Electricity Sector Woes: N4tn Legacy Debt Frustrating Fresh Power Sector Investments- Energy Experts

…Financial Burden Poses Significant Risks For Power Generation, Distribution

Some energy experts including a former General Manager of Corporate Communications at the Abuja Electricity Distribution Company (AEDC), Barrister Bode Fadipe, have expressed concern over Nigeria’s growing electricity sector debt, which has now reached over N4tn.

THE WHISTLER had reported how the Minister of Power, Chief Adebayo Adelabu, admitted that the federal government owes a significant portion of the sector’s debt.

He gave a breakdown of the N4tn owed to GenCos and DisCos, revealing that N2tn is classified as legacy debt, while N1.9tn is tied to the electricity subsidy for 2024.

Additionally, both the federal government and DisCos are owed N450bn as part of the 2024 electricity subsidy.

The minister also acknowledged that this financial burden poses a critical challenge to the nation’s efforts to reform the power sector, and called for a comprehensive solution to manage the debt and improve the sector’s efficiency.

However, Fadipe, who spoke exclusively with THE WHISTLER in Abuja on Sunday, stressed the urgent need for the government to address the crisis.

He said the current financial burden on electricity generation companies (GenCos) and distribution companies (DisCos) poses a serious threat to the sector’s sustainability.

Over $15bn private sector investments would be required to boost the level.of power supply in the country

Fadipe, who is the CEO of Sage Consulting
Communications, said the chances of the sector emerging as a profitable, bankable, and efficient utility are extremely slim.

He warned that no investor would be willing to invest in a sector with such a massive debt overhang and lamented that the debt continues to grow as the issue of tariff parity remains unresolved, with a shortfall of about 70 per cent still unaddressed.

He said, “The debt burden on the sector has reached a crisis proportion that requires urgent action. Unfortunately, the debt is still building as the about 70 per cent shortfall in tariff parity remains unaddressed.

“The implication of this type of debt overhang is that it is a disincentive for investors.
No investor will see this huge debt and be willing to pit his money into the business.

“As for the way out, we just have to bite the bullet and one way of doing this is to ensure the parity between the production and selling price of the commodity.”

Fadipe also emphasized the importance of moving away from reliance on foreign loans to fund the sector.

“It is also important that we begin to move away from taking foreign loans to service this sector. We cannot grow the sector using foreign loans”, he said.

Also, the Executive Director of PowerUp Nigeria, Mr Adetayo Adegbemle, told THE WHISTLER that the legacy debts are major impediments to the development of the power sector.

Adegbemle claimed that the debt is also one of the major reasons the electricity tariff seems to be getting out of reach of Nigerians.

He said, “Debts to Gencos and Discos are major impediments to investment and development of our power sector.

“This debt is also one of the major reasons electricity tariff seems to be getting out of reach of Nigerians.

“The only way out of this is for the government to clear up this debt so Gencos and Discos can reinvest in the network; it drastically reduces commercial and collection losses.

” Also, it will help to reduce technical losses because we are now able to upgrade ageing infrastructure. We should try and change our approach to these issues”.

Electricity Sector Woes: N4tn Legacy Debt Frustrating Fresh Power Sector Investments- Energy Experts is first published on The Whistler Newspaper