The Federal government has reportedly approved a plan to pay the debt owed by the power sector, estimated at ₦3.3 trillion. This disclosure was made by the minister of power, Adebayo Adelabu, at the 8th Africa energy marketplace in Abuja.
The minister said the government will liquidate the ₦1.3 trillion owed to power generation companies and the $1.3 billion debt to gas companies.
Adelabu said the ₦1.3 trillion debt to power-generating companies would be paid via cash injections and promissory notes, while about $1.3 billion owed to gas companies will be paid via cash and future royalties.
The minister said the federal government had commenced payment of the cash part of the ₦1.3 trillion debt owed GenCos and concluded plans to settle the second part via promissory notes within two to five years.
“So that is the situation and the model that we actually want to adopt for the gas segment of the power sector value chain for the gas. For the power generating companies, the debt is put at ₦1.3 trillion. I can also tell you that we have the consent of Mr. president to pay on the condition of settling the reconciliation of the debts between the government and the power generating companies.
“And this we have successfully done. And it’s been signed up by both parties. Now, majority have signed up and we are actually engaging others to ensure we have a hundred percent sign off from the power generating companies.
“And the modality of paying this would be in two ways, of course there will be cash injection, immediate cash injection. Government is not buoyant enough to pay down ₦1.3 trillion once and for all in terms of cash, but a fraction of it that will be paid, while the remaining fraction will actually be settled through a guaranteed debt instrument, preferably, a promissory note, that is more like a comfort to these companies that in next 2 to 5years government is ready to defray this debt finally.
“This will go a long to encourage these power generating companies, to incentivise them to invest more in generation so that we can move our generation output from the level it is now to a higher level because like I said there is opportunity for higher demand, locally and across border and that is a source of foreign exchange earnings,” he said.
