Nigeria’s Energy Lifeline: FG Approves N185 Billion to Clear Gas Debts and Supercharge Power Supply
The Federal Government’s recent approval to settle N185 billion in long-standing debts owed to natural gas producers marks a crucial intervention aimed at revitalizing Nigeria’s gas sector and stabilizing the nation’s erratic power supply. Authorized by President Bola Tinubu and endorsed by the National Economic Council (NEC), this payment is expected to unlock investment, restore trust, and ultimately boost electricity generatioPost
n across the country.
Table of Contents
Key Debt Settlement Details
The Problem: Why the Debt is Crippling
The Solution: Benefits of the N185 Billion Payment
Revitalising the Gas Sector
Boosting Power Generation
Attracting New Investment
Alignment with National Strategy
Context: The Larger Power Sector Debt Burden
Key Debt Settlement Details
The Problem: Why the Debt is Crippling
The Minister of State for Petroleum Resources (Gas), Dr. Ekperikpe Ekpo, highlighted how the backlog of N185 billion has severely stressed the gas-to-power value chain:
Strained Cash Flow: The unpaid arrears limited the cash flow of gas producers, restricting their ability to fund operations.
Reduced Operations: Debt discouraged further exploration and production activities in the upstream gas sector.
Worsened Power Shortages: Critically, the reduced output meant gas suppliers limited supply to power plants, worsening electricity shortages nationwide.
Low Investor Confidence: International and domestic suppliers repeatedly raised concerns over government indebtedness, leading them to withhold or slow new investments.
The Solution: Benefits of the N185 Billion Payment
According to Minister Ekpo, this financial intervention is a “decisive step” with wide-ranging benefits for the economy and energy sector.
Revitalising the Gas Sector
The settlement is crucial for rebuilding trust between the government and gas producers. Improved financial stability will accelerate upstream activity, speeding up exploration and production efforts. This is expected to directly boost Nigeria’s gas output.
Boosting Power Generation
An increase in guaranteed gas supply from stable producers will directly translate into increased power generation. This is vital for easing the persistent electricity shortages that continue to hinder businesses, industry, and daily life across the country.
Attracting New Investment
The approval of this debt settlement, coupled with the royalty-offset arrangement, is designed to reassure investors that the government is committed to honoring its obligations. Better fiscal discipline and enhanced transparency are expected to attract fresh investment from both local and foreign players, stimulating broader economic growth.
Alignment with National Strategy
The intervention is fully aligned with the Decade of Gas initiative, a strategic effort aimed at unlocking more than 12 billion cubic feet per day (bcf/d) of gas supply by 2030.
Mr. Ed Ubong, the Coordinating Director of the Decade of Gas Secretariat, praised the decision, stating that it “underlines the Federal Government’s determination to clear legacy liabilities and gives gas producers the confidence that supplies power generation will be honoured.” He believes this move could unlock stalled projects and rebuild momentum behind Nigeria’s transition to a gas-driven economy.
Context: The Larger Power Sector Debt Burden
This N185 billion payment is part of a much larger, systemic debt challenge within Nigeria’s power sector.
Overall Arrears: In 2024, the Managing Director of the Shell Petroleum Development Company of Nigeria (SPDC), Osagie Okunbor, noted that gas producers were grappling with outstanding payments amounting to $1.3 billion.
NMDPRA Suspension: In December 2024, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) directed gas producers to suspend supply to indebted Generation Companies (GenCos) following an accumulation of over N2 trillion in debts owed by the government and various GenCos.
N4 Trillion Bond Plan: Recently, the Federal Government concluded implementation frameworks for a larger N4 trillion government-backed bond aimed at settling verified arrears owed to all power GenCos and gas suppliers, indicating a comprehensive strategy to clean up the sector’s balance sheet.
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