Nigeria’s power sector faces a deepening financial crisis as the federal government (FG) has settled only 20% of the N1.9trn (US$1.2bn) subsidy debt owed to generation companies (GenCos). This shortfall has triggered warnings of potential shutdowns, raising fresh concerns over the country’s already fragile electricity supply. Nigeria’s power sector challenges are well-documented, ranging from inadequate generation capacity and a weak transmission grid to a lack of cost-reflective tariffs and poor metering.
- 1. The sector’s liquidity constraints are worsened by weak billing and poor collection efficiency among distribution companies (Discos), largely due to limited investment in metering and infrastructure.
- 2. Data from the Nigerian Electricity Regulatory Commission (NERC) shows that in Q3 2024, out of 7,606.8 gigawatt hours (GWh) of energy offtake by Discos, only 6,249.2 GWh was billed, translating to a billing efficiency of 82.2%.
- 3. Collection efficiency the ratio of actual revenue collected relative to the amount billed was even lower, reflecting broader financial inefficiencies.
- 4. Discos collected N467bn in revenue during the period, compared to an aggregate billed value of N626bn, translating to a collection efficiency of 74.6%, down from 79.3% in the previous quarter.
- 5. Due to the revenue collection shortfall, the Discos were only able to remit N370.0bn of the N441.7bn invoiced to them by the Nigerian Bulk Electricity Trading Plc (NBET) and the market operator.
- 6. Of the 13.3 million customers registered by Discos as of Q3 2024, only 6.2 million were metered, leaving a metering gap of 53.4%.
- 7. The combination of technical losses, low tariffs, and inadequate metering resulted in Discos reporting aggregate technical, commercial, and collection (ATC&C) losses of 39.1% in the quarter.
- 8. To address revenue shortfalls, the FG recently announced plans to raise tariffs for Band B customers who receive 17 to 18 hours of electricity supply from N63 per kilowatt-hour (kWh).
- In contrast, Band A customers, who get just two hours more of supply, are charged N209 per kWh, raising concerns over tariff disparities.
- 9. The sector’s worsening financial position underscores the urgent need for a sustainable framework to enhance electricity supply and support economic growth.
- 10. Without urgent reforms, the crisis could deepen, further limiting businesses’ and households’ access to stable electricity.
This could feed into consumer prices and exacerbate the already elevated inflation readings.