The Nigerian government has sanctioned the payment of N130 billion to reduce the debt owed to gas companies (GasCos), according to Nigeria’s Minister of Power, Adebayo Adelabu. This announcement was made during the eighth edition of the Africa Energy Market Place (AEMP) Nigeria in Abuja on Thursday.
Minister
Adelabu revealed that President Bola Tinubu has approved the Minister of State
for Petroleum Resources’ (Gas) proposal to clear the outstanding debts to gas
suppliers, who are crucial to the country's power sector.
"The
payments are divided into two parts, addressing both legacy and current debts.
For the current debt, approval has been granted for cash payments of
approximately N130 billion from the gas and stabilization fund, which the
Federal Ministry of Finance is responsible for disbursing," Adelabu
explained.
In
February, Adelabu highlighted that the power sector's total debt to electricity
generating companies (GenCos) and gas companies (GasCos) had exceeded N3
trillion. He specified that N1.3 trillion was owed to power generating
companies, with 60% of this sum due to gas suppliers. Additionally, there is a
legacy debt of $1.3 billion (nearly N2 trillion) to gas companies accrued
before 2014.
Earlier
this year, the Director of the Decade of Gas Secretariat, Ed Ubong, noted that
over $120 million had been paid between October 2023 and January 2024 to reduce
these arrears.
Adelabu
outlined that the legacy debt would be settled using future royalties and
income streams from the gas subsector, a plan satisfactory to the gas
companies. This strategy is aimed at fostering firm supply contracts between
gas suppliers and power generating companies, which currently operate on a
non-binding, best-effort basis.
"The
legacy debt figure of $1.3 billion is expected to facilitate these companies
entering firm contracts, ensuring consistent gas supply for power
generation," Adelabu stated. He added that the government has also secured
the agreement of most power generating companies on this payment plan.
The
payment will be handled in two ways: an immediate cash injection and the
issuance of a guaranteed debt instrument, such as a promissory note, to assure
the gas companies of the government’s commitment to settling these debts fully.
"This
approach will encourage power generating companies to increase their investment
in generation capacity, potentially boosting power output to meet both local
demand and export opportunities, which can generate foreign exchange
earnings," Adelabu concluded.
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