The federal government plans to complete the payment of outstanding legacy debts owed to electricity generation companies (GenCos) by 2027, Minister of Power, Joseph Tegbe, has said.
Tegbe disclosed this weekend in Lagos at the Harvard Business School Association of Nigeria (HBSAN) Energy Conference, where he said the government had successfully paid about N1.23 trillion through bonds.
“We have brought in bonds. We’ve paid about N1.23 trillion successfully, we plan to finish paying by next year,” he said.
The minister, however, said the government was also working to prevent a recurrence of the debt accumulation, adding that a review of the electricity market structure and design was necessary.
“But again, it’s not just paying the backlog or legacy debt. The plan is how to make sure it doesn’t happen anymore and one of the ways that we’re trying to make sure this happens is to take a second look at the market structure and market design itself,” he said.
Tegbe also raised concerns about tariff assumptions underpinning the federal government’s electricity subsidy, arguing that the current market arrangement was unsustainable.
He said the Nigerian Bulk Electricity Trading Plc (NBET) had been due for sunset, alleging that some market participants were taking advantage of its model for purchasing and selling electricity.
“And my plan at the end of the day is to move from that model. That model will not help us. We can’t keep covering tariff shortfalls and think we’ll be able to give power to every Nigerian,” he said.
According to him, the government intends to encourage bilateral electricity agreements between market participants, noting that such arrangements are already operational.
“So all we need to do is to move to bilateral agreements, and we already have bilateral agreements working.
“Mainstream Energy Solutions Limited (MESL) supplies IBEDC, Mainstream supplies Ikeja DisCo and they pay because mainstream will supply you what you pay, rather than somebody who will say the government will always give you money,” Tegbe said.
The minister also identified underutilised power generation capacity as a major challenge facing Nigeria’s electricity sector, particularly in the Niger Delta.
He cited the Alaoji power plant, where he said about 3,000 megawatts could be generated, but only around 400 megawatts was being utilised.
Also speaking at the conference, the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Rabiu Umar, said investments in gas processing, transportation and power generation must be commercially and financially viable.
He said investors needed to generate revenue, repay loans and make profits, while warning that excessive charges to electricity and gas off-takers could create additional problems.
“But at the same time, we also must be careful because if the off taker that is supposed to pay for the service is also overcharged, it the creates a problem,” Umar said.
He added that Nigeria’s gas market was not yet mature enough to operate as a fully liberalised market, making some level of regulation and price control necessary.
According to Umar, the Petroleum Industry Act envisages a transition that would eventually lead to a free market.
He had said on September 22 that Nigeria would stop regulating prices in the domestic gas market by September 2028, with the aim of establishing a fully operational willing-buyer, willing-seller framework.
