Nigeria Govt to Offset N130 Billion Debt to Gas Companies

Mr Adelabu said in February that the indebtedness of the country's power sector to electricity generating companies (GenCos) and gas companies (GasCos) had risen to over N3 trillion.

The Nigerian government has approved the payment of N130 billion to offset some of the debts owed to gas companies (GasCos) in the country, Nigeria's Minister of Power, Adebayo Adelabu, has said.

Mr Adelabu disclosed this while speaking at the eighth edition of the Africa Energy Market Place (AEMP) Nigeria, in Abuja, on Thursday.

He explained that the president has approved the submission of the Minister of State for Petroleum Resources (Gas) to defray the outstanding debt owed to the gas supply companies to power sector operators.

"The payments are actually in two parts, but we have the legacy debt and we have the current debt. For the current debt, approval has been given for cash payments of about N130 billion from the gas and stabilisation fund, which the federal ministry of finance will pay or even already paid, not very sure," Mr Adelabu said.

Earlier in February, Mr Adelabu said that the indebtedness of the country's power sector to electricity generating companies (GenCos) and gas companies (GasCos) had risen to over N3 trillion.

"Today, we are owing a total of N1.3 trillion to the power generating companies, out of which 60 per cent is owed to gas suppliers. Today we have a legacy debt, prior to 2014, to the gas companies of $1.3 billion; at today's rate, that is close to N2 trillion.

"Now, if you add N2 trillion legacy debt owed to gas companies and the N1.3 trillion being owed to GenCos, we have an inherited debt of over N3 trillion in this sector. How will the sector move forward? Nigerians deserve the right to know this," Mr Adelabu said at the time.

Previous payment of $120 million

In late February, the Director, Decade of Gas Secretariat, Ed Ubong, announced the payment of over $120 million to offset some of the debts.

"The arrears gas producers are owed as of last year was about $ 1.3 billion. But I am pleased that between October 2023 and the end of January, the government has paid over $120 million to offset some of that money," Mr Ubong said while speaking at the 7th edition of the Nigeria International Energy Summit (NIES 2024) in Abuja.

How remaining debts will be paid

On Thursday, Mr Adelabu said the payment for the legacy debt is going to be made from future royalties and streams of income in the gas subsector, which is quite satisfactory to the gas supply companies.

"The last figure we quoted was $1.3 billion, which we believe will go a long way to encourage these gas companies into entering into firm supply contracts with the power generating companies.

"The situation we are in now is on the best endeavour model, which means that there is no firm contract between the gas companies and the majority of the power generating companies. The day they are able to supply gas, they will, the day they cannot supply gas, they will not and there's no penalty.

"But once there is a firm contract, they will be under contractual obligation to supply gas to these power-generating companies so that you can have consistent power generation. So that is the situation and the model that we want to adopt for the gas segment of the power sector value chain, for the gas, for the power generating companies, the debt is put at N1.3 trillion naira," he said.

He added that the payment has been signed up by both parties.

"Now, the majority have signed up and we are engaging others to ensure we have a hundred per cent sign-off from the power-generating companies," he said.

He explained that the modality of paying this would be in two ways, noting that there will be immediate cash injection.

He said the government is not buoyant enough to pay down N1.3 trillion once and for all in terms of cash, but a fraction of it will be paid, while the remaining fraction will be settled through a guaranteed debt instrument, preferably, a promissory note. It's meant to assure these companies that the government is ready to defray these debts finally.

"This will go a long to encourage these power generating companies, to incentivise them to invest more in a generation so that we can move our generation output from the level it is now to a higher level because like I said there is an opportunity for higher demand, locally and across the border and that is a source of foreign exchange earnings," he said.

AllAfrica publishes around 500 reports a day from more than 100 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.