Electricity generation companies (GenCos) have warned that the Federal Government's ₦4 trillion Presidential Power Sector Debt Reduction Programme may not provide a lasting solution to the liquidity crisis in the electricity industry, saying fresh debts of more than ₦7 trillion could accumulate before the programme is completed.
The warning came from the Chief Executive Officer of the Association of Power Generation Companies (APGC), Joy Ogaji, who reacted to the Federal Government's planned issuance of a second bond valued at about ₦729 billion to settle verified legacy debts owed to power generation companies.
The Federal Government had announced that the bond issuance would complete the first phase of its debt reduction programme, bringing the total value of the first two bond issuances to about ₦1.23 trillion.
But Ogaji who spoke in an interview with Punch Newspaper said the initiative addresses only part of the problem because unpaid obligations continue to pile up every month.
"Well, the GenCos are not against bond issuance. However, we need to put the discussion into context. You're raising a ₦4tn bond over seven years. Now, this ₦4tn will be spread over seven years. And currently, there is still a shortfall. Not that the shortfall has stopped," she said.
She warned that unless the underlying liquidity challenges are resolved, the industry would accumulate significantly more debt before the repayment programme ends.
"So by the time you finish paying the ₦4tn over seven years, more than another ₦7tn has accumulated. How do we deal with that? So what we are looking for is a sustainable solution," Ogaji added.
According to her, the debts covered under the government's bond programme relate only to obligations incurred up to December 2024, while debts from 2025 and 2026 are already mounting because electricity market participants are still not receiving full payments.
"Every month, the DisCos are not paying 100 per cent. NBET is not paying 100 per cent. This ₦4tn is until December 2024. So, how about the accumulation for 2025? And what is already accumulated for 2026? So by the time you finish issuing this ₦4tn bond over seven years, by 2033, two times what you're going to pay will have accumulated. So what is your plan?" she queried.
Ogaji also demanded greater transparency in the implementation of the debt repayment programme, urging the government to disclose details of beneficiaries under the first bond issuance.
"They say they have finished disbursing the first one, according to them. So why didn't they show you the recipients and how much each person was paid?" she asked.
While reiterating that the generation companies support efforts to settle outstanding debts, she insisted that the repayment mechanism must also account for the financial realities facing investors.
"The GenCos are not against bond issuance or whatever the Federal Government wants to use to pay their debts. They should take into consideration the time value of money and the sustainability of this business. That's just our position," she said.
Ogaji also faulted the Federal Government's electricity subsidy policy, arguing that the subsidies exist largely as policy declarations without corresponding financial backing.
"One of the sustainable ways is for the Federal Government to acknowledge the fact that they cannot subsidise the power market. Because you can see it's only on paper that the government is subsidising power. It's not in the budget.
"There is no monetary provision anywhere for subsidies, not even in the supplementary budget; it's nowhere. It's just being said. It's an assumption under the budget. NERC said that they assumed that the Federal Government would pay subsidies. You said you would pay. We have not seen it," she stated.
She urged the government to replace the current blanket subsidy regime with a targeted approach backed by budgetary allocations.
"The Federal Government may need to come to the understanding that, okay, you cannot subsidise everybody. How much can you pay in subsidies? Is it 500 megawatts? Then, drop that money. Put it somewhere. Let us see that 500 megawatts will be subsidised, and this is the class of customers that will enjoy the 500 megawatts. The rest, allow the DisCos to pay for it," Ogaji said.
She maintained that without comprehensive reforms to address the structural financing problems in the electricity market, the debt burden would continue to grow despite the government's intervention, threatening the long-term sustainability of Nigeria's power sector.
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