How electricity distribution companies are finding profit across geopolitical zones

Industry players in the electricity sub sector, especially the distribution companies (Discos) had little going for them, until recent years when they have been recording substantial revenue growth. At least, a fair number of them. A major step towards achieving this was to cover their operational costs, which could be seen in the last few years, when electricity rates were reviewed as dictated by economic realities. Due to the constantly changing assumptions and parameters such as inflation rate, exchange rate, gas price, generation capacity, among others, another review may be in the offing.

Considering that rate adjustments have been implemented in the last few years, it is time to evaluate the impact of the previous rate hikes on the nation’s electricity sub sector, through the analysis of the recently released industry data from 2015 to 2020 by the National Bureau of Statistics (NBS).

This is as Wood Mackenzie stated that countries in Sub Saharan Africa would require about $350 billion to improve electricity generation and distribution in the sub region by 2030. We evaluated the growth and distribution of the total number of customers, metered customers, estimated billing customers, energy supplied, and revenue generated by each disco, as well as their performance in the six geopolitical zones in the country.

Electricity customers in Nigeria grew by 48.2 percent to 10.37 million in December 2020 from 6.99 million as of December 2015.Electricity customers in this sense are classified into two categories-metered and estimated billing customers.

As of December 2020, electricity customers comprised 3.51 million metered customers and 6.86 million estimated billing customers as against 3.15 million metered customers and 3.85 million estimated billing customers in December 2015.

Both the metered customers and estimated billing customers increased by 11.4 percent and 78.4 percent respectively in December 2020. Apart from that, the metered customers accounted for 45 percent and 33.8 percent of the electricity customers in 2015and 2020. On the other hand, the estimated billing customers accounted for 55 percent and 66.2 percent of the electricity customers in 2015 and 2020 respectively.

A unique trend in that period was that electricity customers grew by double digits across all the discos, with seven of them performing above the national average. Port Harcourt Electricity Distribution Company, in south-south geopolitical zone, topped with 84.7 percent because its customers rose from 375, 535 in 2015 to 693,784 in2020.

Jos discos’ customers grew by 84.6 percent from 348,014 to 642,418. The growth rate was 75.2 percent in Kaduna disco, while Kano and Yola discos grew their customers by 74.6 percent and 72.2 percent respectively. In the south east, customers of Enugu disco increased by 63.9 percent; it was54 percent for Abuja disco, and 48.5 percent for Ikeja disco.

Although there was an increase in the customers of Eko, Benin, and Ibadan discos to the tune of 37 percent, 21.9 percent, and 21.8 percent respectively, it was below the national average during the period.

Geographical distribution as at 2020 showed that 19 percent of electricity customers were from the north central compared with 17 percent from the same zone in 2015. Still on 2020, four percent of the electricity customers were from the north east, 13 percent from the north west, 17 percent from the south-south, and 35 percent from the south west geopolitical zone.

By metering, on the average nationwide, 34 out of 100 electricity customers were metered in 2020, compared with 45 in 100 in 2015. Meanwhile, metering by regions varied across the zones. In the north central, 42 out of 100 electricity customers were metered in 2020, compared with 41 out of 100 in 2015. In the north east, 17 out of 100 were metered in 2020 as against 18 in 100 in 2015.

Read also: Ibadan DisCo records highest electricity customer base in Nigeria

In the north west, 20 out of 100 were metered in 2020 in contrast to 44 in 100 in 2015. In the south east, 38 out of 100 were metered in 2020 as against 51 in 100 in 2015. In the south-south, 52 out of 100 customers were metered in 2020 compared with 59 in 100 in 2015.

In the south west, 26 out of 100 electricity customers were metered in 2020 as against 41 out of 100 in 2015. Metering in south west in 2020 fell below the national average. This may be due to a number of factors. First, the region has the highest number of electricity customers in Nigeria. Also, the south west is one of fastest expanding zones for real estate development. It is the commercial and industrial hubs of the nation, witnessing unprecedented immigration from other zones and this comes with housing units spring up in urban, semi-urban and rural areas.

Source: NBS, BusinessDay

Marginal increase in electricity supplied/billed in 2020

Across Nigeria, the electricity billed saw a moderate growth of 5.5 percent to 2,058.3 GWh in 2020 from 1,950.6GWh in 2015. This growth was noticeable in Ikeja at 38.6 percent; 28 percent in Eko; 25.9 percent in Benin; 18.4 percent in Ibadan, and 4.2 percent in Kano.

But electricity supplied declined in Enugu discos coverage areas by 3.4 percent in 2020. Same period, the decline was 4.2 percent in Yola; 8.7 percent in Port Harcourt; 14.4 percent in Kaduna; 18.4 percent in Abuja, and 40.8 percent in Jos, when compared with 2015.

By energy supplied per capita, this fell to 0.54KWh in 2020 down from 0.76 KWh per customer per day in 2015. It translated to an annual 278.98 KWh in 2015 and 198.56 KWh in 2020. By this metric, all the discos experienced a decline in electricity supplied per customer per day except Benin where it rose from 0.48 KWh in 2015 to 0.50KWh in 2020.

Revenue growth rode on rates hike

With a marginal 5.5 percent growth in electricity supplied/billed, it is hard to justify an 89 percent upsurge in revenue of the eleven discos during the reference period. The total revenue of the eleven discos rose from N278.89 billion in 2015 to N526.77 billion in 2020, translating to N764.09 million per day in 2015 and N1.44billion per day in 2020.

Revenue growth in Yola disco that generated N10.64 billion in 2020 as against N4.12 billion in 2015was highest at 158 percent. Kano discos’ revenue increased by 143 percent to N32.74 billion in 2020 up from N13.46 billion in 2015. For generating N102 billion in 2020 up from N44.96 billion in 2015, Ikeja disco increased its revenue by 127 percent.

Eko and Abuja discos’ revenues rose by 105 percent and 103 percent as the former generated N81.39 billion in 2020 compared with N39.67 billion in 2015, while the latter realised N79.03 billion in 2020 as against N38.91 billion in 2015.The increase in revenues of other discos, that is, Kaduna, Ibadan, Enugu, Port Harcourt, Benin and Jos ranged from 44 percent to 86 percent.

Almost half of discos’ aggregate revenue generated in south west

Most of the revenues generated by discos came from south west. The three south west discos, Ikeja, Eko and Ibadan, generated N244.43 billion as combined revenue in 2020, representing 46 percent of the total revenue made by the eleven discos. The region got 45 percent of the total electricity supplied in Nigeria in 2020.

The combined revenue of Kano and Kaduna discos was N53.55 billion in 2020 as against N27.86 billion in 2015. Proportionally, north west’s share in total revenue for both years remained at 10 percent each. Meanwhile, the region got 13 percent of the total energy supplied in 2020.And whereas the energy supplied to Kano slightly increased by 4.2 percent, energy supplied to Kaduna fell sharply by 14.4 percent.

The north central discos in Abuja and Jos got 14 percent of the total energy supplied, but their combined revenue accounted for 18 percent of the eleven discos’ revenue in 2020. Both realised N96.33 billion in 2020 as againstN48.22 billion in 2015.The energy supplied to Abuja customers fell by 18.4 percent just as energy supplied to Jos decreased by 40.6 percent during the period.

The disco in Yola marginally increased its share of the revenue from 1 percent in 2015 to 2 percent in 2020.

Further, with N29.34 billion revenue, Enugu disco’s share of the total revenue fell during the period. It accounted for 10 percent in 2015 as against 9 percent in 2020. The south-south discos made N75.74 billion in 2020 as against N44.38 billion in 2015. Regardless, their combined revenue relative to the total revenue fell from 16 percent in 2015 to 14 percent in 2020.

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