Nigerians may experience more power cuts as generation companies (GenCos) have threatened shutdown of plants over outstanding payment of N1.529 trillion subsidy by the federal government which has paid only about 20 per cent or N371 billion of amount owed.
This comes as GenCos, in a new letter written to the Financial Reporting Council of Nigeria (FRCN), disclosed the possibility of tariff increase following the imposition of new taxes on power companies.
Nigerian Electricity Regulatory Commission (NERC) documents show that Abuja only paid N371 billion or 19.5 per cent of N1.9 trillion subsidy arising from last year’s tariff shortfalls.
More than 99 per cent of the N762.1 billion paid to GenCos came from distribution companies (DisCos) that were also unable to collect N155 billion of their own bills, per reporting by The Guardian.
Between January and November 2024, GenCos issued invoices valued at N2.7 trillion. But only N762.1 billion was paid, leaving a shortfall of N1.94 trillion, according to official documents.
This translates to a 28.18 per cent payment rate, highlighting deep-rooted revenue collection and enforcement challenges.
A breakdown of the monthly invoices shows the payment rate in 2024 as follows:
- January – N256 billion (9.46 per cent) of bill
- February – N208 billion (9.29 per cent)
- March – N235 billion (9.34 per cent)
- April – N213 billion (40.91 per cent)
- Payment fluctuated between 31.01 per cent and 39.05 per cent in the following months, with November recording the highest rate at 39.05 per cent.
- Despite gradual improvement, the payment gap remains high and has led to stranded 26,160 mega watts (mw) of generated power.
- As of Wednesday, 24 power plants on the national grid were generating between 3,900 mw and 4,900 MW, far short of the 6,000 mw target on which the tariff increase for band A was executed.
- The NERC report for 2024 shows that GenCos billed a total N2.972 trillion for power supplied but only N155 billion or 7 per cent of outstanding debt was attributed to market inefficiencies by DisCos.
- The remaining N1.94 trillion resulted from unfunded government subsidies, which stem from the gap between the cost of production and tariffs charged to consumers.
- Despite allocating N450 billion in 2024 to cover subsidies, the government used the funds to clear tariff shortfalls from 2023, leaving 2024 shortfall largely unresolved.
- The Nigerian Bulk Electricity Trading Company (NBET) contributed N371 million toward the 2024 tariff deficit, covering just 0.019 per cent of the outstanding debt.
- While DisCos managed an 84 per cent remittance rate on their Debt Repayment Obligation (DRO) of N1.031 trillion, paying N867.08 billion, the overall invoice settlement rate for GenCos stood at 29.48 per cent.
- A letter addressed to Power Minister Adebayo Adelabu, signed by Association of Power Generation Companies (APGC) Board of Trustees Chairman Sani Bello, has called for urgent intervention.
- The letter, seen by The Guardian, was dated 17 February 2025 and copied to key government officials, including the Chief of Staff to the President, the Governor of the Central Bank of Nigeria (CBN), and acting Managing Director of NBET.
- It outlined the severe impact of the persistent shortfall in payments, noting that NBET’s remittance to GenCos for electricity sold to DisCos was below 30 per cent, making it nearly impossible for GenCos to sustain operations.
- The operators demanded immediate approval of a mechanism to ensure 100 per cent payment of GenCos’ invoices by NBET, as well as settlement of GenCos’ historical market debts.
- The federal government earmarked N450 billion for 2024 and N900 billion for 2025 to partially clear the debts, but stakeholders argue that without a sustainable funding structure, the crisis will persist.
- Burden of levies on turnover
- GenCos in a letter to FRCN expressed deep concern over the financial implications of Section 33 subsection 1 of the FRC Act (Amended) 2023, which mandates annual levies based on turnover.
- GenCos said being subjected to multiple taxes at both federal and state levels would further squeeze their already strained finances.
- They noted that despite not being able to operate optimally due to debt, they are being forced to pay corporate tax at 30 per cent, education tax at 3 per cent, police tax at federal level, land use charge at state level, and various other state and council levies.
- Most power plants are already operating on the verge of collapse, according to the February report of NERC that measures the performance of the plants.
- Performance in February 2025
- Last month, Olorunsogo 2 reported a plant availability factor of 5 per cent, meaning capacity down 95 per cent.
- Afam – plant availability factor of 10 per cent
- Sapele Steam – 4 per cent
- Alaoji – zero per cent – completely offline.
- Omotosho (2) – 14 per cent
- Ihovbor (1) – 9 per cent
- Geregu (1) – 20 per cent
- Geregu (5) – 53 per cent
- Omotosho (1) – 52 per cent
- Ibom power (1) – 11 per cent
- Rivers (1) – 39 per cent
- Omoku (1) – 17 per cent
- Ikeja (1) – 98 per cent
- Trans Amadi – 7 per cent
- Igbafo (1) – 46 per cent
- Grid total plant availability factor for these plants in February was 40 per cent.
