Federal Government has allotted N702 billion to the Nigeria Bulk Electricity Trading (NBET) as power payment guarantee support.
This is in recognition of the critical role access to electricity plays in economic growth and poverty reduction.
According to the Minister of Power Works and Housing, Mr Babatunde Fashola, the money is meant to solve the liquidity challenges faced by electricity generating companies (GenCos).
He further said that NBET would pay GenCos in arrears of electricity generated as a deliberate step to improve their confidence and that of intending investors into the sector.
The Minister said further that this step is part of government’s Economic Growth and Recovery plan.
He pointed out that the plan will not immediately solve the problems of the power sector or produce overnight the electricity that has eluded us for decades, but will bring some stability to the production side of the power value chain and also give confidence to investors who want to come in and who are concerned about how to recover their money.
The Minister disclosed that subsequent complimentary interventions will ultimately seek to strengthen financial transparency and to ensure that industry revenue are fairly distributed to all market participants and their suppliers according to contractual commitments, secure adequate capitalization and liquidity to ensure that all market participants, particularly those upstream of the Discos, are paid according to contracts and are adequately funded to sustain and expand their operations; attain and sustain generation, transmission and distribution above 4,000 MWh/h; facilitate new power generation using all available energy sources, recovering lost gas supply, adding new gas supply, completing transmission projects.
Furthermore, through wider consultation, implement a simplified tariff methodology that more accurately reflects market realities, exchange rate realities and cost of producing and delivering electricity.
NBET is a 100 percent government owned company which buys electricity in bulk from electricity generating companies (GenCos), licensed to produce energy to the grid.
As required by the Electric Power Sector Reform Act of 2005, the commission licensed 11 distribution companies (Discos) to distribute and sell electricity.
The companies are 60 percent owned by private investors with government retaining a 40 percent shareholding.
For the time being, government also retains ownership for the transmission system used to transmit the electricity from the GenCos to the Discos.