Nigeria’s Federal Government Pays $120 Million Gas Debt to Boost Power Generation

The Federal Government has announced a major payment towards the debts owed to gas companies for electricity generation.

At the 7th edition of the Nigeria International Energy Summit (NIES 2024) in Abuja, Ed. Ubong, director of the Decade of Gas Secretariat, revealed that more than $120 million has been paid to alleviate some of the financial burdens on these companies.

This initiative is part of a broader effort to address the challenges faced by Nigeria’s power sector and to improve the country’s overall economic outlook.

The move to clear the gas debts comes at a time when the power sector has been grappling with significant challenges, including a decline in available generation into the grid due to gas constraints.

The Transmission Company had attributed this decline to the constraints, which have impacted the quantum of bulk power available on the transmission grid for onward transmission to the distribution load centers nationwide.

The government’s decision to pay the gas debt is a step towards addressing the legacy debt owed to players in the electricity value chain, which has been eroding investor confidence and investments.

The payment is also aimed at fostering a stronger relationship between gas and power sectors, as the government has established a ministerial committee that involves the Minister of State for Gas and the Ministry of Power.

According to Ed. Ubong, the government is also working on a framework to curb most of the failures in the system. He said, “The arrears gas producers are owed as of last year was about $ 1.3 billion.

But I am pleased that between October 2023 and the end of January, the government has paid over $120 million to offset some of that money.”

Akachukwu Nwokedi, President of the Nigerian Gas Association, stressed the need for policies to boost sector growth and attract investments.

He said, “We, therefore, recognize that there have been steps to clear the debts and I’m happy to hear that over $120 million had already been cleared.”

The Federal Government’s move to pay the gas debt is a positive development for Nigeria’s economy and energy sector.

It is expected that this payment will lead to increased investments in the power sector and ultimately improve the country’s power generation capacity.