The government of Nigeria plans to spend NGN200bn (US$517m) to ensure the supply of gas to the power generation companies (Gencos) in the context of the coronavirus epidemic. The objective of Nigerian authorities is to address the indebtedness of Gencos to gas companies. In 2018, more than 80% of Nigeria's electricity generation came from natural gas.
Due to cash shortfall in term of collection from distributions companies (Discos), Gencos are only partly paid for their outputs. Consequently, companies are unable to settle their gas bills. These persistent revenue shortfalls have hindered plans to build private power plants in recent years. In addition, suppliers have demanded, in recent weeks, upfront payment before making available gas for power generation. Given the liquidity issues in the Nigerian electricity sector, Gencos cannot afford to meet this requirement.
Electricity distribution companies recently pledged to supply electricity to their consumers free of charge for two months. Despite reforms and the privatisation of generation and distribution companies, some 80 million Nigerians remain without access to electricity, the grid is plagued by frequent blackouts and the government has supported the power sector with NGN1,700bn (US$5.6bn) since 2017.