The Nigerian Federal Government has earmarked a budget of N40 billion to clear the electricity bill debts owed by various ministries, departments, and agencies (MDAs) in 2024, as revealed in the sectoral allocation details released by Solomon Adeola, the Chairman of the Senate Committee on Appropriations. This allocation mirrors the budget for the same purpose in 2023 but represents a notable increase from the N27 billion budgeted in 2022.
InfoStride News obtained insights into this budgetary allocation, shedding light on the ongoing challenge of MDAs accumulating significant arrears in their electricity bills. The intricate power sector landscape in Nigeria involves 11 power distribution companies established in the aftermath of the Power Holding Company of Nigeria’s dissolution in November 2013.
The Transmission Company of Nigeria (TCN) acts as the conduit for transferring electricity generated by power generation companies to these 11 Distribution Companies (Discos). These Discos, in turn, sell electricity to end users, generating revenue for the entire power value chain. However, persistent grievances from Discos highlight the non-payment of energy bills by certain end users, particularly MDAs under the Federal Government’s purview.
A concern articulated by Sunday Oduntan, the Executive Director of the Association of Nigerian Electricity Distributors, in January 2022, highlighted that the cumulative outstanding debt from Federal Government MDAs and the military exceeded N90 billion. Despite ongoing negotiations for settlements, this outstanding debt has continued to accumulate since the privatization of the power sector in November 2013.
Oduntan pointed out the historical challenges, stating, “There was a time when a former minister of power said they (the government) had concluded arrangements on how to settle the debt, but as I speak with you, the bills are still unpaid. Since privatization, there have been issues around the MDAs’ debt.”
Further complicating matters, the Managing Director of Eko Electricity Distribution Company (EKEDC), Miss Tinuade Sanda, disclosed in January 2023 that MDAs owed the Disco N40 billion as of December 2022. This revelation underscores the persistent nature of the issue, as MDAs continue to accumulate substantial debts despite periodic warnings and calls for settlements.
In October 2023, the Nigerian Electricity Regulatory Commission (NERC) issued a stern warning to the Federal Government, cautioning that failure to settle outstanding electricity bills totaling N25 billion could result in the disconnection of the Ajaokuta Steel Co. Ltd facility from the national grid. Notably, this outstanding debt persists even with the provision of electricity subsidies by the Federal Government.
The Federal Government’s commitment to subsidizing electricity costs was evident in Q2 2023 when it disbursed approximately N135.23 billion, marking a staggering 275% quarter-on-quarter increase from the N36.02 billion paid in Q1 2023, according to information obtained from NERC. The World Bank’s Nigeria Public Finance Review report also identified the failure of various federal, state, and local government MDAs to settle their electricity bills as a key factor necessitating government subsidies.
The report highlighted that the Federal Government has been shouldering electricity costs through public subsidies since the privatization of the sector. This subsidy, however, has been identified as a contributing factor to the underperformance of the power sector. As the government allocates substantial funds to address the mounting electricity bill debts of MDAs, the broader issue of sustainable financial practices within the power sector remains a critical challenge that requires comprehensive and enduring solutions.
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