GenCos Warns FG: Unpaid N2 Trillion Debt Could Stop Electricity for Nigerians

Power Generation Companies (GenCos) in Nigeria have issued a stern warning to the Federal Government over the non-payment of over N2 trillion in outstanding electricity debts. 

They caution that this could disrupt Nigerians’ electricity generation sustainability.

The appeal was made by Retired Col. Sani Bello, the Board Chairman of GenCos, in a statement released in Abuja on Sunday.

 He said that the government’s failure to settle debts for already generated and consumed power is posing a major threat to the ongoing operation of power generation plants across the country.

Bello further explained that this enormous debt is severely impeding GenCos’ ability to meet their obligations to lenders, procure Operations and Maintenance (O&M) spare parts, and fulfill employee-related commitments.

He said, “GenCos are currently owed more than two trillion naira for power they generated, put unto the national grid, and consumed by end users. 

This is in addition to the more than 1.7 trillion naira funding gap created in the recent supplementary Multi-Year Tariff Order (MYTO) 2024 without a designated fund to fill the gap,” 

“In light of the severity of the issues highlighted above, the GenCos are requesting that immediate and expedited action be taken to prevent national security challenges that may result from the failure of the GenCos to sustain steady generation of electricity for Nigerians.” 

Bello also pointed out that GenCos’ liquidity challenges have been worsened by policies like the payment waterfall in the Nigeria Electricity Supply Industry (NESI), which deprioritizes payments to them.

He said GenCos hopes to receive settlements through external support, such as the World Bank Poverty Reduction Support Operation (PSRO).

This have been dampened due to other market participants’ failure to meet their distribution-linked indicators (DLIs) outlined in the Power Sector Recovery Programme (PSRP).

Bello also drew attention to the issue of access to foreign exchange, as major operations and maintenance needs in the generation subsector are dollarized.

He emphasized the need for a specialized window or stable dollar allocation for GenCos.

Bello stressed, “GenCos are of the position that there is a need for a coordinated approach by all stakeholders in the NESi to address the liquidity issue realistically and sustainably in the power sector so that Nigerians can have access to reliable electricity supply.”

Government Response to GenCos Warning Over Unpaid Electricity Debt

In response to GenCos’ appeal, the Nigerian government has taken several steps.

The Minister of Power announced a payment plan approved by President Bola Tinubu, which involves immediate cash payments and promissory notes. 

However, GenCos is demanding a clear and immediate implementation plan.

Furthermore, the government has set up a committee to ensure a more consistent power supply. 

During their meeting, they addressed the indebtedness to GenCos by the Nigeria Bulk Electricity Trading Company (NBET). 

While acknowledging the sector’s liquidity challenge, they are working on validating the debt and determining a fair resolution².

Despite these actions, GenCos continues to urge the government for the immediate implementation of payment plans to settle all outstanding invoices in line with their Power Purchase Agreements.