Analysts at Agusto & Co, an indigenous African credit rating agency and provider of industry research and knowledge in Nigeria, have said that while electricity consumers rate is growing at an average rate of 75,000 new customers every month, metering penetration has decreased from about 45.3% in January 2017 down to 40.6% in December 2019.
“Inadequate metering and limited technology in remote meter monitoring continue to contribute to the DisCos’ high loss levels,” the firm said in a note sent to BusinessDay.
Due to challenges with collection, the Nigerian Electricity Regulatory Commission (NERC) introduced the Meter Asset Provider (MAP) regulation in 2018 which is a means to liberalise the distribution market while resolving the challenges surrounding estimated billing and collections but the policy has faced challenges including a 35 percent duty introduced by the Federal Government.
Agusto & Co expects a decline in collections in year 2020 given the significant slowdown in the economy following the outbreak of the coronavirus (Covid-19) pandemic with the attendant lock-down order imposed by the Federal Government on economic activities in H1’2020. Our pessimism for DisCos’ collections is based on several factors (outlined in the report) including the ‘no disconnection’ measure implemented by the DisCos during the Covid-19 lockdown period.
“We believe that the ‘no disconnection’ stance will affect internally generated revenues such as disconnection and reconnection fees. Moreover, NERC has commenced the enforcement of the minimum remittance order (which stipulates the minimum remittance obligation for a DisCo having adjusted for tariff shortfall). This order is expected to end the erstwhile discretionary remittance regime by DisCos and should constrain the DisCos’ earnings in the short term,” the firm said.
Low remittance has adversely affected the ability of Nigerian Bulk Electricity Trading Plc (NBET) to honour its financial obligations to the GenCos as well as constrained the ability of other service providers such as NERC to perform their statutory obligations.
Nevertheless, the firm believes that the Nigerian power sector strengths include assured electricity power demand with Nigeria’s growing population, operators’ access to several intervention funds such as the Nigerian Electricity Market Stabilisation Facility (NEMSF), abundant gas reserves, the largest gas deposits in Africa estimated at 201 trillion cubic feet (TCF) together with about 600 trillion cubic feet unproven gas reserves will provide support for the sector.