A recent disclosure by the federal government put the debt burden of the Nigerian Electricity Supply Industry (NESI) at over N3 trillion.
Minister of Power Chief Adebayo Adelabu who made the disclosure at a media parley in his office in Abuja, noted that the debts were accumulated under previous administrations, and if not addressed, uninterrupted power supply being targeted in the near future would remain a mirage.
According to the Minister, the Tinubu administration inherited over $1.3 billion debts owed the generation companies, GenCos, out of which 60 percent goes to gas supply, while the legacy debt stood at US$1.3 billion, now valued at about N2 trillion.
He maintained that for January the federal government was owing over N450 billion subsidy, and it is expected to pay over N3 trillion for the year, adding however that “we are working underground to salvage the situation”.
He diagnosed the sector of multiple simple technical problems across all segment in the value chain made complicated by lack of liquidity and infrastructure funding on one hand, and structural misalignment on the other.
According to him, the liquidity issues which are part of the complications stemmed from inappropriate tariff regime, poor collections, and inadequate funding of government subsidies leading to huge debts owed to the transmission, generation, and gas supplying companies.
This situation, he said, had restricted investments required for sustaining supply flow, capacity expansion, and infrastructural improvements and discouraged lending to the sector by financial institutions because the activities are not bankable, thus making the sector unattractive to investors.
To this effect, he advocated a national discourse to consider if electricity should be regarded as a commercial product or a social service.
“Should it be considered as a commercial product or social service. There must be an agreement across divides on how we define electricity. If we don’t resolve subsidy, whatever we do is like working in the dark.
“Depending on the outcome of the above, either implementation of a cost reflective tariff or cash-backed federal government guaranteed subsidy funding regime to inject liquidity into the sector should be adopted” he said
Also, the minister stated that for the power sector to run seamlessly, there should be increased investments across the value chain for infrastructural improvements, capacity expansion, and transmission automation.
“Equally, there should be diversification of power generation to absorb renewables and facilitate the nation’s journey to energy transition target, plan distribution strategies in conjunction with sub-national governments while focusing on embedded power model to reduce pressure on the national grid, and to ensure alternative electricity supply to the distribution companies (DisCos)
Other problems in the industry, he said, include, inadequate power evacuation capacity at generation companies (GenCos) locations, coupled with unstable and fragile transmission lines, devoid of automated frequency controls, lacking in fail-over or back-up capacity with frequent human disturbances through vandalisation and theft.
“Aging weak distribution infrastructure (lines and transformer) coupled with huge meter gap is causing unbearably large technical and collection losses” he noted.
These, Adelabu said, are issues that look so simple on the surface and should ordinarily require little efforts to fix over time, adding however that it’s been quite difficult to get them fixed over the years due to the complications wrapping the entire value chain end to end.
He also disclosed that in a bid to strengthen the grid against collapse which has been a recurring decimal in the system, efforts were being made to complete the SCADA project started many years back.
He said the worsening situation of power supply witnessed since January happened because the companies who supply gas to the generation companies (GenCos) demanded that the money owed them be paid before further delivery, hence part of the solutions being applied is to boost liquidity in the system.
Another equally serious complication which the Minister pointed out bordered on governance: the operations and control of the generation, transmission, and distribution segments.
“There has been an inability of the Nigerian Electricity Supply to adhere to market rules and to enforce market discipline. This has led to each segment in the value chain operating on a best endeavour principle,” he noted.
To this end, he charged the Nigerian Electricity Regulatory Commission (NERC) to up its game by ensuring that market rules and discipline are enforced, with punitive actions taken against erring operators in accordance with the operational agreements.
This is where the bubble burst. Barely a week after that, Abuja Electricity Distribution Company (AEDC) issued an ultimatum to disconnect electricity in the Presidential Villa and about 86 federal government’s ministries, departments, and agencies (MDAs) including the Ministry of Power over N47,195 billion outstanding debts as of December 2023.
In a disconnection notice, the DisCo gave the defaulters 10 days to comply and defray their debts or risk blackout from February 28, 2024.
Part of the notice read: “The Abuja Electricity Distribution PLC is constrained to do this publication with the details of Government, Ministries, Departments and Agencies with long outstanding unpaid bills for services rendered to them through the provision of electricity supply in that our previous attempts to make them honour their obligations have not achieved the desired results.”
And in a swift response, the presidency ordered the immediate settlement of N342m as an outstanding electricity bill due to the Abuja DisCo, following the reconciliation of accounts between the State House Management and AEDC.
Although AEDC in its notice claimed that it was owed N923m by the Villa, the presidency refuted the claim, saying that
the State House outstanding bill was N342.35m.
“Who is fooling who here?”, exclaimed a senior public servant who obliged our correspondent to respond to this situation in the Nigerian power sector under anonymity.
According to him, the bulk of the crisis in the sector can be attributed to “corruption and insincerity” on the part of government.
He noted that the huge debts owed the Abuja DisCo by the presidency and majority of the MDAs and the poor funding of government subsidy over time are an indication that the problem is not just about the lack of cost-reflective tariff being orchestrated by the operators, but largely the government.
“And if you check very well, you would discover that most private organisations are paying their electricity bills as at when due. Why can’t governments and their agencies do the same? We are only hearing every day that efforts are on by government to ensure that the country has quality uninterrupted power supply. Is it not a shame that this kind of thing is happening now?
“Don’t forget that it is not just AEDC that is in this kind of mess, other DisCos are likely to be suffering the same fate,” he said.