AGS NEWS – In a strategic move to address persistent power outages, President Bola Tinubu has sanctioned the phased repayment of over N3.3 trillion in power sector debts.

The Federal Government will settle approximately N1.3 trillion owed to power generation companies through a mix of cash injections and promissory notes.

The $1.3 billion (N1.994 trillion) debt to gas suppliers will be repaid using cash and future royalties.

The government has already initiated the payment of the cash portion of the N1.3 trillion debt to the generation companies (Gencos), with plans to settle the remainder via promissory notes over two to five years, as revealed by Minister of Power, Chief Adebayo Adelabu, during the 8th Africa Energy Marketplace in Abuja.

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This event, themed “Towards Nigeria’s Sustainable Energy Future: Policy, Regulation and Investment,” highlighted the government’s commitment to stabilizing electricity supply by managing gas payments, which have been irregular, leading to substantial debts.

President Tinubu has directed the immediate disbursement of N130 billion from the Gas Stabilisation Fund to begin clearing the Gencos’ debts.

Minister Adelabu elaborated on the repayment strategy for the $1.3 billion legacy debt to gas producers, which will be drawn from future royalties and income streams in the gas sub-sector.

This approach has been met with approval from gas companies, which are crucial suppliers for Nigeria’s predominantly gas-powered electricity generation.

Adelabu emphasized that the current model, lacking firm contracts between gas suppliers and power companies, is insufficient.

The aim is to establish binding contracts to ensure consistent gas supply and reliable power generation. This new model is expected to encourage more investment in the power sector.

He also discussed the recent increase in electricity tariffs for Band A users, affecting 15% of the population, as part of the broader reform agenda.

The government’s efforts have led to a new peak in power generation, reaching 5,000MW with the contribution of the Zungeru hydroelectric power plant.

Addressing the financial constraints, Adelabu noted that the government cannot pay the entire N1.3 trillion debt at once.

Instead, a portion will be paid in cash, with the rest settled through promissory notes, providing a timeline of two to five years for complete repayment.

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This plan aims to enhance the confidence of power generation companies, promoting further investment in capacity expansion.

In line with the new Electricity Act of 2023, the power supply has improved, and Distribution Companies (Discos) are requesting more load to meet customer demand.

The Federal Government has already paid $120 million of the $1.3 billion gas debt, a move praised by industry stakeholders.

The African Development Bank (AfDB) is also set to support Nigeria’s energy reforms with a $1 billion policy-based operation.

This funding will back the implementation of the National Integrated Electricity Policy and Strategic Implementation Plan (NIEP-SIP), aiming to improve electricity access and financial sustainability in the power sector.

Dr. Kevin K. Kariuki, AfDB’s Vice President for Power, Energy, Climate, and Green Growth, emphasized the need to utilize Nigeria’s full power capacity and improve transmission infrastructure.

He highlighted the importance of reliable power for economic growth and the AfDB’s ongoing investments, including transmission projects and renewable energy initiatives like the Desert to Power initiative.