The Nigerian power sector is grappling with a significant debt crisis, with generation companies (Gencos) owed a staggering N4.7 trillion. This massive debt burden threatens the stability of the national grid and has prompted urgent calls for government intervention. Gencos are urging President Bola Tinubu to expedite a planned meeting to address the issue, emphasizing the precarious state of the power sector and the need for immediate action. The escalating debt, coupled with operational challenges such as erratic gas supply and foreign exchange volatility, has placed immense strain on the Gencos, hindering their ability to maintain infrastructure and meet their financial obligations.
The gravity of the situation was underscored in a recent meeting between the Minister of Power, Adebayo Adelabu, and representatives of the Gencos. Acknowledging the looming threat of grid collapse due to the liquidity crisis, the government pledged to settle a substantial portion of the debt immediately, with the remaining balance to be addressed through financial instruments like promissory notes within six months. This commitment was further reinforced by the announcement of a planned meeting between President Tinubu and the Gencos’ leadership. While a specific date for the meeting has yet to be confirmed, the Gencos are pushing for it to take place as soon as possible, recognizing the urgency of the situation.
The Gencos have articulated their concerns and demands in a letter to the Federal Government, highlighting the multifaceted challenges confronting the power generation sector. These challenges include inconsistent gas supply, persistent payment defaults, and the debilitating impact of naira devaluation. The dramatic depreciation of the naira against the dollar has significantly eroded the Gencos’ maintenance budgets and loan repayment capabilities, exacerbating their financial woes. Furthermore, they have stressed the unsustainable risks they have borne, ranging from grid failures to unproductive taxes, while maintaining their commitment to providing power to the nation.
The N4.7 trillion debt comprises N2 trillion owed for power supplied in 2024 and an additional N1.9 trillion in legacy debts. This accumulating debt has crippled the Gencos’ operations and severely limited their access to funding for essential maintenance and infrastructure upgrades. The Chairman of Mainstream Energy Solutions and head of the Association of Power Generating Companies, Col. Sani Bello (retd), warned of the imminent collapse of the power sector if urgent intervention is not forthcoming. He emphasized that the debt burden is stifling the sector’s ability to function effectively.
The Minister of Power, Adebayo Adelabu, echoed the Gencos’ concerns, emphasizing the need for immediate payment of a substantial portion of the debt. He advocated for the use of promissory notes to cover the remaining balance, recognizing the government’s responsibility to stabilize the power sector and avert further crisis. Adelabu described the situation as a national emergency, underscoring the government’s commitment to resolving the debt issue. The precarious state of the power sector has prompted industry leaders to issue urgent warnings, emphasizing the critical role of electricity in powering industries, homes, and essential services like hospitals.
The Gencos’ plea for a swift meeting with President Tinubu underscores the urgency of the situation and the need for decisive action to prevent the collapse of the national grid. The government’s commitment to addressing the debt crisis, coupled with its recognition of the power sector’s vital role in the nation’s economic and social well-being, offers a glimmer of hope. However, the complexity of the challenges and the magnitude of the debt require a comprehensive and sustainable solution to ensure the long-term stability and viability of the Nigerian power sector. The planned meeting between President Tinubu and the Gencos represents a crucial opportunity to chart a path forward and secure the future of Nigeria’s power supply.
