GenCos threaten to shut down power over N4tn debt

GenCos threaten to shut down power over N4tn debt

Power Generation Companies (GenCos) on Monday warned of imminent shutdown due to a N4 trillion debt owed by the Nigerian government for electricity generated and supplied to the national grid.

A statement on Monday, signed by the Board of Trustees Chairman, Association of Power Generation Companies, Sani Bello, said the debt, which includes N2 trillion for 2024 and N1.9 trillion in legacy debts, is threatening the continued operation of their power generation plants.

In February, the Minister of Power, Adebayo Adelabu, said the Nigerian government owes electricity generation companies (GenCos) and distribution companies (DisCos) in the country over N4 trillion debt.

Mr Adelabu added that the debt burden is crippling the sector, making it challenging for GenCos to perform optimally.

GenCos said against the backdrop of the many challenges facing the power sector in Nigeria, the crises from cash liquidity are on the top burner and have reduced its ability to continue to perform their obligations, thereby threatening to completely undermine the Electricity value chain.

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The firms added that their expectations of being settled through external support such as the World Bank PSRO have also been dampened due to other market participants’ inability to meet their respective distribution-linked indicators (DLIs) enshrined in the Power Sector Recovery Program (PSRP).

Mr Bello said access to forex is another problem, adding that given that major operation and maintenance needs in the generation sub-sector are dollarised, the importance of a specialised window or stable dollar allocation option for the GenCos cannot be overemphasised.

“GenCos is of the position that there is a need for a coordinated approach by all stakeholders in the Nigerian Electric Supply Industry (NESI) to address the liquidity issue realistically and sustainably in the power sector so that Nigerians can have access to reliable electricity supply.”

In light of the severity of the issues highlighted, he said the GenCos are requesting that immediate and expedited action is taken to prevent national security challenges that may result from the failure of the GenCos to sustain steady generation of electricity for Nigerians.

“The 2024 collection rate has dropped below 30 per cent, and 2025 is not any better, severely affecting GenCos’ ability to meet financial obligations. High corporate income tax, concession fees, royalty charges, and new FRC compliance obligations are further straining GenCos’ revenue.

“GenCos are currently owed about N4 trillion (N2 trillion for 2024 and N1.9 trillion in legacy debts). No possible solutions, including cash payments, financial instruments, and debt swaps are in sight,” Mr Bello said.

GenCos threaten to shut down power over N4tn debt