In a decisive move to tackle Nigeria's chronic power shortages, President Bola Tinubu has given the green light for the settlement of a staggering N185 billion in outstanding debts owed to natural gas producers. This crucial decision, aimed at revitalizing the energy sector, was endorsed by the National Economic Council (NEC) on Wednesday, December 4, 2024.
Clearing Arrears to Restore Gas Supply and Confidence
The approval, announced by the Minister of State for Petroleum Resources (Gas), Dr. Ekperikpe Ekpo, targets the longstanding arrears accumulated over years of unpaid obligations for gas supplied to power plants. This debt had severely hampered the cash flow of producers, discouraging further exploration and production activities, which in turn contributed to the unreliable gas supply that cripples electricity generation.
Dr. Ekpo emphasized that clearing these debts is expected to restore confidence among gas producers and strengthen operations within the sector. The payment will be executed through a royalty-offset arrangement, a mechanism designed to settle the obligations efficiently.
"Settling the debts is crucial to rebuilding trust between the government and gas producers, many of whom have withheld or slowed new investments due to uncertainty over payments," the Minister stated. He described the presidential approval as a key milestone in efforts to revitalize the gas sector and improve the nation's power generation capacity.
A Pillar of the Decade of Gas Agenda
This financial intervention is a cornerstone of the Federal Government's Decade of Gas agenda, which seeks to expand Nigeria's gas output to more than 12 billion cubic feet per day by 2030. By restoring financial stability to producers, the government aims to unlock new investments, stimulate exploration, and ultimately increase the volume of gas available for domestic use, particularly for power.
Mr. Ed Ubong, the Coordinating Director of the Decade of Gas Secretariat, welcomed the development. He noted that the approval demonstrates the government's commitment to addressing structural gaps in the gas-to-power value chain and could revive stalled projects, encouraging renewed investor participation.
Dr. Ekpo further highlighted that improved gas availability will directly enhance electricity generation, supporting broader economic growth. A consistent energy supply is vital for boosting industrial productivity, creating jobs, and improving national competitiveness.
Broader Impact on Investments and Sector Discipline
The minister also pointed out that the move is expected to promote greater fiscal discipline and transparency in the gas sector, making it more attractive to both local and foreign investors. This comes on the heels of reports that Nigeria's power sector has secured over $2 billion in new investments, attributed by the Minister of Power, Adebayo Adelabu, to ongoing reforms like the Electricity Act 2023.
However, these investments have yet to translate into stable power for most Nigerians, as the country continues to struggle to generate electricity consistently above 6,000 megawatts. The settlement of the gas debt is viewed as a critical step to address one of the fundamental bottlenecks preventing these investments from yielding tangible improvements in power supply.
The NEC's endorsement, under the chairmanship of Vice-President Kashim Shettima, underscores the high-level governmental priority placed on resolving this issue. The decision represents a strategic attempt to break the cycle of debt and poor supply, paving the way for a more reliable and gas-driven Nigerian economy.
