The Federal Government has announced that it has paid off N205bn of the N1.3tn debt owed to power generation companies, in a move aimed at boosting liquidity in the power sector.
The Minster of Power Adebayo Adelabu disclosed this in Abuja on Monday during an oversight visit by the House of Representatives Committee on Power.
Adelabu emphasised the need for lawmakers to hold the executive accountable for settling outstanding debts to players in the sector, and must therefore sustain their pressure to achieve this goal.
“In terms of markets and liquidity, the government is also owing these companies, but they have started paying them little by little. Just about three weeks ago, out of the about N1.3tn we are owing the Generation Companies, we were able to pay them N205bn. And they are also happy.
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“But I will plead with the members of the House committee to help us mount pressure on the executive to continue to pay these people,” he said.
Adelabu also announced plans by the Federal Government to introduce a franchising system for power distribution.
He explained that the franchising system will allow trusted investors to take over existing power distribution infrastructure, bring in new transformers, reconstruct cables, and supply power to customers. In return, the investors will pay royalties to the government.
He made this announcement as part of the ministry’s effort to ensure electricity gets to every part of the country where the major distribution companies are not considered profitable to operate.
“We want to introduce what we call a franchising system,” Adebayo said.
“We have a lot of trusted investors that are ready to take out some opportunities out of the existing major discourse. Do investment with a structure. Bring new transformers. Reconstruct the cables and start supplying power. All we need to do is to pay a royalty to Abuja Electricity Distribution Company,” he said.
The minister also discussed the challenges facing the power sector, including the high cost of producing electricity and the need to balance activities across different regions.
“The average cost of producing one-kilowatt hour of light a day, generating cost, is not less than N120” Adebayo said.
“Before we add distribution charges. So even if they’re paying N65, paying N58, they are paying way below the cost. Which is what we are still subsidising,” he added.
He emphasised the need for Nigeria to modernise its power sector infrastructure and overhaul the existing tariff policy, stressing that a comprehensive overhaul of all aspects of the power sector is necessary to drive improvement.
“A lot of the towers are falling. The substations are dilapidated with very old transformers, some of them were installed in the 60s. We have not been able to replace them. The same thing with distribution infrastructure. The substations at the distribution level are also not working properly,” he said.
He revealed that the ministry’s target is to install two million meters annually for the next five years, and expressed optimism that the power sector, which had been stagnant for the past 15 years, is finally showing signs of recovery.
He noted that currently, only about 5 million out of 12 million electricity consumers have been metered, leaving a significant gap of over 7 million meters that need to be installed.
On the Siemens project, Adelabu stated that the pilot phase was being gradually rounded off, stressing that several equipment from the project are already being installed nationwide.
He said, “We went to Germany together and we had a meeting with the German Chancellor that we needed to accelerate implementation of the presidential power initiative, which you all know as Siemens project.
“And the following month, we had a meeting in Dubai and we signed an acceleration agreement to ensure that we continued with this project. And I can tell you, within one year, we have almost concluded the pilot phase of this project.
“The pilot phase included importation, commissioning, and installation of 10 power transformers across Nigeria, 10 power mobile substations across Nigeria. So the improvement you see today is not accidental. It’s not due to rainfall.
“Hydroelectric power in Nigeria today is just a bit over 20 per cent of our total power generated. The remaining almost 80 per cent is from gas. So it’s not rain, but by the intentional activities of the federal government through the ministry of power. That’s why we are seeing all those improvements.”