In a recent address, His Excellency, President Bola Ahmed Tinubu, highlighted the critical role of the Nigeria Electricity Liability Management Company Ltd/Gte (NELMCO) in revitalizing the country’s power sector. He stressed that NELMCO’s mandate is key to addressing the longstanding challenges of debt and liquidity that have hampered the Nigeria Electricity Supply Industry (NESI). With an expanded role, NELMCO is now positioned as a major force in stabilizing the sector, particularly in managing post-privatization liabilities.
NELMCO’s Background and Mandate
Originally incorporated under the Companies and Allied Matters Act of 2000, NELMCO was established to manage the non-core assets and liabilities of the defunct Power Holding Company of Nigeria (PHCN). Following the privatization of the electricity sector in 2013, NELMCO’s responsibilities expanded significantly. It now manages both pre- and post-privatization liabilities, a critical function as the sector strives for operational efficiency and long-term sustainability.
Under the Electricity Power Sector Reform (ESPR) Act of 2005 and the amended Electricity Act of 2023, NELMCO is tasked with managing liabilities that stemmed from PHCN’s operations prior to privatization, overseeing tariff shortfalls from 2015 to 2020, and handling other post-privatization obligations as directed by the National Council on Privatization (NCP).
Key Objectives
NELMCO’s core objectives include:
- Liability Management: Administering and resolving stranded PHCN debts through a strategic approach to financial liabilities.
- Asset Management: Holding and managing PHCN’s non-core assets, with a focus on settling debts through asset sales or disposals.
- Settlement of Agreements: Managing Power Purchase Agreement (PPA) obligations and legacy debts, reinforcing its role in ensuring financial stability in the NESI.
- Facilitating Financial Sustainability: By addressing liquidity issues, NELMCO creates an environment that fosters investment and growth in the power sector.
Recent Developments and Expanding Responsibilities
In 2022, NELMCO’s mandate expanded to include managing tariff shortfall liabilities from power distribution companies that arose between 2015 and 2021 due to non-cost reflective tariffs. This was part of the Federal Government’s Power Sector Financing Plan, demonstrating a clear commitment to addressing financial imbalances in the sector.
The Electricity Act of 2023 further solidified NELMCO’s role in managing liabilities and non-core assets, positioning it as a cornerstone of the ongoing reforms in Nigeria’s electricity sector.
Achievements and Impact
As of December 2023, NELMCO inherited liabilities totaling over N2.3 trillion and has successfully settled over N1.3 trillion through diligent verification, reconciliation, and negotiations. This includes direct payments, negotiated savings, and the transfer of liabilities to other federal agencies, reflecting NELMCO’s effectiveness in easing the sector’s financial burden.
Despite these successes, NELMCO still faces N972.6 billion in outstanding liabilities, highlighting the ongoing challenges. The transfer of N825.8 billion in tariff shortfall liabilities from the NCP underscores the confidence placed in NELMCO’s ability to navigate the complexities of the NESI.
Looking Ahead
NELMCO’s mission is clear: to resolve the liquidity challenges that have plagued the NESI by managing post-privatization liabilities and ensuring financial stability. Through its efforts, NELMCO aims to create a stable and sustainable power sector that can meet the demands of a growing economy and attract critical investment.
As NELMCO continues its essential work, it remains a beacon of hope for a reformed and resilient power sector in Nigeria. With a focused strategy and dedicated leadership, NELMCO is poised to lead the charge towards a brighter and more sustainable future for Nigeria’s electricity supply industry.
