The Nigerian power sector is grappling with a severe liquidity crisis, threatening to plunge the nation into darkness. Power generation companies (Gencos) are owed a staggering N4.7 trillion in unpaid debts, a figure that continues to escalate by over N200 billion monthly. This massive debt burden has crippled the Gencos’ ability to operate effectively, jeopardizing their capacity to purchase crucial feedstock like gas, maintain their power plants, and meet their financial obligations. The precarious financial situation has raised concerns among stakeholders, who fear that without urgent government intervention, some Gencos might be forced to shut down, triggering a nationwide blackout.
The government’s inability to settle the mounting debt is rooted in several factors, including legacy debts, unpaid electricity subsidies, and the failure of some significant consumers, such as military installations and government agencies, to pay their electricity bills. While the Gencos record profits on paper, these profits are essentially illusory as the government, their primary debtor, withholds payment. This creates a vicious cycle where Gencos are unable to reinvest in their operations, further hindering their ability to generate power efficiently and reliably. The situation is exacerbated by the rising cost of gas and other operational expenses, squeezing the Gencos’ already strained finances.
The N4.7 trillion debt comprises various components, including over N2 trillion in legacy debts and approximately N1.9 trillion in unpaid electricity subsidies for 2024. Additionally, Distribution Companies (Discos) are owed N450 billion for the same period. The documentation reveals a consistent pattern of underpayment throughout 2024. For instance, Gencos received only 33.80% of their January 2024 invoice and a meager 9.3% in February. This persistent shortfall in payments has steadily compounded the debt crisis, pushing the power sector to the brink of collapse.
The government, acknowledging the gravity of the situation, has assured Nigerians that it is committed to averting a nationwide blackout. The Minister of Power, Adebayo Adelabu, has pledged to intervene and ensure that all stakeholders across the power value chain, including Gencos and gas suppliers, receive their due payments. He emphasized that the government understands the economic consequences of a power shutdown and will take all necessary measures to prevent such a scenario. However, concrete details of the government’s plan to address the N4.7 trillion debt, especially in light of the sector’s relatively modest N900 billion budget, remain unclear.
Industry players and experts have expressed skepticism about the government’s ability to resolve the crisis effectively. The sheer magnitude of the debt, coupled with the limited budgetary allocation for the power sector, raises serious doubts about the feasibility of a swift resolution. Some operators have questioned the government’s commitment to sustainable solutions, pointing to the repeated cycle of accumulating debts and temporary interventions that have failed to address the fundamental issues plaguing the sector. Concerns have also been raised about the government’s ability to enforce payment from delinquent government agencies and military installations, which significantly contribute to the Discos’ inability to remit funds upstream.
The liquidity crisis in the Nigerian power sector underscores systemic challenges within the industry, including inadequate cost-reflective tariffs, inefficiencies in the distribution network, and a lack of accountability across the value chain. The continuous accumulation of debt, coupled with the government’s apparent inability to implement lasting solutions, threatens the sector’s viability and, consequently, Nigeria’s economic stability. The situation requires a comprehensive and sustainable approach that addresses the root causes of the financial crisis rather than resorting to ad-hoc interventions that provide only temporary relief. Unless decisive action is taken, the specter of a nationwide blackout looms large, with potentially devastating consequences for businesses, households, and the overall Nigerian economy.
