The Minister of Power, Adebayo Adelabu, recently revealed that the federal government owes over N4 trillion to electricity generation companies (GenCos) and electricity distribution companies (DisCos) due to electricity subsidy payments.
Speaking at the public presentation of the National Integrated Electricity Policy (NIEP) and Nigeria Integrated Resource Plan (NIRP) in Abuja, Adelabu outlined that N2 trillion is owed to GenCos as legacy debt, while N1.9 trillion is owed as part of the 2024 electricity subsidy. Additionally, DisCos are owed N450 billion for the same subsidy.
Adelabu expressed concerns about the challenges this debt poses in improving the power sector’s service delivery, highlighting that the inability to settle these debts has hindered the GenCos’ capacity to perform optimally.
He noted that the increasing electricity consumption in Nigeria further complicates the situation, stressing that the government cannot afford to continue funding the current level of subsidy. The Minister emphasized the need for reforms in the electricity sector, including a review of tariffs, although he clarified that this may not necessarily result in an increase.
The Minister also pointed out the lack of investment in the DisCos’ distribution networks, which has slowed the migration of customers to Band A. He noted that the current tariff system, where customers in Band B receive 17-18 hours of electricity at N63 per kilowatt-hour, while those in Band A only get two more hours of supply but pay N209 per kilowatt-hour, is “unfair.”
To address this, the government is considering restructuring the tariff system to create a more balanced and equitable pricing structure, possibly reducing the tariff gap between the different bands. Adelabu called for more investment in the sector to speed up the migration of lower-band customers to Band A, saying that without significant investment, the transition would take much longer.
The government is also contemplating the cancellation of some sections of the electricity consumers’ classification, reducing it to three bands: A, B, and C, to enable lower-band customers to receive more hours of electricity.
The Minister reiterated that the government is committed to sector reforms, focusing on market liquidity, and addressing the current sectoral challenges, but made it clear that the government’s subsidy model is unsustainable in its present form.