Nigeria Considers Forex Allocation to Boost Power Generation

As hope of improvement in electricity supply in the country continues to look like a mirage due to under-capacity generation, the federal government is now considering liaising with the Central Bank of Nigeria (CBN) to prioritise allocating foreign exchange (FX) to power generating companies (Gencos) to enable them ramp up power output.

In addition, the government also said it would from April 2024, begin to clear the huge debts owed Gencos, noting that it would also grant gas suppliers access to gas wells as a way of defraying the legacy debts owed them by the power sector and guarantee more feedstock supply to power plants.

Minister of Power, Mr. Adebayo Adelabu, disclosed these to journalists, on Thursday, in Lagos, after touring Egbin Power Plant and its facilities as part of his routine official visits to power firms in the country.

The minister spoke just as the Chief Executive Officer of Egbin Power Plc, Mr. Mokhtar Bounour, lamented the huge revenue losses being suffered by the company because of under-capacity generation as its capacity dropped to about 400 megawatts (MW) due to shortage of gas and the N1.4 trillion owed it by the federal government.

However, Adelabu explained that his visit to the power plant was to know how the federal government would support the power generating plants to strengthen their output, admitting that forex sourcing had been major constraints to effective maintenance and sustainability of the power generation facility.

“Once we have seen what we have on ground now and the critical need for spare and tools for maintenance, we would be able to liaise with CBN to prioritise FX allocation to the power sector,” the minister said.

He added, “This will ensure that we are able to ramp up capacity in terms of generating output, it’s not only peculiar to power plants, it’s across all the generating plants. They need forex for them to be able to maintain the turbines and replace the tools and the spares.

“This has been a major issue. I’m going to take a step to ensure I liaise with the foreign exchange authority in CBN to see how they can prioritise FX allocation to the power generating companies.”

Adelabu said he also visited the 1,300mw installed capacity power plant to seek more understanding with them.

He acknowledged that the federal government was owing the powerful Gencos a lot of money.

He pointed out that Egbin Power Plant tops the list of the creditors, noting that the government would not want the debt to cripple the company’s operations.

For being magnanimous enough to continue operating and generating power despite the challenges, Adelabu also announced that the federal government was prioritising paying down all the outstanding debts owed Egbin and others.

“And I’ve assured the management that effective April, we will start paying that money as a form of incentive and part of encouragement to continue to have them in operation,” he said.

Admitting that gas constraints had been an impediment to almost all the power plants, the minister informed that his ministry had already had conversation with the Minister of Petroleum (Gas) to try to resolve the gas to power supply challenge.

He said the government was also meeting with the gas suppliers to plead with them to understand that the government was prepared to start paying down all the debts owed them.

“Like I mentioned earlier, we are going to make some cash injections in terms of payment. We are going to give them some guarantee debt instrument, and we are also looking at ways of allowing them access to Nigeria gas wells which would be used to defray the outstanding debt of gas suppliers.

“We would start seeing the impact in April when we start paying these loans, I’ve had meetings with the Minister of finance and minister of budget planning and they have given me the promise that we are going to look for funds to start paying these,” Adelabu stated.

He described Egbin Plant as the best power plant in sub-Saharan Africa with six turbines of 1,320mw, noting that the plant was established 40 years ago.

He expressed his excitement about the maintenance culture of the power facility, which he said, was the result of the huge investment made by the present owner to sustain the plant and ensure it continues to produce and generate power on a continuous basis.

“We received a delegation led by the Hon Minister of Power. The message is clear. They care about power generation, they care about the industry and Nigeria, the care about the community and it 100 per cent aligns with our strategy.