An industrial take-off is essential for Nigeria to achieve sustainable double-digit GDP growth. The power industry plays a key role in ensuring industrialisation across emerging economies. According to the recently released Q2 ’21 report from the Nigerian Electricity Regulatory Commission (NERC), the average of daily available generation capacity was 5,472.10 MW. Implying a decline of 8.1% compared with 5,956.23 MW recorded in Q1 ’21. However, actual generation was limited to an average of 4,074.30 MW. The total electrical energy generated in Q2 ’21 was 9,187,337 MWh, this was 3.3% lower than the 9,498,786 MWh generated in Q1 ’21 and attributable to an increase in the number of generation units that underwent maintenance and repairs, which resulted in unavailability for operations during the quarter.
In terms of delivery, a total of 8,909,910 MWh (96.9% of total generation) was delivered to the grid but only 7,332,949.05 MWh was delivered to the DISCOs during the quarter. This was due to energy export, energy sold on bilateral contracts and transmission losses.
In terms of the energy mix, the share of thermal power plants in the energy mix increased to 82.3% from 76.3% recorded in Q1 ‘21. While, the share of energy generated from hydro declined to 17.7% from 24% recorded in Q1 ‘21. According to the report, a total invoice of N259.70bn was issued to the eleven (11) DISCOs for energy received from the Nigerian Bulk Electricity Trading Plc (NBET) and for administrative service charges by the market operator (MO), but only N130.1bn was settled, creating a total deficit of N129.6bn. This represents a remittance performance of 50.1%.
This is a -1.8% decline compared with the final settlement rate of 51.9% recorded in Q1 ‘21. We note that total billing to electricity consumers by the eleven (11) DISCOs stood at N268.9bn, while total collection was N185.3bn in Q2 ’21. This implies a collection efficiency of 68.9%. However, this is a marginal improvement of 0.4% from the collection efficiency of 68.6% recorded in Q1 ’21. Ikeja, Eko and Abuja DISCOs had the highest collection efficiency of 84.5%, 84.1% and 81.8% respectively while Kaduna DISCO had the lowest collection efficiency of 33.3%.
One roadblock within the power industry is the huge metering gap for end-use customers.
According to the NERC report, as at end-June ’21 only c.4.5 million customers have meters, accounting for 41% of the estimated 11.1 million registered energy customers. Furthermore, the report shows that 315,717 meters were added by DISCOs in Q2 ’21 compared with 189,226 meters provided in Q1 ’21. Therefore, c.6.5 million (59%) unmetered customers are currently on estimated billing. A billing estimation cap has been established to guide the DISCOs and protect unmetered customers from being over charged while awaiting appropriate metering.
The non-settlement of energy bills by ministries, departments and agencies (MDAs) across the three tiers of government (i.e. federal, state and local government) also features as a challenge. Resolving the debt owed by MDAs would assist in significantly improving the liquidity of DISCOs, as well as their capacity to settle invoices from NBET and MO.
The report also revealed that in Q2 ’21, power companies from the Republic of Benin, Niger Republic, Togo and other special customers such as Ajaokuta Steel Co. Ltd, were issued a total bill of N770m by both NBET and the MO and they made no payment for the electricity supplied and services rendered. We understand that the economic scarring from the Covid-19 pandemic and lockdowns were major reasons for the non-payment.
Typically, industrial customers fall into the highest tariff class. We understand that some industrial customers prefer to avoid using the grid power supply for production purposes. This is due to the potential adverse effect of poor energy quality from the grid on production cycles. Data from DISCOs indicate that industrial customers’ account for only 12% of annual energy sales by DISCOs. To boost the patronage of grid electricity by industrial customers, improving the quality of energy supplied via the grid is imperative.
Fixing Nigeria’s epileptic power supply will serve as a catalyst to boosting industrial activities, which by extension would support economic growth and development.
