Nigeria may soon face a nationwide blackout as the Association of Power Generation Companies (APGC) has raised alarm over the possible shutdown of electricity generation operations due to mounting debts and worsening economic conditions.
In a statement released late Monday, Sani Bello, Chairman of the APGC Board of Trustees, expressed deep concern over the unsustainable financial burden placed on power generation companies (GenCos).
He highlighted that the federal government’s indebtedness and harsh monetary and fiscal policies are crippling the operations of electricity providers.
According to Bello, one of the biggest challenges plaguing the Nigerian power sector is the poor cash flow within the Nigerian Electricity Supply Industry (NESI). This persistent liquidity crisis has left GenCos struggling to meet operational costs while still trying to deliver stable power to Nigerians.
According to him, GenCos are currently owed about N4 trillion (N2 trillion for 2024 and N1.9 trillion in legacy debts) with no possible solutions, including cash payments, financial instruments, and debt swaps. He further said that the 2025 government budget allocates only N900 billion to power, raising concerns about its adequacy to cover arrears and future payments.
“The power generated by GenCos have continued to be consumed in full without corresponding full payment, notwithstanding the commencement of the Partial Activation of Contracts in the NESI which took effect from July 1, 2022, the minimum remittance order, bilateral market declaration, waterfall arrangement, the risks of inflation, forex volatility with no dedicated window to cushion the effect of the forex impact, the supplementary MYTO order which leaves about 90 percent of GenCos monthly invoices unmet without a bankable securitization, or financing plan,” he said.
He noted that the situation has dire consequences for the GenCos and by extension the entire power value chain.
“GenCos’ liquidity challenges are further worsened by the various policies introduced such as the payment waterfall in the NESI, which deprioritises payment to GenCos as service providers such as MO/NISO, NERC and NBET /leaders all receive 100 percent payment of their market invoices starting from May 2019. As a result of this, no one is under pressure to ensure GenCos invoices are fully settled.
“The implication of this, is that GenCos only get paid a portion of their invoices (9 percent, 11 percent) from whatever amount is left. This is an aberration as it is a clear departure from existing terms of the Power Purchase Agreement (PPA) guiding the contractual relationship between GenCos and the Nigeria Bulk Electricity Trading Plc (NBET), by which NBET as buyer has contracted to purchase the available capacity as agreed under the PPA,” he said.
He explained that GenCos, as responsible investors with patriotic zeal, have made large-scale investments and have continued to demonstrate commitment by ramping capacities in line with their contracts amid system constraints, policies & regulations that are not investor-friendly.
Bello stated that notwithstanding the severe difficulties that GenCos have battled with since take-over in 2013, the players have kept to the terms of their contractual agreements by ramping up capacity, which has been largely constrained systemically. He said that the GenCos’ expectations of being settled through external support such as the World Bank has 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).
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 GenCos’ ability to continue to perform their obligations, thereby threatening to completely undermine the electricity value chain. Access to forex is another problem, given that major operation and maintenance needs in the generation sub sector are dollarized, the importance of a specialised window or stable dollar allocation option for the GenCos cannot be overemphasized.”
He said GenCos are of the position that there is a need for a coordinated approach by all stakeholders in the NESI to address the liquidity issue realistically and sustainably in the power sector so that Nigerians can have access to reliable electricity supply.
‘’GenCos should be accorded the utmost priority when it comes to payment to enable them to have the capacity to continue to produce the electricity which is the product around which the entire power value chain is built.
“On the foregoing, we hereby demand the following to URGENTLY put GenCos in a position to continue generating power for transmission and distribution to Nigerians: Immediate implementation of payment plans to settle all outstanding GenCos invoices, reprioritization of payments under the waterfall arrangement to give full priority to a hundred percent payment of GenCos’ invoices as at when due, a clear financing plan to backstop the exposures in the NERC’s Supplementary Order to the MYTO and the DRO 2024, provision of payment security (guarantees) backed by World Bank/AFDB to guarantee full payment to GenCos, to enable them to meet their critical needs, improve generation to Nigeria and implement their respect growth and expansion plans.
“GenCos are of the position that the liquidity challenge threatening the continued operation of their power generation plants must be addressed urgently, and sustainably too. This would enable GenCos to meet their critical needs, which would, in turn, ensure that they generate power sustainably so that Nigerians can have better access to reliable electricity supply. GenCos would like to re-emphasize that this request requires urgent attention,’’ he added.
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