Cash Crunch Drives Nigerian Power Producers Out of Business
(Bloomberg) -- A number of heavily indebted Nigerian power producers have ceased operating because their customers aren’t settling their bills and they can’t afford to run their equipment or pay for gas supplies.
The shutdowns are the consequence of financial pressures across the power-supply chain, said Joy Ogaji, chief executive officer of the Association of Power Generation Companies.
“We cannot maintain the machines,” she said in an interview. “If there is no money,” they can’t be serviced, she said.
Power suppliers were owed about 6.8 trillion naira ($4.9 billion) as of the end of February, a debt that has been mounting since 2015 and continues to grow by about 200 billion naira each month, data shared by the industry association shows.
‘Critical Situation’
The firms in turn owe suppliers of gas and transport services an amount equivalent to about 60% of what is due to them, Ogaji said. Gas-fired thermal plants generate about 70% of the West African nation’s electricity.
The accumulated debt has left many power-generation firms in a “critical situation,” with some having taken out loans to keep operating and others unable to pay salaries, Ogaji said. In some instances, the owners have personally put up collateral so they can stay in business, she added.
Sixteen of the nation’s 33 power plants weren’t supplying any power as of Tuesday afternoon, data from the Nigeria Independent System Operation, a government body that tracks power generation, show. The balance were producing 3,705 megawatts of electricity.
Nigeria, which has more than 230 million people, has been dogged by power shortages for decades — its total generation capacity has been roughly static at 4,000 megawatts and just over half of the population are connected to the gridelectricity. By comparison, South Africa, which has 63 million people, can produce more than 10 times as much electricity.
Ogaji is skeptical a government plans to raise 4 trillion naira from domestic capital markets to settle the debts owed to the power companies will address the issue because it is being implemented too slowly. An eighth of the targeted amount has been raised so far, and the balance is set to funded via quarterly bond sales.
“We appreciate that effort, but we’re looking at a debt from 2015 to 2026 that is still growing,” Ogaji said. If the debt stabilizes “we could have some glimmer of hope that at least things are looking up,” she said.
A spokesperson for Nigeria’s power minister didn’t immediately respond to request for comments.
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