The Federal Government has stated its intention to undertake necessary measures to settle the N4.7tn debt owed to power generation companies, in order to avert a potential nationwide power outage.
This development coincides with stakeholders expressing apprehension that certain power generation companies may be compelled to cease operations due to a lack of liquidity within the sector, unless the Federal Government promptly intervenes to clear the debts owed to Gencos.
However, the Federal Government has affirmed that it will exert every effort to prevent Gencos from shutting down their plants, as the issue is receiving due attention.
The Minister of Power, Adebayo Adelabu, assured Nigerians that the government would take action to prevent power plants from ceasing operations due to financial constraints.
Speaking through his media aide, Bolaji Tunji, the minister disclosed that efforts are underway to reimburse the power generation companies and gas suppliers. Facing a N4.7tn debt, our correspondent has learned that generation companies are encountering difficulties in maintaining their power plants. It has been gathered that gas-fired thermal plants are particularly affected, as they are unable to remit payments to gas companies supplying them with feedstock.
Recently, Transcorp Power expressed concern that it is owed approximately N650bn for the power it generated, stating that the liquidity shortage has impeded its ramp-up plans.
In December 2024, it was reported that gas companies formally notified all Gencos of their intention to suspend gas supply due to escalating debts. However, the Federal Government’s intervention appeared to have averted another nationwide blackout, similar to the one experienced in the first quarter of 2024.
Sources within the power sector indicated that generation companies are struggling to remain solvent, following the Federal Government’s failure to settle the N4.7tn debt.
The sources, who requested anonymity due to the sensitive nature of the matter, disclosed that some Gencos report profits in anticipation of the Federal Government’s payment, but the debt continues to accumulate daily.
It was gathered that approximately N200bn is added to the debt burden owed to the Gencos at the end of each month. According to a document reviewed by our correspondent, the total invoice from January to December 2024 was N2.7tn, of which N762.1bn was paid, leaving an outstanding balance of N1.94tn. This suggests that the Gencos were only able to recover 28.18 percent of their total debt for the first 11 months of 2024.
For instance, in January 2024, the Gencos’ invoice was N281.33bn, but only 33.80 percent was paid. In February, when the invoice totaled N208bn, the Gencos received 9.3 percent. From January to December 2024, this trend persisted, and the debts accumulated daily.
Operators, who requested anonymity, stated that while some Gencos, such as Transcorp and Geregu, reported profits at the end of the year, these funds are being withheld by the Federal Government.
“People assert that we generate revenue and are quick to cite two generation companies. However, if you have sold your goods and the payments are not forthcoming, how can you achieve profitability? You make sales, but the debtor refuses to remit payment. That is the predicament faced by Gencos,” an operator explained.
Another source added that generation companies are reliant on the Federal Government.
“We report profits in anticipation of government payments, even without clear indications of payment modalities. As of December 2024, N4tn is owed to Gencos. The government has declined to disburse electricity subsidies,” he stated.
The operators expressed concern that if immediate action is not taken, numerous power plants may cease operations or be denied access to gas supply to prevent further debt accumulation. Some questioned how the Federal Government intends to settle the debt with a budget of N900bn allocated to the sector.
“Gencos are merely struggling; we are uncertain how the government will clear the N4.7tn debt with a budget of N900bn. I can only hope that Nigeria will rectify this situation. However, sustainability is unattainable without financial resources,” another source stated.
Nonetheless, the Minister of Power, Adelabu, through his media aide, affirmed that the issue is currently receiving the necessary attention, assuring that all stakeholders within the value chain will be compensated.
“We are consistently intervening. I can assure you that no power plant will cease operations; such an event will not transpire due to its repercussions on the economy.
“The minister has already advocated for the government to settle the outstanding and legacy debts. The government will not permit the situation to deteriorate to the point where Gencos declare their inability to generate electricity.
“Both Gencos and gas suppliers, encompassing the entire value chain, will be compensated. The government will not allow any occurrence that could destabilize the economy,” he said.
The Chief Executive Officer of the Association of Power Generation Companies, Dr. Joy Ogaji, disclosed that the Gencos are experiencing financial hardship and require immediate and pragmatic solutions to alleviate their liquidity crisis, emphasizing that the liquidity deficit amounts to N4.7tn.
“Regarding liquidity, Gencos are facing severe financial strain and urgently require pragmatic solutions to address the liquidity crisis, which totals N4.7tn,” Ogaji stated.
The President and Group Chief Executive Officer of Transcorp Plc, Owen Omogiafo, lamented that Transcorp Plc, as a group, possesses an installed capacity of 2,000 megawatts, but is currently generating approximately half of that due to illiquidity.
“For Transcorp Plc as a group, our installed capacity is 2,000 megawatts, but our current available capacity is roughly one thousand megawatts. Why? Is it due to a lack of desire to invest further? Is it due to a lack of resources to expand? No!
“However, when considering the liquidity challenges we are encountering, it is noteworthy that Transcorp Group alone is owed approximately N650bn by the government.
“We are owed approximately N650bn for the power we have generated. As an investor, I aspire to expand our operations. I aim to operate a sustainable business. However, we must ensure liquidity and the return of funds to facilitate reinvestment,” Omogiafo stated during a recent television interview.
The Minister of Power had previously confirmed that the Federal Government owed electricity generation companies and electricity distribution companies over N4tn.
Providing a breakdown, the minister stated that N2tn was owed to Gencos as legacy debt, and an additional N1.9tn was owed to them as part of the electricity subsidy for 2024. He disclosed that Discos were owed N450bn for the 2024 electricity subsidy.
Adelabu had stated in February, “One of the principal concerns that occupies my attention is the substantial debt within the sector. We are discussing legacy debt, which is pervasive, exceeding N2tn, and we still have an unpaid subsidy for 2024; we have an additional N1.9tn owed to them as part of the electricity subsidy for 2024, while Discos are owed N450bn for the 2024 electricity subsidy.
“How can we expect Gencos to perform optimally? How can we expect them to pay for gas, services, and maintain their turbines and other infrastructure, as well as compensate their staff, when a total of N4tn is owed to them? I am under no illusions. The government cannot afford to continue funding the level of subsidy that our consumption pattern is generating, given the increasing consumption of electricity.”
Speaking, the Executive Director of the Association of Nigerian Electricity Distributors, Sunday Oduntan, disclosed that the failure of customers, such as the military and other government agencies, to settle their bills is impacting the electricity value chain.
According to him, military organizations, such as the Air Force, which attacked Ikeja Electric despite a N4bn debt, pose a significant threat to the sector.
“These military and MDAs are among the primary customers responsible for the erratic power supply we experience in Nigeria. Imagine an Air Force Base alone owing over N4bn. How do we remit payments to the market? Our portion constitutes only 20 percent of the tariffs we collect. How can a generation company generate more power when the Discos are unable to remit funds due to unpaid bills? These are the challenges. It is a cyclical problem,” he stated.
Oduntan further noted that “Discos owe generation companies funds due to a lack of payments.”
He emphasized, “All funds accruing to the market monthly are directed to the Central Bank of Nigeria; then the Nigerian Electricity Regulatory Commission, all their operations, including salaries, are funded from this tariff; the Transmission Company of Nigeria; the generation companies; and the gas suppliers.
“Gas suppliers are compensated by the generation companies. Generation companies cannot compensate gas suppliers unless we remit funds upstream in the market. The debt owed to Gencos increases daily. Every instance of power consumption incurs costs. Generation companies operate their machinery daily by combusting gas or other feedstocks.”
