Illiquidity has reduced our capacity utilisation to 1,000MWs, says Omogiafo
The liquidity crisis in Nigeria’s power sector is worsening as Transnational Corporation Plc (Transcorp) has revealed that the Federal Government owes its power subsidiaries about N650 billion for electricity generated but not paid for.
With over N1.9 trillion in debt to generation companies in 2024 alone, there are indications that the country’s power plants are on the verge of shutdown despite significant capital commitments from private investors.
The crisis comes at a time when Transcorp, one of Nigeria’s largest listed conglomerates, reported a remarkable financial performance in 2024, with a 107 per cent increase in revenue to N408 billion and a 188 per cent rise in profit after tax to N94.1 billion.
However, while these figures reflect operational efficiency and resilience, the non-payment of electricity debts threatens the company’s ability to sustain investments and expand power generation capacity.
Nigeria’s power sector has long been marred by chronic liquidity challenges, resulting in unstable electricity supply, poor infrastructure and the inability of power generation and distribution companies to meet consumer demands.
The sector’s financial struggles are largely attributed to delayed payments by government agencies, particularly through the Nigerian Bulk Electricity Trading Plc (NBET), which acts as the intermediary between electricity generators and distribution companies.
Similarly, despite Nigeria’s abundant natural gas reserves, gas supply constraints continue to hamper power generation. A longstanding challenge in the sector is the inefficient electricity tariff structures, which have historically been set too low to recover the cost of generation, transmission, and distribution.
Despite the increase in band A tariff, tariff shortfall accounts for the N1.9 trillion debt in 2024 as DisCos only owed N155 billion of the energy they received.
Speaking on the crisis, President and Group CEO of Transcorp, Dr Owen Omogiafo, stressed that the N650 billion owed to the company is stifling growth and investment in the sector.
“We have an installed capacity of 2,000 megawatts, but only about 1,000 megawatts are available. This is not due to a lack of capacity but liquidity challenges. If we are not paid for the power we generate, it becomes difficult to reinvest, expand capacity, and address Nigeria’s electricity shortfall,” she said.
The liquidity crisis is further exacerbated by gas supply shortages, which have severely impacted power generation in the country. Most of Nigeria’s gas-fired power plants, but inadequate gas infrastructure, rising costs, and payment delays have discouraged gas suppliers from meeting demand.
Transcorp, which operates three power generation companies, has sought to mitigate this issue through strategic partnerships. The company has collaborated with Axxela Energy to secure gas for its TransAfam Power Plant, significantly boosting output. However, these efforts are unsustainable without a steady flow of payments from NBET and other government agencies.
“Gas is the backbone of power generation in Nigeria, and without liquidity in the sector, we cannot develop gas assets or secure sustainable fuel supply. We have gas-rich assets in Delta State that could help stabilise supply, but investments are stalling due to the funding crisis,” Omogiafo explained.
It is good to note that despite the Nigerian Electricity Regulatory Commission (NERC) implementing new tariff structures and subsidy removal strategies, collection inefficiencies remain a major bottleneck on the side of DisCos, considering low metering rates.
Transcorp’s financial report highlights its resilience in navigating Nigeria’s tough economic environment, with the company declaring a N10.1 billion dividend for shareholders and maintaining a strong asset base of N751.6 billion.
According to industry experts, the liquidity crisis is not just a problem for power companies, it affects Nigeria’s broader economic stability as the development continues fuel unreliable electricity supply that discourages industrial investment, increases business costs, and hampers economic growth.
The manufacturing sector, for instance, has repeatedly cited poor electricity supply as a major constraint, forcing companies to rely on expensive diesel generators.
Transcorp has urged NBET, NERC, and other relevant government agencies to settle outstanding debts and implement reforms that enhance the sector’s financial sustainability. Experts argue that clearing existing debts owed to power generators is critical to restoring investor confidence while also implementing a cost-reflective electricity tariff to ensure GenCos and DisCos can cover operational costs.
Meanwhile, expanding gas infrastructure and ensuring prompt payment to gas suppliers would help stabilise power generation. Strengthening electricity distribution networks is another vital step toward reducing losses and improving collection efficiency. (Guardian)
