August 17, 2023/FBNQuest Research

The most recent electricity report from the National Bureau of Statistics (NBS), shows that the total electricity billed by the country’s distribution companies (Discos) declined slightly by -2% y/y, but increased by +4% q/q to 5,852 gigawatt hours in Q1 ’23. In comparison to the more robust data from the Nigeria Electricity Regulatory Commission (NERC), which is frequently delayed, the NBS data does not provide a complete picture.

With respect to revenue generation, the total revenue collected by the Discos amounted to NGN247bn, implying an increase of 21% y/y and 7% q/q. However, the NBS data fails to show the total amount invoiced by the Discos.

Historically, revenue remitted by the Discos has always fallen short of the invoiced amount billed to them by the Nigerian Bulk Electricity Trading Plc (NBET).

Consequently, the federal government (FG) has always covered the shortfall in electricity tariffs, and it remains a significant fiscal burden.

To put into context, the NERC’s report for July stated that the FG spent approximately NGN2.8trn on electricity subsidy payments from 2015 to 2022.

The poor level of revenue collection which has resulted in liquidity constraints in the sector can be partly attributed to the country’s huge metering gap and non-cost reflective electricity tariffs.

To further illustrate, out of the 11.3 million customers registered by the Discos as of Q1 ’23, only 5.3 million had been metered in by the commission as of the same period.

This represents a metered customer rate of 47% and a metering gap of 53%.

In addition, the power sector continues to face numerous challenges which have hindered service delivery of the sector. Some of the significant challenges confronted by the sector include gas shortages, constant power losses and liquidity constraints.

However, we believe that decentralisation of the sector due to the newly signed 2023 Electricity Act will enhance the sector’s infrastructure and make it more attractive for private investments.