At PwC Roundtable, Adelabu Says Power Sector Debt to Hit N6tn by December

•Declares banks shun funding Discos over poor balance sheet

•Reveals most distributors have not offset acquisition loans since 2013

•MDAs, others owe Eko Disco N183 billion

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

The Minister of Power, Chief Adebayo Adelabu,  yesterday said the debt profile of the Nigerian power industry would rise further to N6 trillion by December 2025, up from the N4 trillion reported in 2024.

The Minister stated this in Lagos while reacting to issues raised by stakeholders at the PwC Annual Power and Utilities Roundtable, with the theme: “Multi-tier Electricity Market: Imperatives for Successful Evolution.”

Adelabu blamed the illiquidity in the sector largely to the non-performance of the Distribution Companies (Discos), saying the poor balance sheet of the utility firms has made them unattractive to banks for lending.

He decried that most of the Discos have not been able to complete the payment of their acquisition loans since 2013, adding that their focus on paying those loans has diverted their attention from investing in their networks and improving supply to customers.

To address the financing challenge facing the power sector, Adelabu said the Federal Ministry of Power is currently trying to put together a master plan for short-term, medium-term and long-term financing structure for the sector.

He said the destination was for the sector to be able to make profit and fund itself like the telecoms sector.

He said payment of full cost-reflective tariff and absence of subsidy were the way to go for the sector to break even and perform optimally both in terms of commercial and technical positions.

Adelabu said: “The moment revenues in the power sector are able to pay fully for the energy cost, energy invoice, and achievements, and you are able to pay for 90 per cent of your operations costs, nobody will advise banks before they are ready to give you money. So that is the destination we are targeting.

“And the only way you can achieve that is when you have commercial pricing of energy costs. The moment you still rely on government subsidies of almost 60 per cent of revenues, it’s a lie. You cannot get banks.

“The government will only promise you a subsidy. Cash release is a different thing entirely. As at December 2024, we had N4 trillion in indebtedness hanging. By December this year, it will be N6 trillion, because it’s an average of N200 billion per month. For 12 months, it’s N2.4 trillion every year. So that is the destination.”

But before transiting fully to commercial pricing of electricity in Nigeria, the minister noted that there must be a very transparent transition programme to achieve that. According to him, the industry must be de-risked before banks can come in.

He pointed out that funding is not a challenge in the generation segment as evidenced by the entrance of new investors and the springing up of hydropower and the thermal generation plants.

He mentioned that transmission remains the only segment that is 100 per cent-owned by the government, and that the government cannot continue to fund it alone.

“So what we have done is to establish a financing framework that will attract private sector investors to come into transmission lines so they can fund specific load centres in terms of transmission, specific substations, specific transformers. And since there is a wheeling charge that is payable on those lines, they have a line of sight on how their investments will be recouped”, Adelabu explained.

Still hammering on Discos’ poor balance sheet, the minister warned that with the way they are today, no bank will be willing to fund them unless they restructure their balance sheets.

“They must inject new capital. Improve their revenue generation  ratio. That’s the only way the banks can actually fund the Discos. But we also must de-risk it. And we are getting technical support from JICA. We just had a meeting yesterday.

“They are picking a couple of Discos whereby they can see how they can clean them up and try to prepare a template that other Discos will replicate. Number one is we must clear losses. Reduce losses significantly. There is no way a Disco will be having 40 per cent ATC&C losses and you say banks come and bring money. They will not. 40 per cent of revenue is lost”, he stated.

Presenting the debt status of her organisation at the event, Chief Executive Officer of Eko Electricity Distribution Company (EKEDC), Mrs Rekiat Momoh, revealed that Ministries, Departments and Agencies of government (MDAs) in addition to residential and commercial and industrial customers within its network owe the company a total of N182 billion as of last October.

“So this is the debt status for Eko. The MDAs alone is N66 billion. And residential, N96 billion. Then the commercial and industrial, N20 billion. So the total debt for Eko at the end of last month is N182 billion. You can imagine if we can have 50 per cent of this, it will go a long way to help our finances”, Momoh revealed.

She said the debt burden is one of the many challenges facing Discos, adding that issues around energy theft, vandalisation of facilities, high interest rates among others continue to hinder their operation.

Momoh said over 60 per cent of the Discos in the county are technically insolvent, adding that they have negative equity and that creditors and lenders have already initiated actions against some of them.

She noted that Gencos were facing a gas supply containment due to non-payment of invoices, adding that investors’ confidence was declining every day.

Meanwhile, PwC said Nigeria’s recent electricity policy reforms signal the beginning of a decisive phase for the sector, adding that effective implementation will depend on clarity of stakeholder roles, stronger collaboration, investor confidence, and the adoption of business model reinvention across the value chain.

Contributing during the discourse, Partner and Leader for Energy, Utilities and Resources at PwC Nigeria, Pedro Omotuemhen, said with the ongoing implementation of the Electricity Act 2023 and recent policy developments, including states exercising their new powers, the sector has entered a phase where the success of the multi-tier market will be determined by how effectively reforms are applied in practice.

He noted that the reforms recognise that decentralisation was vital to achieving Nigeria’s electrification and sustainability goals, enabling localised solutions that support national objectives.

“Our engagement with industry leaders shows that clarity of stakeholder roles and collaborative action will be essential to navigate teething challenges. Additionally, supporting emerging state-level structures and exploring opportunities for regional coordination across neighbouring states will be key to strengthening oversight and overall sector performance.

“Market players must also reinvent their business models in line with global energy trends, particularly as climate change, AI, and geopolitics continue to reshape ‘how we fuel and power’. This is the transformation Nigeria’s power sector must prepare for to remain competitive and sustainable in the future”, Omotuemhen said

As Nigeria’s power sector continues to adapt to new policy and regulatory frameworks, he advised that industry players must reinvent their business models to ensure reliable electricity supply while positioning themselves to compete in a rapidly evolving global energy landscape.

“Failing to adapt risks falling behind the accelerating transformation in electricity generation, distribution, and market structure”, he added.

Commenting, Partner, Energy and Resources at PwC Nigeria, Bimbola Banjo, said in a liberalised and increasingly sub-nationally regulated power market, the basis of competition across the value chain was being fundamentally rewritten.

He maintained that state-level licensing, sub-franchise models, and the separation of distribution and supply were reshaping market structure in the Nigeria Electricity Supply Industry (NESI), challenging the idea of exclusive territories and shifting success factors from regulatory protection to operational excellence.