N2.7tn debt: Nigerians face blackout as gas producers cut supply to Gencos
Wholesale gas-producing companies have abruptly stopped the supply of natural gas to power generation companies for electricity production over the non-payment of debts accrued from previous supplies.
The Chief Executive Officer of the Association of Power Generation Companies, Dr Joy Ogaji, disclosed the latest development in an interview with The Press on Wednesday, stressing that the gas-producing companies have formally notified all GenCos of the suspension of natural gas supply.
The gas supply was abruptly halted after the Nigerian Midstream and Downstream Petroleum Regulatory Authority reportedly instructed gas producers to suspend the delivery of natural gas to indebted GenCos until further notice, citing the escalating debts.
The situation has led to a nationwide electricity blackout, severely impacting power generation across the country.
Currently, over 70 per cent of Nigeria’s power is produced by gas-fired power plants.
Earlier this year, Minister of Power, Adebayo Adelabu, disclosed that the Federal Government would start offsetting part of the debts it owes power generating companies and gas suppliers from April this year.
The minister, while on a working visit to Egbin Power Plc in the Ikorodu area of Lagos State, said he would liaise with the Central Bank of Nigeria to prioritise foreign exchange allocation to the power sector, saying this would boost the ability to ramp up capacity in terms of generating output.
“The Federal Government is now prioritising paying down on the outstanding debts, and I have assured the board and management that effective from April, we will start paying down on debts, as a form of incentive to continue to have them in operation,” he stated.
While the government has in the past few months paid N205bn of the debt owed to the GenCos, an ongoing disagreement between the NMDPRA and gas producers on who should collect the 0.5 per cent wholesale price levy imposed on petroleum products by the Petroleum Industry Act made the suppliers demand the payment of monies owed.
Speaking during the interview, APGC CEO Dr Ogaji stated that all relevant authorities, including the presidency, have been notified of the current situation and are awaiting the necessary interventions.
She added that debt, which hovered around N2tn earlier this year, has increased to N2.7tn.
She said, “It is no longer a matter of NMDPRA giving a directive. They have already stopped the supply of gas to power-generating companies.
“They (gas suppliers) have halted the supply. They have already informed our gencos that they are not going to be supplying gas anymore until what is outstanding is settled and it didn’t happen today.
“We have told the Nigerian Electricity Regulatory Commission, they are already aware of the situation. There is nobody who would say they are not aware; the minister is aware, and the presidency is aware.
“The total debt has now increased to over N2.7tn and you know that 70 per cent of thermal Gencos invoice is gas.
“They have been paying a small amount. So, when they pay us nine per cent, we just calculate nine per cent of our gas invoice and send it to the gas supplier because that is the only way to survive. We are all sharing in the poverty that NBET is giving us.”
The halt in supply has disrupted the energy sector, leading to growing concerns about energy shortages and operational instability nationwide.
Already on Wednesday, Nigerians were plunged into darkness following another collapse of the national power grid.
This is the 12th time the grid would collapse in the year.
Our correspondent reports that the grid went off at about 1:36 pm on Wednesday afternoon.
It was observed that power generation was 0.00 megawatts as of 2 pm.
The grid produced 3,087MW at 1 pm. Generation peaked at 4,013MW at 4 am.
Within one week in October, the grid collapsed three times with its attendant blackouts, sparking reactions from Nigerians.
A tweet via the official handle of Nigeria’s National Grid confirmed that the grid collapsed at about 2:09 pm on Wednesday.
“The major grid setback has occurred and the restoration is to commence,” the tweet stated.
Confirming the incident, distribution companies in different notices to their customers said the grid collapse caused the outage.
Jos Disco in a statement signed by the Head, Corporate Communications, Friday Elijah, said, “The current outage being experienced within our franchise states is a result of loss of power supply from the national grid. The loss of power supply from the national grid occurred this afternoon at about 1333 hours of today, Wednesday, 11th December 2024, hence the loss of power supply on all our feeders.
“We hope to restore normal power supply to our esteemed customers as soon as the grid supply is restored to normalcy.
“Thank you for your patience and understanding as we strive to serve you better.”
Similarly, the Abuja Distribution company stated, “We wish to inform you that a system disturbance occurred on the national grid at 1:32 pm today (Wednesday) causing a power outage across our franchise areas.
“While gradual restoration of power supply has commenced, be assured that we are coordinating closely with relevant stakeholders to restore power fully as soon as the grid is stabilized.”
Reacting, the President of Nigeria Consumer Protection Network, Kunle Olubiyo, called for an independent forensic audit of the debt claims by gas-producing companies as the outstanding amount does not correlate with realities in the sector.
He further urged the government to fully privatise the power sector and not remain a scapegoat for the inadequacies of players in the sector.
Olubiyo told The press, “What we need to do is adequately interrogate these claims; once they are checked, audited and verified, then we can see what is going on in the sector. It’s a buying and selling market.
“The model currently being deployed at Azura is what we are supposed to have for all Gencos abinitio. When the government offered the power sector for privatisation (upstream and downstream), there was the provision of financial instruments such as letters of credit to help in the event of non-compliance with the market rules and obligations. That letter rule could be used to create some level of discipline but players in the sector cut them off and preferred to get product on credit without a plan to pay back. The market should be administered like a business so that if there are infractions, you can call the penalty clauses and instruments. If you pledge an amount of money that can translate to the failure of the sector, there have to be punishments.
“The Discos are taking supply in the value chain without any form of collateralization. It’s not done anywhere. The sector is only enjoying the goodwill of some personalities in the sector, who have a name and they are bankable. But this goodwill has also been overdrawn, so the earlier we face the facts, the better for us.”
He added, “I am sure that if we do proper follow-up and forensic checks, it is likely to find out that 75 per cent of the bill we have been paying on subsidy by the federal government is public sector funded, just like the oil sector; nobody would want to reveal what has been over-bloated in the past. The danger is that the continued misbag of the public and private sector models is giving room for corruption because we can’t see in an actual sense the claims from all players are synergised corruption that is, in most cases, bloated.
“It’s not impossible that some of these classes might be inflated. Governor continued equity in the power sector is giving room for corruption. The government should not bear the brunt of challenges in any sector because some persons will latch onto it and begin to feed their pockets. The government should let go of the power sector and concentrate on the underserved and unreached persons to close the gap.”
Meanwhile, the Nigerian Midstream and Downstream Petroleum Regulatory Authority has denied giving any directive to stop the supply of gas to the power-generating companies.
The statement signed by its Public Affairs Unit read, “The attention of the NMDPRA has been drawn to a news publication with a spurious claim that the Authority has directed that Gas Supply to GENCOs be halted and instructed wholesale gas suppliers to stop the further supply of gas to companies due to failure in payment obligations.
“The NMDPRA wishes to state categorically that this report is false and completely unfounded. It a bearing ring on the information shared at a recent stakeholders’ engagement held in Lagos between the Authority, the OPTS, IPPG and other stakeholders in the oil and gas industry.”
It added that the meeting was organised, “to sensitise stakeholders on the requirements, opportunities and benefits associated with the implementation of wholesale supply license as provided by sections 142 and 197 of the Petroleum Industry Act 2021. It was a follow-up to an earlier stakeholder engagement held at the NMDPRA corporate headquarters in Abuja on November 27, 2024.
“The Authority wishes to reassure all our stakeholders and indeed the general public that at no time was the false statement made at that event and anywhere else, and are advised to completely disregard the publication as every effort is being made to ensure that the supply and distribution of natural gas and petroleum products to end users is seamless and unabated as we head into the festive season and indeed all through the coming year 2025.”
