In its bid to pacify the electricity Generation Companies (GenCos) from shutting down their plants, the federal government has announced a plan to pay them N2 trillion of the N4 trillion debts owed to them between now and the end of 2025.
The Minister of Power, Adebayo Adelabu, broke the news at the 2025 Ministerial Press Briefing Series in Abuja on Thursday.
He said he was already discussing with the Minister of Finance, and the Coordinating Minister of the Economy, Mr. Wale Edun, who has pledged to settle the debt with budgetary allocation or guaranteed debt instruments as promissory notes.
He explained that the promissory notes would be formidable enough for them to tender at the banks for immediate cash needs.
The minister said, “And I can tell you that between now and the end of the year, we are going to pay close to N2 trillion out of this N4 trillion.
“I have had discussions with the Minister of Finance and the Coordinating Minister of the Economy, who has promised that they working on the promissory note and once we have budget releases, cash payments will also be made.”
Defending the existence of the subsidy and how the debt was accumulated, he said“We believe that the average energy cost today per kilowatt of power is about 170 Naira per kilowatt. But 85% of customers are still paying 60 Naira.”He added that the government has always paid a shortfall as subsidies to the operators.
Adelabu said the debt accumulated from unpaid electricity subsidies, describing 50 per cent of it as legacy debt and the balance emanating from 2024 operations.Admitting the GenCos threatened to halt operations, he insisted that plans are underway to defray the debts gradually, even as the government cannot settle them at a go.
The minister said, “Let me first explain that these debts are unpaid subsidies of the Federal Government, which are due to the power-generating companies. Almost half of it was inherited, while about half of it came from 2024 operations, which is N4 trillion.
“I agree with you, there was a publication in the papers where the companies threatened to shut down their plants.
”On the steps to pay the debt, he said, “There are plans underway to make these payments. While I will not say it will be paid 100%, we will be paying it gradually. And the mode of payment is in two ways.
“We have sub-budgetary provisions which will facilitate cash payment while we are discussing with generating companies to give them guaranteed debt instruments like a promissory note, which we will give to them to pay them or defray some of these debts. These promissory notes will be liquid enough for them to be taken to the banks for discounting if they need immediate cash injections. So, it is the combination of cash payment and promissory notes.”
Adelabu recalled that the debt built up to N4 trillion because of government’s failure to meet the payment obligations regularly.
He said in order to ensure it does not accumulate to an unbearable burden, the government has is discussing the payment.
He however said before now, Nigerians were about 20 percent of energy costs. And government has always been subsidizing.
Adelabu said the government power companies as the National Electric Power Authority (NEPA), Power Holding Company of Nigeria (PHCN) were almost supplying energy free of charge as it was subsidized almost 90 per cent.
He said the firms were getting government subvention for subsidies.
According to him, the present 11 DisCos are not charging cost reflective tariff and it has restricted investment in the sector.
He said it is not enough to increase energy production without proportional demand for it, adding that the GenCo makes losses when there is no demand for its energy.
Culled from The Nation
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