FG to pay N40bn MDAs’ debt to DisCos as financial crisis persists

As Nigeria Electricity Supply Industry continues to gasp over growing financial illiquidity, the Federal Government may spend about N40 billion to reduce outstanding electricity bills of its Ministries, Departments and Agencies (MDAs).

The expected payment, which is only a proposal captured under the wide vote of the 2022 budget, is part of many debts the Federal Government is expected to pay this year.

President Muhammadu Buhari had, last month, signed the 2022 Appropriation Bill titled “Budget of Economic Growth and Sustainability” into law at the Presidential Villa, Abuja. The budget is valued at N17.126 trillion.

As of July 2021, federal, state and local government MDAs were reportedly owing DisCos up to N202 billion.

Last year, the Association of Nigerian Electricity Distributors (ANED) disclosed that the Federal Government had verified N48 billion as MDAs’ debts, while N61 billion was yet to be confirmed. Another N93 billion was estimated to be owed by Armed Forces and other security agencies in Nigeria.

The Guardian had reported that the growing debt situation had the possibility of putting more pressure and burden on private electricity consumers who pay more through estimated bills and higher tariffs.

Stakeholders had decried that non-payment of utility bills by MDAs remained direct sabotage and failure to respect extant regulations, particularly, the Electric Power Sector Reform Act (EPSRA) as the indebtedness of the utility companies now stands at over N500 billion.

Privatised in 2013, the power sector, aside from failing to perform, has been in financial crisis, requiring perpetual intervention funds from the government. While the sector has been bogged down by a financial crisis reportedly hovering around N4 trillion, the Federal Government has spent over N2 trillion as subsidy or intervention in recent years.

With the sector’s lingering financial crisis earlier projected by the French Agency for Development to be growing at N474 billion yearly, industry players noted that the sector might be on the verge of collapse.

PwC’s Associate Director, Energy, Utilities and Resources, Habeeb Jaiyeola, said the impact of government efforts through improvements in tariff structure, infrastructure development and others would be negatively affected if the government and private sector customers do not settle their bills when due.

He insisted that there was a need for the DisCos to install prepaid meters to further halt the growth of unsettled bills, adding that the government needs to seek appropriate means to settle existing bills to further aid improvement of liquidity in the sector.

“While this continues to be an area being worked on by the Discos, the solution must involve all stakeholders in the economy, including government parastatals and the private sector. All stakeholders must pay for services enjoyed, which will ensure the sustainability of the sector and reduce government interventions,” Jaiyeola had said.