Eleven power distribution companies have lost over N1.4tn in revenue to the non-payment of electricity bills by Nigerians and consumers in Benin, Niger and Togo.
In Nigeria, many customers supplied electricity by the Discos are issued invoices based on meter bands and the number of hours supplied every 30 days, while others with prepaid meters load prepaid power units onto their meters.
Data from quarterly reports and Discos energy sales records published by the Nigerian Electricity Regulatory Commission from 2019 to 2022 showed that out of the N4.30tn billed customers, only N2.92tn was reimbursed to the companies.
This represents a collection efficiency of over 55 per cent, whereas the Discos are heavily indebted to local banks.
As of August 2022, the Discos were unable to pay the N2tn debt owed the power generation companies.
Last week, the Market Operator, a division of the Transmission Company of Nigeria, disconnected the Kano Electricity Distribution Company, Kaduna Electric and APLE Electric from the national grid for failing to settle their debts, thereby throwing customers in their franchise areas into darkness for days.
The affected Discos were, however, reconnected on Monday, May 1, 2023 following the intervention of the Minister of Power, Mr Abubakar Aliyu.
They were subsequently given 60 days to settle their outstanding invoices.
A breakdown showed that the Discos billed Nigerians N690.2bn in 2018, N730.88bn in 2019, N816.16bn in 2020, N1.1tn in 2021 and N840.18bn in 2022.
However, revenue receipts showed that N442.3bn was collected in 2018; N483.65 in 2019; N542.73bn in 2020; N771.3bn in 2021; and N596.63bn in three quarters OF 2022.
Benin, Togo, Niger owe N22.55bn
Findings indicate that neighbouring customers are also indebted to the Nigerian power distribution firms to the tune of N22.55bn for unremitted payment for electricity supplied in five years.
NERC pointed out that the power firms were indebted to the Nigerian Bulk Electricity Trading Company Plc and the power market operator.
Under an international treaty, Nigeria sells electricity to neighbouring countries like Benin Republic, Togo and Niger Republic through Paras-SBEE, Transcorp-SBEE and Mainstream-NIGERLEC, respectively.
Data gathered showed that an invoice of N50.01bn was sent to the firms in 2018; N30.03bn in 2019; N16.22bn in 2020; N7.67bn in 2021 and N4.66bn in 2022.
While N9.62bn was received as revenue in 2018; N56.94bn was collected in 2019; N12.06bn in 2022; N2.9bn in 2021 and N4.62bn in 2022.
However, the commission did not specify the number of megawatts supplied to the countries in the same period.
Explaining reasons for the non-remittance of revenue by the bilateral consumers, the commission stated in the report, “The Nigerian government has continued to engage governments of neighbouring countries benefiting from the export supply to ensure timely payment for the electricity purchased from Nigeria.”
Experts’ opinions
Reacting to the development, the Director, Research and Advocacy, Association of Nigerian Electricity Distributors, Sunday Oduntan, urged customers to pay up their bills, stressing that the debts were affecting the viability of the power sector.
He said, “As Discos, we implore everyone to pay their debts so that we can also pay what we owe the market.
“We are electricity distributors and the industry’s collection agents. Anytime a customer defaults in paying the bill, it affects our ability to pay the generation companies. It is a value chain and every action or inaction affects our sustainability.”
Oduntan added that the association was intensifying efforts through collaboration as high debts had diminished the sustainability of the sector in a way that was impacting businesses, paying of salaries, and meeting contractual obligations.
He added, “One important thing is that everybody has a role to play, from consumers to service providers and the government. We all need to work together; there is a need for collaboration in ensuring that our people pay their bills.
“We want the sector to be vibrant and reduce the indebtedness in the sector, but we can only do that if we all work together to ensure that everybody plays their own part. We will intensify efforts to ensure that our customers pay their debts. We also enjoin them to please pay their debts.”
When asked for possible solutions, the director stated that increased awareness was part of the activities being carried out to engage customers.
“Yes, it is one of the solutions that can change the narrative and we are doing that. Recently, we visited Enugu and Benin for continuous customer engagement, information sessions and town hall meetings. There is a need for more information and we are doing that through interacting with our customers, and through television and radio interviews; we are also resolving customer service issues between the Discos and the consumers,” Oduntan added.
On his part, the Associate Editor of SPE Journal of Economics and Management, Prof Wumi Iledare, in an interview with Saturday PUNCH said debts were limiting the ability of the Discos to pay the generating firms and the transmission company, which had to pay for gas used in generating power.
He said, “Certainly, such a massive debt has implications for the Discos. It limits the ability of the Discos to pay the generating companies and the transmission company. Interestingly too, the Gencos are badly affected and are unable to pay for the gas used to generate power, leading to electricity market failures.
“Of course, to a large extent, the Discos have the responsibility to install meters and they have failed. Subsequently, they are delimited in revenue collection with no tool to disconnect power without incurring additional costs.
“The solution is power decentralisation. Perhaps, there may be a need to revisit the Nigerian Electricity Regulatory Commission and the Energy Commission of Nigeria for a proper electricity market restructuring; the Petroleum Industry Act and the Central Bank of Nigeria type of restructuring.”
An energy expert, Yemi Oke, said the industry regulators should be blamed for the unrecovered funds as strict regulation would force the Discos to increase revenue collection.
He advised the Discos to take legal action to recover the debts or disconnect errant entities, adding that the huge amount was not an excuse to keep Nigerians in darkness.
He also advocated another round of reacquisition and refinancing because none of the Discos was solvent.
Oke said, “I blame the regulators because I have always argued that NERC is a weak and lame entity that is not living up to expectations. We need a serious, strict and aggressive regulator, which knows the rules and the law, and is able to apply the law to whip players in line.
“We can’t continue to have a weak regulator and have a buoyant industry, and it is a question of using the power sector for patronage in terms of acquisitions. Even the regulator is being polarised by needless political sentiments and that is not going to help the country.
“If the regulator is not independent and efficient, it will not get anything achieved; it will be an anything-goes kind of setting and I guess the starting point is to get an efficient regulator, which is able to whip those in the system in line with accepted global practices.
“I don’t think the debt claim is sufficient for Nigerians to continue in darkness. If the companies are not solvent, does it mean Nigerians have to suffer? If they are not competent and are not buoyant, then those assets should be sold to competent and financially suitable entities, which can rejig them and pump money so that the power sector can deliver on its mandate.”
Efforts to get the reaction of NERC proved abortive as its spokesperson, Usman Arabi, did not respond to enquiries by our correspondent.
Manufacturers’ N221bn expenditure
Manufacturers spent at least N221.69bn on self-generated power to run their factories in 2021 and 2022, this is according to the Manufacturers Association of Nigeria.
The Director-General, MAN, Segun Ajayi-Kadir, who disclosed this in an exclusive interview with Sunday PUNCH, also cited energy costs alongside other biting challenges as the primary cause of the dip in production output and the volume of sales.
Out of this amount, the Bi-Annual Economic Review published by MAN put the amount spent last year for the same purpose at N143bn.
The report indicated that electricity supply to the industries from the national grid declined marginally to 11 hours per day in the second half of last year from 12 hours recorded in the first half.
A breakdown of manufacturers’ energy cost revealed that expenditure on alternative energy sources increased by 70 per cent to N76.7bn in the second half of 2022 from N45.04bn recorded in the corresponding half of the previous year.
It also rose by N8.9bn or 13 per cent when compared with N67.8bn recorded in the preceding half. The expenditure was incurred on procurement of diesel, gas, generators and spare parts, inverters and UPS, among others.
The report said the average outages per day stabilised at four times in the second half of 2022, the same as it was recorded in the first half of the year.
The manufacturers stated that the trend showed that power supply to the industries was still a huge challenge, which accounted for huge investment by industrialists in self-energy generation.
Ajayi-Kadir said, “Production activities were reduced because of the environment; many companies, because of the prevailing situation — forex, power and so on – had to cut down on production. Many that were running up to three to four shifts had to reduce to two or one.
“Inadequate power supply to the economy has been a core challenge for industries in Nigeria. It is responsible for the high cost of manufacturing production and domestic commodities prices in the country. The poor energy situation is underlined by the mere 4,000MW distributed daily through the national grid.
“Specifically, for manufacturers, they have resorted to alternative energy generation in order to sustain production notwithstanding the associated prohibitive cost. For instance, the survey conducted by MAN shows that in 2021 and 2022, manufacturers expended about N221.69bn on diesel, gas, generator/spare parts, inverters, UPS, etc so as to sustain operations in the sector. The power scenario in the country today is mainly traceable to years of limited investment in electricity value chains; generation, transmission and distribution.
“The ideal situation is that as industrial activity grows, more investment is made to boost power supply to support the level of industrial expansion. However, this has not been the case in Nigeria as the power sector has suffered inadequate or misplaced investment. The post-power sector privatisation also threw up the same lacuna – lack of investment.
“We didn’t attract international and local energy companies that have the expertise and financial muscle for such capital-intensive projects. Today, apart from government intervention that has been driving electricity production, albeit sub-optimally, private investment has remained low.”
The MAN DG added that to improve the level of electricity generation, transmission and distribution, the Federal Government should review the power sector privatisation to allow for the presence of strong international energy equipment producers and companies.
Ajayi-Kadir stated, “In addition, to support the industries, the following measures are critically important: develop and implement a roadmap for improved power supply focusing on off-grid solutions and independent power projects; and concretely address the claim by Discos of ownership of the geographical areas they operate. The claim has truncated laudable projects such as the off-grid initiatives.
“Also, we need to carry out further investment in the electricity value chain and commit to adding 10,000MW to the current electricity distributed in the country; embrace and support significant development of energy mix and renewable – the country has huge potential for solar and wind energies; resuscitate the existing national refineries to produce fuels locally; review the gas price for domestic consumption to be at par with the export price, which is about $3.25 per cubic meter; promote energy efficiency and renewable energy deployment in industries and homes; incentivise more investment in gas aggregation to end gas flaring; and optimise crude oil production based on OPEC quota.”
(Punch)
