President Tinubu Approves N2.8tn for Power Sector as Audit Concludes
President Bola Tinubu has approved the payment of N2.8 trillion to power generation companies (GenCos) as the verified liability for accumulated electricity subsidies dating back to 2010. This decision follows months of negotiations and a tripartite audit involving the Ministry of Finance, the Nigerian Bulk Electricity Trading Plc (NBET), and the GenCos themselves.
The approval came after the President rejected the initial claim of N6 trillion submitted by the operators. He insisted on an audited figure, emphasizing that he would not pay more than what was verified. Multiple sources from the Presidency and the Federal Ministry of Power confirmed this stance, highlighting the need for transparency in the process.
The Audit Process and Negotiations
The audit was a critical step in resolving the long-standing power sector debt crisis. The GenCos had initially demanded N6 trillion, proposing a N3 trillion federal bailout. However, the President insisted on a thorough review of their claims, comparing the initial submissions to the inflated documentation seen during the fuel subsidy regime.
During a meeting in August, the GenCos presented a claim of N4 trillion. The President sent them back to subject their figures to further scrutiny through a tripartite committee. The audit ultimately revealed a verified liability of N2.8 trillion, significantly less than the original claim.
The Federal Government also took a step toward addressing the debt by raising N501 billion through a bond issued under the Presidential Power Sector Debt Reduction Programme. This move was described as a gesture of good faith while negotiations continued.
The Significance of the N501bn Bond
According to one source, the N501bn bond was part of a strategy to show willingness to pay while still negotiating the final amount. The President likened the situation to a scenario where a debtor claims a certain amount but the creditor is willing to pay a smaller sum upfront.
“This means you said I’m owing you N1,000. I said, no, I’m owing you N600. But I’m saying, okay, to show that I’m willing to pay, while we are still negotiating whether it is N500 or N700 or N800, take N100,” the source explained.
The Power Sector Debt Crisis
The power sector debt crisis dates back to the 2013 privatisation of electricity assets, when generation and distribution companies were sold for approximately N400 billion. Since then, a combination of government-regulated tariffs that do not cover the full cost of generation, chronic liquidity shortfalls, and foreign exchange constraints has kept operators in a cycle of unpaid invoices.
An analysis by The PUNCH revealed that the accumulated debt, classified as an electricity subsidy, grew steadily as the gap between what consumers paid and what it cost to generate and deliver power widened. In April 2024, the Federal Government removed subsidies for Band A customers, increasing rates to N225/kWh while Band B-E remained subsidised.
Settlement Agreements and Future Payments
Five generation companies signed settlement agreements with NBET, with a total negotiated value of N827.16 billion to be paid in four phased instalments. These include First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited, and Niger Delta Power Holding Company Limited.
A third source in the power ministry disclosed that between May and July, the FG plans to release an additional N600 billion to N800 billion, which would bring total payments to approximately half of the approved liability by mid-year. The remaining balance will be spread over 12 to 24 months.
Conditions for Payment and Infrastructure Investment
The President attached conditions to the disbursement, directing that a significant portion of the payment be ring-fenced to settle the GenCos’ outstanding debts to gas suppliers. This move aims to address the gas supply challenge, which has been a key factor in the recurring collapse of the national grid.
According to the source, the GenCos have long blamed their inability to maintain stable generation on unpaid gas bills. The President’s condition ensures that the money is used to pay gas suppliers, preventing misuse of funds.
Addressing Underinvestment and Infrastructure Issues
The audit also identified a pattern of underinvestment by both generation and distribution companies. Sources allege that operators were collecting revenue without reinvesting sufficiently in maintaining and expanding infrastructure.
“Look at the telecoms, they are investing in technology, investing in their base stations. So the DisCos and GenCos are collecting money. They are not putting enough of the money back into the business. That is why when a transformer breaks down in a neighbourhood, it is still the residents who contribute to buy a new transformer. Why should Nigerians contribute money to go and buy a transformer for a private company?” the source argued.
As part of the conditions for the N2.8tn payment, the government will require GenCos to commit a specified percentage of the proceeds to infrastructure renewal, with evidence of compliance.
Conclusion
The approval of N2.8tn marks a significant step in resolving the power sector debt crisis. It reflects the government’s commitment to transparency, accountability, and sustainable investment in the energy sector. As the payments are disbursed, the focus remains on ensuring that the funds are used effectively to improve infrastructure and service delivery.
