The Nigerian Federal Government has raised concerns over the liquidity challenges facing the Nigerian Electricity Supply Industry (NESI), acknowledging that the sector’s debt has soared to over N4 trillion. Speaking in Abuja, Minister of Power, Chief Adebayo Adelabu, emphasized the critical need to address these challenges to ensure a consistent power supply for Nigerians.
With a legacy debt of N2 trillion, current debts amounting to N1.3 trillion owed to generation companies, and a gas supply debt of $1.3 billion, the sector is facing significant financial strain. The Minister highlighted the sector’s struggle, noting that resolving the liquidity crisis is vital for its survival.
He explained that the government must decide on the payment method for electricity in the country, whether through a cost-reflective tariff or subsidies. Adelabu emphasized that the sector’s liquidity issues stem from inappropriate tariff regimes, poor collections, and insufficient funding of government subsidies, resulting in substantial debts to transmission, generation, and gas supply companies.
Proposed solutions by the government include settling existing sectoral outstanding debts using cash payments and guaranteed debt instruments, with N1.3 trillion owed to GenCos and $1.3 billion as legacy debts. Additionally, a national dialogue on electricity supply’s nature, whether a commercial product or a social service, is being considered to reach a consensus on defining electricity.
Depending on the dialogue’s outcome, the government may implement a cost-reflective tariff or a cash-backed Federal Government-guaranteed subsidy funding regime to inject liquidity into the sector. Adelabu also stressed the need for increased investments in infrastructure, capacity expansion, and transmission automation across the value chain to improve the sector’s attractiveness to investors.
Vanguard News