The Minister of Power, Adebayo Adelabu, has revealed that the Federal Government owes electricity generation companies (GenCos) and electricity distribution companies (DisCos) a staggering N4 trillion in electricity subsidies, a figure that is crippling the power sector and hindering optimal service delivery to consumers.
Speaking at the public presentation of the National Integrated Electricity Policy and Nigeria Integrated Resource Plan in Abuja on Thursday, February 27, Adelabu explained that the vast debt burden has significant repercussions for the functioning of the power industry.
The minister provided a detailed breakdown, stating that GenCos are owed over N2 trillion as legacy debt. Additionally, another N1.9 trillion is still outstanding as part of the electricity subsidy for 2024. Meanwhile, DisCos are owed N450 billion for the same subsidy period.
“One of the major issues that concerns me is the huge debt in the sector. We are talking about legacy debt, which is over N2 trillion, and we still have an unpaid subsidy for 2024, How do you expect the GenCos to perform optimally? How do you expect them to pay for gas, service and maintain their turbines and other infrastructure, as well as pay their staff, if a total of N4 trillion is being owed to them?” Adelabu said.
The debt, which encompasses both legacy and subsidy-related payments, has left the power sector grappling with liquidity problems and the inability to meet the growing demand for electricity.
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The minister warned that the continued government subsidy model is unsustainable, particularly as electricity consumption in the country rises.
“I do not deceive myself. The government cannot afford to continue funding the level of subsidy that our consumption pattern is throwing up, We have seen increasing consumption of electricity, and we need to address the key issues — the market, liquidity, and sector reforms.” Adelabu said.
While not explicitly stating that tariffs would be increased, the minister hinted at a review of the current electricity tariff structure, noting that the government would consider ways to improve upon last year’s modest achievements in the sector.
Adelabu also acknowledged that a new model of intervention would be necessary to address the ongoing subsidy payments.
He pointed out that the government plans to identify a specific segment of the population in need of assistance, rather than continuing the blanket subsidy approach.
In addition to the financial struggles, the minister expressed concern over the lack of investment in the distribution networks of DisCos, which has prevented more customers from migrating to higher tariff bands, particularly Band A.
“The government has not seen the migration of more customers to Band A as we anticipated, This is largely due to the lack of investment by DisCos in their networks.” Adelabu lamented.
The challenges outlined by the minister underscore the urgent need for reforms within Nigeria’s power sector to ensure its sustainability and ability to meet the growing demands of consumers.
The government is under increasing pressure to find a long-term solution to the sector’s financial woes while improving service delivery for Nigerians.
