The electricity generation companies (GenCos) have threatened to shut down over N156 billion debts owed them by consumers, especially government agencies.
Investors that bought the six power generating companies unbundled from the state firm, Power Holding Company of Nigeria (PHCN) said they would shut down their power plants if the N156 billion debts about $485 million owed by government agencies were not paid. They also said banks were recalling loans advanced to them.
In a joint statement yesterday, the GenCos said they will shut down power supplies unless the government pays longstanding bills it owes them and improves gas supplies.
The GenCos, which include Transcorp’s power and Forte Oil’s power, said they struggled to repair their networks because imports of spare parts had become too expensive due to naira devaluation. “In 2013, when we bought the power plants, exchange rate was N150 per dollar. Today it is N310 per dollar. How can we repair, equip, acquire new turbines at this rate of N310 per dollar and yet still operate with an old tariff?A shutdown is, indeed, imminent,” they said.
If the companies make good their threat, most industries and residential homes will be in darkness except for those that rely on expensive diesel generators.
The government has paid arrears of N186.7 billion. The Central Bank of Nigeria (CBN) has stepped in with a N213 billion loan to keep the system afloat and allow the power firms to access credit, but more is needed as the oil price slump puts pressure on Nigeria’s currency.
The naira has lost 40 percent of its value since Nigeria ditched its 16-month-old peg of 197 naira to the dollar in June in a bid to lure back foreign investors who fled both the equities and bond markets after the plunge in crude prices.
After the privatisation of the PHCN assets, the government pledged to review tariffs as more power is generated and upgrade the transmission network to give more people access to the grid. But tariff reviews have not kept pace with rising cost, worsened now by the naira devaluation.
In February, the Nigerian Electricity Regulatory Commission (NERC) increased tariffs by 45 percent, triggering protest from consumers, already under pressure from rising inflation, which hit a 10-year high in June. But the tariff increase was not enough to cover their cost, the generating companies said.
As of last month, the generating firms have received only 28.6 percent of their April invoices, they said.
Chronic power shortages are one of the biggest constraints on investment and growth in Africa’s largest economy. Producing less than 4,000 megawatts (Mw), Nigeria’s requires ten times the amount it currently produces to guarantee power to its 170 million people.
However, the generating firms are holding off on expansion. Generating companies have around 5,000Mw of spare capacity which has no access to gas, they said.
In 2013, the government privatised the power sector to attract private sector investment into it and boost supply but the improvement is yet to be seen as militants and vandals continue to destroy the gas pipelines.
