The Federal Government of Nigeria plans to settle about N1.7 trillion in electricity debt by issuing bonds and promissory notes.
This plan is contained in the draft Accelerated Stabilization and Advancement Plan (ASAP) presented by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, to President Bola Tinubu.
Through this plan, which is expected to be implemented within the next six months, the government hopes to address a significant tariff shortfall and the liquidity crisis in Nigeria’s power sector.
According to the ASAP document seen by Nairametrics, the Minister of Finance, the Federal Inland Revenue Services (FIRS), and the Central Bank of Nigeria (CBN) will work alongside key stakeholders in the power sector to implement alternative settlement methods for verified legacy debt, primarily through the issuance of bonds and promissory notes.
Other key plans for the power sector
- Another crucial intervention is the quarterly provision of funds to gas suppliers. This step is designed to ensure a consistent and reliable supply of gas to power plants, crucial for maintaining steady electricity generation. The cost for this intervention is projected at N216 billion. The impact of this provision is the replenishment of the Gas Supply Stabilisation Fund (GSSF), which is essential for maintaining the stability and reliability of the gas supply chain.
- There is also a plan to integrate renewable energy sources into Nigeria’s energy mix. Variable renewable energy integration (VREI) studies will be conducted to incorporate renewable energy sources such as solar and wind into the national grid. This intervention, costing $2 million, aims to improve the energy mix and reduce overall energy costs, contributing to a more sustainable and cost-effective power sector.
- To address the infrastructural gaps in the power sector, the ASAP proposes the completion of 25 Transmission Company of Nigeria (TCN) substation projects that are currently at 30% completion. This effort aligns with the Nigerian Electricity Regulatory Commission’s (NERC) order on TCN’s Performance Improvement Plan and is expected to cost $73.2 million. Additionally, the plan includes completing 25 TCN transmission line projects, also at 30% completion, which will cost $170.4 million. Both interventions are critical for closing the infrastructure gap and enhancing the transmission capacity of the power sector.
- Another significant intervention is increasing the capacity of the Niger Delta Power Holding Company (NDPHC). This initiative, costing €4.5 million, is expected to add 1000 MW of generation capacity, significantly boosting Nigeria’s overall power generation and addressing the persistent power shortages in the country.
Total costs and expected outcomes
The total cost of these immediate interventions is estimated at N1.916 trillion, $245.6 million, and €4.5 million.
Through these plans, the government hopes to stabilize the power sector quickly and ensure a more reliable electricity supply across Nigeria.
The successful implementation of these interventions is expected to significantly impact the power sector, addressing both financial and infrastructural challenges.
What you should know
Addressing the financial challenges plaguing the sector, Tony Elumelu, Chairman of the Board of Directors at Transcorp Group, recently decried the substantial debts owed to power generation companies (GenCos) by the Nigerian Bulk Electricity Trading Plc (NBET). He urged the Federal Government to expedite actions to address these debts, emphasizing the need for liquidity to sustain reliable electricity generation.
The GenCos also urged the Federal Government to settle outstanding electricity debts to ensure their continued operation.
They warned that the non-payment of over N2 trillion could jeopardize the sustainability of electricity generation for Nigerians.
The Federal Government earlier announced plans to pay N130 billion to settle part of the gas supply debts in the Nigerian Electricity Supply Industry (NESI). According to the Minister of Power, Mr. Adebayo Adelabu, President Bola Tinubu endorsed a proposal from the Minister of State for Petroleum Resources concerning gas, which is to clear the outstanding debts owed to gas suppliers by the power sector.