‘It’s difficult to sustain’ — Adelabu laments N3trn electricity subsidy bill

Adebayo Adelabu, minister of power, says it is difficult for the federal government to continue to subsidise electricity, saying Nigeria’s debt to generation and gas companies is now N3 trillion.

Adelabu spoke at a press briefing in Abuja on Wednesday — two days after the International Monetary Fund (IMF) asked the federal government to completely phase out petrol and electricity subsidies.

In the third quarter (Q3) of 2023, the federal government spent N204.59 billion on electricity subsidy, and plans to expend an additional N1.6 trillion in 2024 to enable citizens to access power at a low cost.

But speaking at the conference, the minister said it “is very difficult to sustain subsidy on electricity”, citing huge debt obligations to operators.

He said the country must begin to move towards a cost-effective tariff model, as it currently owes N1.3 trillion to generating companies (GenCos) and $1.3 billion to gas companies.

Adelabu also said only N450 billion was budgeted for subsidy this year but the ministry needs over N2 trillion for subsidy.

The minister said state governments will now be allowed to generate power independently to supply electricity to their states.

“Today, we are owing a total of N1.3tn to the power generating companies, out of which 60 per cent is being owed to gas suppliers. Today we have a legacy debt, prior to 2014, to the gas companies of $1.3bn; at today’s rate, that is close to N2tn,” he said.

“Now, if you add N2tn legacy debt owed gas companies and the N1.3tn being owed the Gencos, we have an inherited debt of over N3tn in this sector. How will the sector move forward? Nigerians deserve the right to know this.

“However, we are working underground to make sure that we resolve these issues and pay these debts either through cash injections or through guaranteed debt instruments to ensure the continuity in the generation of power.”

‘NATIONAL GRID COLLAPSES CAUSED BY GAS SHORTAGES, AGEING EQUIPMENT’

Speaking on the national grid collapses, Adelabu said the event was caused by the shortage of gas, ageing machines in the grid value chain, low capacity to evacuate generated power, and destruction of power stations in some parts of the northeast geopolitical zone of the country.

He also said Transmission Company of Nigeria (TCN) will not award any new contracts till all abandoned projects are completed.

According to Adelabu, the TCN has over 100 abandoned projects due to variations in contract figures as a result of the fluctuations in the foreign exchange.

The minister said over N50 billion has been earmarked in the 2024 budget to build mini-grids to supply power to remote areas.

He, therefore, asked electricity distribution companies (DisCos) to sit up, otherwise, anyone found wanting would have their licence withdrawn.

Adelabu also said Nuhu Ribadu, the national security adviser, has been asked to help provide security for power infrastructure.