Nigeria is to tap a $200-million financing from the World Bank to acquire up to 5 million electricity meters as President Muhammadu Buhari orders an end to the controversial estimated billing, which has caused uproar across the country.
To fast track the plan, BusinessDay gathers that the President has called on the Central Bank of Nigeria (CBN) to provide the $200 million as a short-term credit to finance the ambitious meter acquisition programme, and will then get a refund once the World Bank disburses its loan.
A source in the Federal Government told BusinessDay last night that President Buhari had directed that the issue of estimated billing should be resolved with fresh urgency, and it was on this basis that he gave an approval on Tuesday for a new dispensation, which allows the DisCos after consultation with Nigerian Electricity Regulatory Commission (NERC), to charge a new service reflective tariff for electricity. This thereby ends the regime of government involvement in resolving mere buyer and seller commercial terms between DisCos and consumers. This will now be purely a regulatory play going forward.
Government officials insisted last night that the president intervention was principally to protect the poor consumers and that any increase in tariff would impact only the top 10 percent of electricity consumers in the country.
The president also ordered an end to arbitrary billing, and this would be achieved through the enforcement of the capping order. In addition, there will now be a review of the gas pricing mechanism that allows gas producers to charge in dollars. This will ensure that cost comes down as only a small part of the cost of gas production, like maintenance, will now be costed in dollars.
Under the new plan, which could begin next month, customers have been divided into various bands. Band A is for customers who get 20 hours of power and above daily; Band B has customers who get power for 16 hours daily, C-band has customers who enjoy power for 12 hours and above a day. Those that enjoy power for 8 hours and above are in D-band, and E-band has customers who only get 4 hours.
Accordingly, there will be no tariff increase for customers in Bands D and E representing more than 70 percent of electricity consumers deemed to be poorest of the poor, who are often referred to as lifeline customers.
Consultations held by the DisCos with their customers in January and February this year showed that while Nigerians were willing to pay more for the power they use, but this willingness was tied to improvement in availability. As part of the new deal, DisCos will be mandated to improve service for all customers under a performance improvement plan over time or be sanctioned.
According to data published by the NERC, “Of the 10,374,597 registered electricity customers in Nigeria, only 3,918,322 (37.77%) have been metered as at the end of the fourth quarter of 2019. Thus, 62.37% of the registered electricity customers are still on estimated billing, which has contributed to customer apathy towards payment for electricity.”
In 2018, NERC began a Meter Asset Provider programme to allow third-party investors provide meters for customers at a fee but a controversial 35 percent levy and the foreign exchange challenges blighted the project. Many Nigerians have also wondered why an ordinary electricity metre that is not more than the cheapest made-in-China GSM handset should cost as much as N56,00 apiece.
Relief seems to have come for customers this week as the Federal Government suspended the 35 percent levy on fully built meters, which is expected to bring down the cost of the meters.
In order to streamline payments, the CBN has also directed banks to provide guarantees to DisCos and have a fuller share in collections. This means that the bank account of DisCos will be directly charged for the power they take on behalf of their customers.
Analysts believe this is positive for the sector. “With the involvement of deposit money banks in collection, they will be in a better position to consider proposals for revenue collections that offers best result,” said Chuks Nwani, an energy lawyer based in Lagos.
