- As DisCos’ rake in highest revenue in ten years amid power outages
- Electricity subsidy removal would send manufacturers out of business — Manufacturers
Professor of Law and Senior Advocate of Nigeria, Joy Ngozi Ezeilo has added her voice to that of manufacturers and the organised Labour in condemning the Federal Government’s 240 per cent hike in the tariff payable by electricity users enjoying a 20-hour power supply.
Manufacturers and the organised Labour insist on the electricity subsidy, warning that its removal would send manufacturers out of business and worsen inflation. But the Federal Government has aligned with the International Monetary Fund (IMF) which earlier in the year said there was an urgent need for Nigeria to completely phase out electricity subsidy as part of measures to address its economic challenges.
For Ezeilo who expressed concern through her X (former Twitter) handle, “NERC needs to provide more sophisticated explanations for the hike in electricity prices.”
Meanwhile Abubakar Ibrahim & Faith Esifiho in an elaborate report in BusinessDay disclosed that: “The eleven electricity distribution companies (DisCos) in Nigeria’s electricity supply industry have amassed N1 trillion in revenue in 2023, representing the highest collection recorded in the period in the past ten years.”
In her X treatise, Prof Ezeilo said: “Nigeria’s problems can significantly impact one’s sleep and mindset. Last night, I dreamed of forgetting to switch off my AC and freezer, but then I ran out of credit. I woke up to find that there was no power, despite being in B and A, which promises 20 hours or more of power supply. I woke up to find that there was no power, despite being in B and A, which promises 20 hours or more of power supply.
“As the famous writer Chinua Achebe captured in his book Things Fall Apart, ” Eneke the bird says that since men have learned to shoot without missing, he has learned to fly without perching”. Therefore, I refuse to spend 50% of my hard-earned professorial salary on electricity tariffs. Depending on house occupancy, I currently spend between 100 and 120k a month.
“With the new increase in tariff being put at between 240 and 300 percent, my estimated expenses will come to at least 300k. More than 50 percent of my new salary – for what? I reserve the right to not only explore alternative energy but also refuse to switch on to the damn costly power. Band ‘A’ is not my choice, but by house location (GRA) and three-phased connection. If they give me 20 hours, I will cut my household user hours to 8 hours. After all, we are used to suffering and smiling. I hope that will keep me under 150k a month whilst I start researching and planning for total disengagement from grid connections and subsidising darkness, corruption, and inefficiency.
“Why are there divisions and discriminatory treatment regarding people’s right to access electricity equitably? In Nigeria, people are divided into categories A, B, and C. But we are all equal, and I stand for inclusive development and leaving no one behind. Poor and less privileged Nigerians should also enjoy equitable access to electricity. A former Communication Minister once said telephones were not meant for the poor. I hope that’s not what this electricity user categorisation meant.
“A NERC official recently appeared on Arise News TV to explain that the new electricity tariff is still cheaper than running a generator on diesel or fuel. However, this justification seems too simplistic. NERC needs to provide more sophisticated explanations for the hike in electricity prices.
“More importantly, we need to introduce competition and new policies that prevent DISCOs/GENCOs from operating in multiple states. Nigerians should have access to cheaper energy options. Electricity should be affordable for everyone, and the rates should correspond to the minimum wage. This is what is justifiable in a democratic society where everyone should have access to basic necessities. Again, I stand for inclusive electricity distribution.”
Another concerned Nigerian gave a breakdown of the tariff increase in this manner:
“Electricity tariff increase from N66 to N225, see your living condition, if you don’t want to use lantern:
- 24 hours electricity per day is N5,400 for a day, 30 days is N162,000 and 365 days is N1,971,000.
- For 10 hours a day, you will spend N2,250 per day, for 30 days is N67,500 and 365 days using 10 hours electricity is N821,250.
- For 5 hours electricity per day, it is N1,125, 30 days of 5 hours electricity is N33,750 and 365 days of 5 hours electricity is N410,625.”
In their BusinessDay article, Abubakar Ibrahim & Faith Esifiho had this to say:
This development marks a pivotal moment in the sector, highlighting the growing significance of the electricity distribution industry in the country.
The recent electricity report from the National Bureau of Statistics (NBS) discloses a revenue of N294.95 billion in the fourth quarter of 2023, contributing to a cumulative total of N1.07 trillion for the full year.
In 2022, the revenue of DisCos reached N842.42 billion, according to the Nigerian Electricity Regulatory Commission (NERC). Information extracted from NERC indicated that the combined revenue collected in that period by all DisCos witnessed a substantial 91 percent growth, rising from N442 billion in 2018.
Analysts say the notable increase in revenue for DisCos can be attributed to advancements in metering technology monitoring, enhanced regulatory oversight, a tariff hike, substantial infrastructural investments, a growing customer base, and improved collection efficiency.
“This development has been facilitated by two key factors,” said Pedro Omontuemhen, Partner, West Market Area, Energy, Utilities & Resources Leader at PricewaterCooper (PwC). “These factors include enhancements in customers’ onboarding processes and the mitigation of commercial and technical losses.”
According to Omontuemhen, the momentum behind this positive trend will only continue if Distribution Companies (DisCos) persist in enhancing power supply and minimizing losses.
“To sustain this progress, DisCos must ensure the comprehensive connection of all customers and the reduction of both technical and commercial losses. Achieving these goals will result in a continual increase in their revenue numbers,” he said.
The Aggregate Technical, Commercial, and Collection (ATC&C) Loss for the year exhibited a notable improvement of 8.9 percent from 2022, averaging 41.4 percent in the initial three quarters of 2023.
ATC&C loss encompasses billing losses incurred by the DisCo due to its inability to bill 100 percent of delivered energy to consumers (technical and commercial losses), along with collection losses arising from the DisCo’s inability to collect 100 percent of the invoices issued to consumers.
The Commission highlighted the significance of ATC&C loss as a critical performance parameter for tariff determination, representing the efficient losses that DisCos are permitted to recover from customers.
For James Akwaji, a professional in the energy industries, the three key factors of an uptick in the estimated number of customers, a rise in the adoption of prepaid meters among customers, and enhanced collection efficiency are driving the revenue increase.
“This resulted in a higher recovery of funds, approaching or matching the amount billed to customers,” Akwaji said.
As of September 30, 2023, the Nigerian Electricity Supply Industry (NESI) has metered 5,707,838 customers out of the registered total of 12,825,005.
Throughout the third quarter of 2023, 148,389 end-user customers were successfully metered. “Ikeja, Abuja, and Ibadan DisCos led in meter installations during this period, accounting for 27.35 percent, 20.78 percent, and 17.53 percent of the total installations, respectively.
“By the end of the third quarter of 2023, the metering rate witnessed a 0.35 percentage point increase from the previous quarter, reaching 44.51 percent.
“Five DisCos demonstrated improvements in the number of meter installations, with Benin and Abuja leading in progress,” NERC said.
However, Yola and Eko experienced the most significant decline in meter installations during the third quarter compared to the second quarter of 2023.
According to NERC, the overall decline in the number of meters installed during this period (-18.04 percent) can be attributed to Meter Assets Providers (MAPs) facing challenges in procuring meters due to a substantial deviation between the macroeconomic indices used to determine allowed prices under MAP and market realities.
Addressing this issue, the Commission took action to ensure fair and reasonable pricing of meters for both MAPs and end-user customers.
The Commission stated, “To ensure the fair and reasonable pricing of meters to both MAPs and end-use customers, the Commission reviewed the prices of MAP meters based on the prevailing economic realities vide the Order NERC/2023/020 effective September 6, 2023.”
Clearly, Nigerian leaders do not see the correlation between power generation and prosperity.
