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Tuesday, April 23, 2024

Nigeria’s power sector debt soars to N3.3 trillion amid subsidy concerns

Minister urges shift to cost-effective tariffs as subsidy burden escalates, raising questions over sector sustainability

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Nigeria’s power sector grapples with mounting challenges as the Federal Government discloses a staggering debt of N3.3 trillion owed to electricity-generating companies and gas producers. Minister of Power, Adebayo Adelabu, emphasized the urgent need to transition to a cost-effective tariff model, citing the sector’s crippling subsidy burden and escalating financial strains.

Speaking at a press conference in Abuja attended by heads of agencies under the Federal Ministry of Power, Adelabu underscored the gravity of the sector’s financial predicament. Despite calls for his resignation amid mounting pressure, the minister remained steadfast in addressing the crisis, emphasizing collaborative efforts across ministries to tackle the systemic issues.

Highlighting the intricate web of challenges facing the sector, Adelabu pointed to the mounting debt owed to both electricity-generating companies and gas suppliers, exacerbated by a legacy debt dating back to 2014. The precarious situation led to disruptions in power generation, further exacerbating Nigeria’s energy woes.

The subsidy issue looms large as the government grapples with a shortfall in budgetary provisions, with only N450 billion allocated for electricity subsidies in 2024 against a staggering requirement of N3 trillion. Adelabu questioned the feasibility of sustaining current subsidy levels, citing comparative examples from neighboring countries.

The revelation comes against the backdrop of a recent report by the Nigerian Electricity Regulatory Commission (NERC), highlighting the government’s substantial subsidy commitments to avert tariff hikes. The discrepancy between approved tariffs and actual charges underscores the sector’s dependence on government subsidies to bridge the gap.

Addressing the sector’s structural deficiencies, Adelabu outlined a roadmap for stabilization and transformation, emphasizing the need for sustainable funding mechanisms and infrastructure upgrades. He called for a national dialogue on the future of electricity supply, advocating for consensus on cost-reflective tariffs or subsidized funding models.

In the face of persistent challenges, the power minister stressed the imperative for increased investments, diversification of power generation, and the adoption of renewable energy solutions. As Nigeria navigates its energy transition journey, the path to a sustainable and resilient power sector remains fraught with complex challenges demanding urgent attention and collaborative action.

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