Power Minister says government has paid ₦1.23 trillion but plans market reforms to prevent future debt accumulation and reduce reliance on electricity subsidies…….
The Federal Government has set a 2027 deadline to settle outstanding legacy debts owed to electricity generation companies (GenCos), as it considers changes to Nigeria’s power market to prevent a recurrence of the payment crisis.
Minister of Power, Joseph Tegbe, disclosed this on Friday in Lagos at the Harvard Business School Association of Nigeria (HBSAN) Energy Conference, where he outlined the government’s plans to address financial challenges in the electricity sector.
Tegbe said the government had introduced a bond programme to settle accumulated obligations and had successfully paid about ₦1.23 trillion, with the remaining payments expected to be completed by next year.
“We have brought in bonds. We’ve paid about N1.23 trillion successfully, we plan to finish paying by next year,” he said.
However, the minister stressed that clearing the outstanding debts alone would not resolve the sector’s financial problems, arguing that changes to the electricity market’s structure and design were necessary to prevent fresh arrears from accumulating.
“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.”
Tegbe also questioned aspects of the assumptions underpinning the Federal Government’s electricity subsidy, warning that continued intervention to cover tariff shortfalls could undermine the sector’s financial sustainability.
He said the Nigerian Bulk Electricity Trading (NBET) Plc had reached a point where its role in the market needed to be reconsidered, noting that the existing arrangement allowed some participants to benefit from the system of purchasing and reselling electricity.
The minister said he intended to move away from the current model towards direct bilateral agreements between electricity suppliers and distribution companies, arguing that such arrangements would encourage payment discipline.
“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,” Tegbe said.
He added that bilateral agreements were already operating in parts of the market, citing Mainstream Energy Solutions Limited (MESL), which supplies electricity to the Ibadan Electricity Distribution Company (IBEDC) and Ikeja Electric.
According to him, such arrangements encourage distribution companies to pay for the electricity they receive, rather than depend on government support to cover their obligations.
“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.”
Beyond the financial challenges, Tegbe said Nigeria had substantial unused electricity generation capacity that could help improve supply if existing facilities were better utilised.
He cited the Alaoji power plant, where approximately 3,000 megawatts could potentially be generated, but current utilisation stood at only about 400 megawatts.
The minister said unlocking underutilised capacity, particularly in the Niger Delta, would be important to increasing electricity supply across the country.
Also speaking at the conference, the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Rabiu Umar, stressed that investments in gas processing, transportation and power generation must be financially sustainable.
Umar said investors needed to generate sufficient revenue to service loans, recover their costs and earn reasonable returns, while cautioning that excessive charges could make energy services unaffordable for those expected to pay for them.
“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,” he said.
The NMDPRA chief executive added that Nigeria’s domestic gas market was not yet sufficiently developed to operate as a fully liberalised market, making some level of regulation and price control necessary during the transition.
He said the Petroleum Industry Act (PIA) provided for a gradual process towards a free market in which prices would increasingly be determined by willing buyers and willing sellers.
Umar had earlier said on September 22 that Nigeria planned to end domestic gas price regulation by September 2028, paving the way for a fully established willing-buyer, willing-seller framework.
