Friday, March 04, 2022 / 11:52 AM / by FDC Ltd / Header Image Credit: LegitNG

In recent weeks, major cities across the country have witnessed worse-than-usual levels of power cuts and according to a Business Day report, the Minister of Power, Abubakar Aliyu, at a press briefing, said the performance management of the distribution companies (Discos) had been fully transferred to the Nigerian Electricity Regulatory Commission (NERC) from the Bureau for Public Enterprise (BPE) as of January 2022. He also noted that a team of experts led by the Boston Consulting Group (BCG) have been engaged to conduct a diagnostic of the performance of Discos from post-privatisation to December 2021, and based on the results, actions will be taken against underperforming Discos. Recall that the Asset Management Corporation of Nigeria (AMCON) in January took over the control of Ibadan Disco (IBEDC) while UBA took over the majority stake in the Abuja Disco (AEDC) in December 2021. The minister also said plans are in the way to kick off the second phase of the country's mass metering programme, and contracts would be awarded by the end of the first quarter of 2022. 

Though we acknowledge that the challenges in the nation's power sector run across the entire value chain, we believe the distribution companies are the most troubled. In 2019, there were reports of plans by the government to repossess 10 electricity distribution firms as one of the options to rescue the nation's troubled electricity industry. This was expected to cost US$2.4bn. The core investors paid over US$1.3bn for 60% equity in each of the 11 Discos. We believe the advent of covid-19 and the fiscal challenges that came with it stalled such plans. 

Ineffective metering is another major drawback to the success of power sector reforms in Nigeria. While some consumers avoid paying for power consumed through meter bypass, some other consumers are made to pay for what they have not consumed through estimated billing by discos. Discos have been largely unsuccessful with metering their customers. As far as inadequate metering is concerned, Discos, over time, have used this situation to their advantage via estimated billings. 

The Meter Asset Provider (MAP) Regulation, which became effective on April 3, 2018, introduced meter asset providers as a new set of service providers in the Nigerian Electricity Supply Industry. However, the request for payment before the provision and installation of Meters was a disincentive for the mass adoption of prepaid meters despite the known benefits, giving rise to the CBN-sponsored mass metering plan. 

The Federal Government launched the National Mass Metering Programme (NMMP) in 2020, and the CBN, in October 2020, issued the Framework for its financing. Such initiative is geared towards mass metering of Nigerians by providing loan facilities to:

1. the DisCos (for the procurement of meters for its customers), and
2.  the local meter Manufacturers (for the manufacturing and assembling of meters).

The schemes were launched to bridge the metering gap in the industry, with a target of closing the metering gap by 2023. 

While all of these initiatives are useful, we believe the government must apply a holistic approach towards addressing the numerous problems bedeviling such a critical sector.