There may be an impending nationwide darkness as the electricity generating companies, Gencos, operating in the country have threatened to shut down their operations over N156 billion debt owed them by ministries, departments and agencies, MDAs.
The top power firms stated yesterday that they would shutdown electricity generation imminently if a debt of N156 billion ($485 million) owed by Nigeria’s government was not paid.
Nigeria has paid arrears of 186.7 billion naira. 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 pressures Nigeria’s currency, Reuters reported.
Quoting the statement released on Wednesday, the news agency reported that: “In 2013, exchange rate was 150 naira per dollar. Today it is 310. How can we repair, equip, acquire new turbines at this rate of 310 naira per dollar and yet still operate with an old tariff?,” said the companies. “(A) shutdown is indeed imminent.”
The naira has lost 40 per cent of its value since Nigeria ditched its 16-month-old peg of N197 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.
The government, after the privatisation, 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, analysts say.
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, generating companies say.
As of July, 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, Nigeria 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 5,000 megawatts of spare capacity which has no access to gas, they say.
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