- Nigeria’s Power Minister, Adebayo Adelabu, has said that the country has a significant N1.6 trillion shortfall in wholesale tariffs.
- He also highlighted the fact that in the country’s electricity sector, nearly half of electricity generated is not paid for due to theft and other issues.
Nigeria’s Power Minister, Adebayo Adelabu, on Friday, February 16, stated that the country has a N1.6 trillion shortfall in wholesale tariffs. He wrote this via his official Twitter account, referencing his press conference on February 14.
According to him, the recent power disruptions across Nigeria are due to the inability of major players in the Nigerian Electricity Supply Industry (NESI) to settle old and current debts, causing a broken system where GasCos withhold gas supply from GenCOs.
He wrote:
“One major challenge is the non-cost reflective tariff, hindering DISCOs from meeting revenue targets and investing in reducing technical, commercial, and collection losses (ATC&C). Currently, there’s a significant NGN1.6 trillion shortfall in wholesale tariffs, with an industry average ATC&C loss of 48%, indicating that nearly half of the electricity generated is not paid for due to technical issues, theft, and inefficiencies in billing and collection processes.”
The way forward
The Power Minister said that he is working in collaboration with the Ministry of Finance, Budget and Economic Planning, and the Office of the Special Adviser on Energy to the President, and they have come up with the following solutions:
Guaranteed debt instruments – He mentioned that everyone participating is currently taking active steps to deal with the significant unpaid debts owed to both power generation companies (GenCos) and gas suppliers. This involves a combination of infusing cash and utilizing guaranteed debt instruments to address outstanding financial obligations.
Gas supply contracts and Siemens-backed upgrades – They have forged a strategic alliance with the Minister of State for Petroleum Resources (Gas) to solidify gas supply agreements for power generation companies (GenCos). The objective is to establish robust contracts that contribute to price stability in the local currency for domestic gas-to-power supply. Concurrently, there is a commitment to invest in upgrading ageing infrastructure, expanding capacity, and incorporating advanced technologies. This initiative is being implemented through the Siemens-supported Presidential Power Initiative (PPI), reflecting a comprehensive effort to enhance the efficiency and sustainability of the power sector.
Conclusion of hydropower/wind projects – According to the Power Minister, power generation initiatives are in motion. Notably, the 700MW Zungeru Hydro Electricity Power Plant in Niger State is advancing towards completion. Additionally, the financial arrangements for the 40MW Kashimbila Hydro Power Plant in Taraba state are nearing finalization. Furthermore, efforts are underway to revitalize 26 small and medium-sized hydro plants, incorporating solar hybrid technology. Simultaneously, there is progress in the construction of a 20MW Wind/Solar hybrid power plant in Katsina state.
Upgrading capacity of NIPPs – The Power Minister says he is actively working to boost the operational capacity of NIPP power plants managed by the Niger Delta Power Holding Company, aiming to achieve a minimum of 50% capacity. A top priority is expediting critical power initiatives such as the Siemens Project, which is designed to enhance transmission capacity.
Addressing critical grid and transmission challenges – According to the Power Minister, there are ongoing discussions with two Chinese firms for EPC+F super grid projects, which are essential for ensuring failover and backup capacity to support the National grid. Simultaneously, there are ongoing initiatives to modernize and reinforce the current transmission infrastructure, involving the upgrade of substations and power lines.
He said the administration is also initiating projects to reconductor ageing transmission power lines, with the goal of improving efficiency and reliability. He also highlighted that intervention projects funded by multilateral development partners, including the World Bank, AfDB, and JICA, are being expedited to address crucial transmission challenges. These collaborative efforts aim to enhance the overall resilience and performance of the transmission network.
Fair regulation – Adebayo Adelabu highlighted the success of fair and competitive regulation, leading to substantial fines for non-compliant DISCOs and refunds for over-billed customers. This has strengthened the reliability and resilience of our electricity supply infrastructure. Our commitment is to enhance communication and collaborate in overcoming challenges, with the ultimate goal of providing reliable and accessible electricity across the entire nation.