Nigeria has implemented several metering programmes. Most recently, the Meter Asset Provider (MAP) Regulation and the National Mass Metering Programme (NMMP), all aimed at increasing the number of metered users, cut down on estimated billings to customers and reduced non-technical losses. How is the market faring?
The article appeared in ESI Africa Issue 1-2021.
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Between January 2019 and November 2020, the Nigerian Electricity Regulatory Commission (NERC) reported a total of 525,120 meters deployed and installed across the 11 power distribution companies (Discos). Some 7,588,972 meters were contracted under the NNMP, but of the available 1,000,000 meters rolled out in the first phase of the NMMP, only 16,308 meters had been installed in the premises of customers, leaving 983,692 warehoused in Discos’ offices.
While under phase 0 of the Central Bank of Nigeria-funded meter rollout programme, the Federal Government, which took delivery of 656,752 prepaid meters in May 2021, pledged to provide those whose bills are based on estimations with meters.
NERC has further instructed that all customers who paid for a meter under the MAP programme will need to be refunded. The Federal Government of Nigeria will be distributing six million meters at no cost to customers. Cost issues aside, it would appear that the biggest challenge facing Nigeria’s metering sector is the lack of available workforce to undertake installations and challenges related to logistics.
The lack of cash flow in the sector has been long known. In 2020, to combat the liquidity crisis, NERC implemented a minimum market remittance threshold payable by the Discos. The regulator mandated that they make payments to the Transmission Company of Nigeria’s (TCN) Market Operator, repay loans to the Central Bank of Nigeria and pay a percentage to the Nigerian Bulk Electricity Trading Company (NBET) monthly.
However, the effectiveness of the intervention had no impact, and between January and September 2020, remittances of N416.94 billion ($1.096 billion) were not made. According to NBET, the cumulative revenue lost by the power sector in 2020 is estimated at N645.15 billion ($1.695 billion). As a result, much of the capital needed for system improvements is not available, and the necessary strengthening of the transmission grid is not being undertaken.
Government plans to spend $3 billion in the next 24 months and end electricity subsidies by December 2021.
The Federal Government is, as a result, investing N1.5 billion ($3.942 million) for the distribution expansion programme projects to use the stranded power from the grid. In the 2021 budget, the government allocated N206.746 billion ($543.3 million) inclusive of multilateral and bilateral funded projects to the Ministry of Power (MoP) for capital expenditure. This money will be used to complete hydropower and other renewable energy projects, expand the transmission grid and for rehabilitation work.
Just recently, ESI Africa reported plans for the Federal Government of Nigeria to spend $3 billion on the energy sector in the next 24 months and end the current electricity subsidies by December 2021. The spending is expected to increase power wheeled by the Transmission Company of Nigeria (TCN) from the current 4,900MW to at least 7,000MW.
Special Adviser to President Muhammadu Buhari on Infrastructure, Ahmad Zakari, told attendees at a meeting that following the $500 million in loans the government secured from the World Bank earlier this year, it is expecting another facility from the African Development Bank (AfDB), remarking that the gestures are a demonstration of confidence in the reforms being currently made in the sector.
The collection efficiency of the various Discos has significantly improved since the CBN started warehousing the funds. Zakari explained: “With this enhanced metering on the service-based tariff, we can see the Nigerian electricity supply industry generating over N100 billion in the near to mid-term. This is very impressive.”
“The hypothesis that we have is that if you enhance payment discipline through metering the population, revenue will go up. We have proven that,” he stated, adding that the current administration was focused on moving from the traditional way of funding subsidies or using the liquidity in the sector to fund consumption. Instead, he said, the subsidy budget would go into infrastructure that would ultimately lead to growth.
“People say if you eliminate subsidies, you are going to have poor people or the vulnerable people pay more. But we argue that the only reason the power price in Nigeria is high is that we do not generate enough.
“If you generate 10 gigawatts of power, the tariff will be half of what it is now. Keeping the prices officially low is not the approach; increasing delivery power is the approach that will effectively get the same output, which is, making the citizen pay lower,” said Zakari.
Three distribution utilities, namely Benin Electricity Distribution Company, Ikeja Electricity Distribution Company and Abuja Electricity Distribution Company, have all worked tirelessly to reduce losses and increase payments in the wake of this privatisation element of the Nigerian power sector.
They have achieved a variety of interventions, including the application of technology. Through these efforts, Abuja has brought losses down from 60% to 38%. Despite the COVID-19 pandemic, they have managed to keep the loss reductions low. These are currently sitting on 40%, which is still a major improvement. Ikeja losses are down from 49% to 20%, while Benin’s figures have dropped from 67% by 19%.
Through the implementation of automation and digitalisation and a willing buyer scheme, Ikeja has improved the quality of the power provided to consumers in the company’s service area by providing 22-hour a day electricity – guaranteed by the payment of a higher tariff.
In addition, collections have increased across all three service areas due to the implementation of distribution franchises. This has been accompanied by tech investments into prepaid metering, GIS systems and automation. Through adding meters on distribution network substations, greater clarity has been achieved on the location of losses.
While unmetered customers contribute to threats affecting the financial viability of the country’s electricity supply industry, these end-users have expressed dissatisfaction with the estimated billing methodology. Thus NERC must combine financing, regulatory and policy initiatives to continue efforts to remove the bottlenecks that impede the rapid deployment of meters over the next 24 months. ESI
Nigeria’s Electricity Supply Industry
Highlights. KPMG, Q1, 2021
Nigeria: Federal Government to spend $3b in power sector. ESI Africa 24 March 2021
[This edition of ESI Africa is peppered with information on Nigeria. In particular, see the articles on pages 42 and 78.]
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