In a bid to resolve its longstanding power supply challenges, Nigeria has unveiled a comprehensive strategy aimed at addressing the dual issues of significant debts to energy producers and the persistent shortages of gas supply that have crippled its generating firms. The strategy, as outlined by Power Minister Adebayo Adelabu on Wednesday, focuses on eradicating a staggering debt of approximately $2.16 billion owed to energy producers and addressing the critical issue of gas supply shortages to power generation companies.
Nigeria, recognized as Africa’s largest economy, boasts an installed capacity of 12,500 megawatts. However, the nation only manages to produce about a quarter of this potential, leading to a scenario where both households and businesses, including manufacturing sectors, are heavily reliant on diesel and petrol generators for their energy needs. This reliance not only inflates operational costs but also exacerbates environmental concerns.
During a press conference, Minister Adelabu highlighted that the accumulation of outstanding debts, the scarcity of gas supplies, and the deterioration of power infrastructure are the primary obstacles preventing the nation from achieving its full power generation capacity. He detailed that power generators are currently burdened with a debt of 1.3 trillion naira ($858.65 million), in addition to a $1.3 billion legacy debt that has lingered for over a decade.
To alleviate these issues, Adelabu announced a dual-faceted approach involving the settlement of the existing debts through a combination of cash payments and guaranteed debt instruments. This plan not only aims to clear the financial dues but also to rejuvenate the confidence of investors and stakeholders within the energy sector.
In a notable proposal made last week, Adelabu suggested that payments for gas sales to power plants should be conducted in the local currency, the naira. This strategy is intended to mitigate the impact of dollar shortages, especially in light of the country facing a second currency devaluation in less than a year. The reliance on dollar transactions has been a significant hurdle for power plants, given that investments in gas processors and pipeline infrastructures are typically denominated and settled in dollars.
The urgency of these reforms is underscored by the erratic nature of Nigeria’s grid power. The country, which is Africa’s most populous, experienced a total grid collapse on February 4th, leading to a nationwide blackout. This incident was not isolated, as the grid failed at least three times in 2023 alone, with authorities attributing these failures to various technical problems.
This comprehensive plan by the Nigerian government to settle debts and ensure a steady gas supply represents a critical step towards stabilizing and enhancing the country’s power infrastructure.
