Amidst rising debt to power utility companies, the federal government has said it is working on a new model of electricity subsidy.

Minister of Power, Adebayo Adelabu, who decried the impact electricity subsidy is taking on government coffers, said the country needs to review the model of electricity subsidy in the sector that would target the poor.

The minister, who spoke during the 6th edition of the 2025 Ministering Briefing also stated that the country is sitting on a keg of gunpowder if the debt owed to the power sector is not settled.

Daily Trust reports that there has been an accumulation of subsidy payment to the tune of N4 trillion being owed Generation Companies.

The Minister said the government has not been paying subsidies regularly, which is what led to the build-up in the debt being owed to utility companies.

“Government cannot, after privatisation, continue to keep the funding subsidy, which keeps growing on an annual basis. As our consumption goes up, government subsidies keep growing. So we need to nip it in the bud. We are not saying stop subsidies completely but subsidies in the past have always been favouring the higher echelon in our society because of huge consumption. We want to devise a subsidy strategy that will favour the poor.

“So, we are talking to ourselves to make sure that we pay this subsidy and for it not to cost the government too much money, because a lot of other ministries are begging for resources. We all know that the price of oil is going down and production is not improving. So, we can see that government resources, too. We are not so optimistic about the growth in government resources. So, the government must be able to reduce the subsidy,” he said.

According to him, everything possible must be done to clear the N4 trillion debts.

He said, “For 2024 alone, it was N1.94 trillion. If not for the Band A increase, it would have been N3tr. From 2015 to 2023, it was N2tr, N2tr plus another N1.94tr in 2024, that is N3.94tr. That is N4tr debt. If you have not paid for a good power supply, how do you expect them to supply new goods? So, we are sitting on a keg of gunpowder. If we do not start paying down the debt, the old debt that is unfunded subsidy. So, we need to do everything possible to ensure that we pay the debt so that the nation will not going into darkness.”

Adelabu however said the government is doing its best to offset the debt and N2tr will be paid before the end of the year in cash and bank guarantees.

Daily Trust reports that the GenCos had earlier this week threatened to shut down electricity supply over the accumulated debt.

Our correspondent learnt that the GenCos were being paid less than 40 per cent of their invoices; a situation, which has left them in dire financial straits.

Nigeria made mistake in privatising companies

The minister added that the country made a mistake in handing out the Electricity Distribution Companies (DisCos) to individuals, who are milking the companies without adequate investments.

“On the issue of investments, our power operators are not investing. We made that mistake in 2013, when we did the privatisation. All the Distribution Companies have not injected enough into the sector. They are only milking these companies, so we must do a lot of investment. Governments cannot do it alone. So, we need a lot of investment. These are the challenges that we are working around.”

He added that the government is making moves to regionalise the power grid through the electricity super grids.

The minister said the project under the eastern and western super grids are making progress and would reduce payloads on the grid.

“We have said that what Nigeria needs today is a regional or regionalisation of the national grid, so that there is a problem in one part of the country. It will not affect other parts. Having a single national grid that will be done 100% is not desirable. So, we are taking steps to make sure that we regionalise this grid to not affect the eastern and western super grids. This project is on and we hope to have a favourable reference as soon as we come back from Easter break.

He also said the government would make sure the grid increased to 8,000 megawatt before 2027. (Daily Trust)