Nigeria faces an unprecedented power crisis as gas producers have suspended supply to power generating companies (GenCos) following a directive from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). The suspension, triggered by mounting debts now totaling N2.7 trillion, threatens to plunge the nation into widespread blackouts and severely impact power generation across Africa’s largest economy.
The situation has reached a critical point, according to Dr. Joy Ogaji, Chief Executive Officer of the Association of Power Generation Companies, who confirmed that gas producers have formally notified all GenCos of the immediate suspension of natural gas supply. This development poses a significant threat to Nigeria’s power infrastructure, considering that over 70 percent of the country’s electricity is generated from gas-fired power plants.
The current crisis emerges despite earlier promises by the Federal Government to address the mounting debt situation. Earlier this year, Minister of Power Adebayo Adelabu had announced plans to begin settling these outstanding debts from April, including a commitment to work with the Central Bank of Nigeria to prioritize foreign exchange allocation to the power sector. While the government has made some progress by paying N205 billion of the outstanding debt, it hasn’t been enough to prevent the current crisis.
The situation is further complicated by an ongoing dispute between the NMDPRA and gas producers regarding the collection of a 0.5 percent wholesale price levy on petroleum products, as mandated by the Petroleum Industry Act. This disagreement has prompted gas suppliers to demand immediate payment of their outstanding dues, leading to the current supply suspension.
Dr. Ogaji emphasized the severity of the situation, noting that the total debt has escalated from around N2 trillion earlier in the year to a staggering N2.7 trillion. The impact of this debt is particularly significant for thermal GenCos, as gas costs account for approximately 70 percent of their operating expenses. The current payment system, where GenCos receive only a fraction of their invoiced amounts, has created a unsustainable situation where they can only pay gas suppliers a corresponding percentage of their gas bills.
The crisis has attracted attention at the highest levels of government, with all relevant authorities, including the presidency, being notified of the situation. The Nigerian Electricity Regulatory Commission (NERC) has also been informed of the developing crisis, highlighting the urgent need for intervention to prevent a complete breakdown of the power generation system.
The current situation reflects deeper structural issues within Nigeria’s power sector, where a complex web of debts and payment challenges threatens the entire electricity supply chain. The practice of partial payments has created a ripple effect, with GenCos receiving only a small percentage of their invoices from the Nigerian Bulk Electricity Trading Plc (NBET) and consequently being able to pay only a fraction of their gas supply costs.
This crisis comes at a particularly challenging time for Nigeria’s economy, as stable power supply is crucial for industrial operations, business activities, and daily life. The potential for widespread blackouts could have severe implications for economic productivity and social stability across the nation.
The situation calls for urgent intervention from the federal government to prevent a complete shutdown of gas-powered electricity generation facilities. Without immediate action to address the debt crisis and restore gas supply, Nigeria could face one of its most severe power crises in recent history, with far-reaching consequences for both the economy and society at large.
As stakeholders await government intervention, the crisis underscores the need for comprehensive reform in Nigeria’s power sector, particularly in addressing the financial viability of the entire electricity supply chain. The resolution of this crisis could prove crucial in determining the future stability of Nigeria’s power sector and its ability to meet the nation’s growing energy needs.
