November 8, 2023/CSL Research
Despite the privatisation exercise that was carried out in 2013, the nation’s power sector is yet to experience a turnaround as the investors that emerged from the unbundling of Power Holding Company of Nigeria (PHCN) are still grappling with the age long problems that have plagued the sector. Insufficient gas supply, weak transmission infrastructure, absence of cost reflective tariffs and poor metering systems have remained largely unresolved. In recent times, the collapse of the national transmission grid has become a recurring theme.
Based on the 2022 Market Competition Report released by the Nigerian Electricity Regulatory Commission (NERC) last month, the installed capacity in the sector grew by 7.95% from 12,132MW as of December 2015 to 13,097MW as of December 2022. However, the average available capacity decreased 4,059MW in 2022 from 6,401MW in 2015 to due to a number of factors including poor maintenance due to liquidity challenge and access to foreign exchange. The daily average generation of 3,892MWh/h recorded in 2022 was only 9.42% higher than the daily average generation of 3,557MWh/h recorded in 2015.
On metering, the ratio of metered to registered customers was 42.25% as of 31 December 2022 while Eko, Abuja and Benin DisCos had metered more than 50% of their registered as at the end of 2022. Ineffective metering remains 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 end-user tariffs vary from Disco to Disco and though there has been a general increase between 2019-2022, the tariffs are still considered non-cost reflective. According to the report, the real end-user price of electricity (adjusted for inflation) continues to decline in Nigeria and is lower than end-user tariff in eleven of the sixteen ECOWAS countries partly due to the tariff subsidy provided by the FGN and the relatively cheaper gas price in Nigeria. generation costs account for c.49% of the tariff in 2022.
Over the years, the widening deficiency in on-grid supply of power has forced consumers into costly off-grid alternatives, which account for 52% of electricity consumption, based on IMF estimates. According to the world bank’s most recent data, about 80 million people still lacked access to grid electricity. The institution further puts the national electrification rate at 55%, with rural electrification rate at a meagre 39%. Clearly, a lot of work is still required in improving the supply of power across the country and ensuring its availability to unserved and underserved households and businesses
