September 7, 2023/CSL Research
The Nigerian Electricity Regulatory Commission (NERC) through a circular dated 05-September-2023 revealed that the unit cost of new electricity meters across the country has been reviewed higher to N81,975.16 per unit from the previous cost of N58,661.69 per unit for a single phase pre-paid meter while the price of the three-phase prepaid meter has been increased to N143,836.10 from the previous cost of N109,684.36. Based on the prepayment terms under the NNMP, these revised prices will go to increase the electricity tariffs of the consumers, implying an increase in tariffs of affected consumers.
Ineffective metering has been a major drawback to the success of power sector reforms in Nigeria. While some consumers avoid paying for power consumed through meter bypass, some other consumers are made to pay for what they have not consumed through estimated billing by discos.
Discos have been largely unsuccessful with metering their customers. As far as inadequate metering is concerned, Discos, over time, have used this situation to their advantage via estimated billings. The Meter Asset Provider (MAP) Regulation, which became effective on April 3, 2018, introduced meter asset providers as a new set of service providers in the Nigerian Electricity Supply Industry. However, the request for payment before the provision and installation of Meters was a disincentive for the mass adoption of prepaid meters despite the known benefits, giving rise to the CBN sponsored mass metering plan.
The Federal Government launched the National Mass Metering Programme (NMMP) in 2020 and the CBN, in October of the same year, issued the Framework for its financing. The initiative is geared towards mass metering of Nigerians by providing loan facilities to (i) the DisCos (for the procurement of meters for its customers), and (ii) the local meter Manufacturers (for the manufacturing and assembling of meters).
The purchase price of the eter is to be programmed into the prepaid meter allowing consumers to collect the meter freely whilst the cost is spread and billed into the tariffs payable by such consumers. Under the NMMP, meters are to be deployed in multiple phases with the supply of 1m meters in the first phase which was completed in Q3 2021. Another 4m units of prepaid meters is to be deployed under phase 2 of the NMMP in 2023.
At the end of July, the Nigerian Electricity Regulatory Commission (NERC), noted that eleven electricity distribution companies (DisCos) had filed an application for rate review with the commission. The request for rate review was premised on the need to incorporate changes in macroeconomic parameters and other factors affecting the quality of service, operations and sustainability of the companies.
The DisCos noted that the proposed tariff increase is in response to the depreciation of the Naira which has effectively changed costs. Under the MYTO 2022 guidelines, the previously set exchange rate of N441/1 dollar may now be revised to approximately N750/1 dollar. In effect, current realities point to an increase in tariffs. This in addition to the implied increase for customers that have been supplied meters implies core inflation will likely remain pressured in the short to medium term.
