for a coordinated approach among all stakeholders in the Nigeria Electricity Supply Industry (NESI). They warned of potential national security risks if the liquidity issues are not resolved promptly, affecting the steady generation of electricity.
The companies outlined several demands, including:
- Immediate implementation of payment plans to settle outstanding invoices.
- Reprioritization of payments to ensure full payment of Gencos’ invoices.
- A clear financing plan to support the NERC’s Supplementary Order to MYTO.
- Provision of payment security backed by international financial institutions.
- Greater transparency in the billing, collection, and remittance processes.
- Investor-focused policies to incentivize growth.
- Liberalization of the market to boost confidence and creditworthiness.
- Firm enforcement of market agreements and rules by regulators.
Gencos also highlighted the broader financial and operational challenges they face, including harsh monetary and fiscal conditions, inflation, and forex volatility. They stressed the importance of resolving these issues to enable sustainable power generation and reliable electricity supply for Nigerians.
The companies reiterated that despite consuming the generated power, full payment has not been made, even with the partial activation of contracts and other regulatory measures. They warned of severe consequences for the entire power value chain if these liquidity challenges are not addressed urgently.
Minister of Power, Adebayo Adelabu, recently acknowledged the sector’s debt burden, estimating it at around N3 trillion, and noted the government’s efforts to tackle the issue, including debts owed to gas producers.
