In November 2013 when the Nigeria power sector was partially privatized, one of the key objectives was to ensure improved efficiency in the system and as well attract investment alongside better service delivery.
However, after a decade of experimentation, the sector remains a concern to all Nigerians as no remarkable progress can be said to have been made so far.
Unfortunately available data shows that the electricity sector is weighed down by a culmination of huge debt from the Federal Government, consumers and utility companies.
The challenge posed by the debt factor in the sector was recently echoed when operators in the generating sub-sector under the umbrella of the electricity generating companies of Nigeria (GenCos) threatened to close shops due to an outstanding debt obligation of N4 trillion owed by the Federal Government.
Chairman BOT Power Generation Companies, Col Sani Bello (rtd), who raised the alarm over the issue, also emphasized how the industry has failed to grow as it becomes nearly impossible to invest fresh funds aware of the risk of retrieving such in the face of the current indebtedness.
Elaborating the situation, GenCos’ owners in a statement said they have continued to bear the brunt of the liquidity crisis in the Nigerian Electric Supply Industry but stressed that the debts which are unfortunately owed by the government is creating a crisis for the general energy market.
They noted that the industry currently does not have a clear financing plan, lacks firm contractual structure for them to recoup their investment, even as the market currently lacks securitisation, stressing that these factors are hampering future planning.
“According to NERC’s Factsheet for February 2025, the 12 DisCos spread across the country recovered N191.75 billion out of the N245.93 billion total billings for the month”
Highlighting the implications of the situation to the industry, the BOT chairman said, “Against the backdrop of the many challenges facing the power sector in Nigeria, the crisis from cash liquidity are on the top burner and have reduced GenCos’ ability to continue to perform their obligations, thereby threatening to completely undermine the electricity value chain.
“The GenCos’ expectations of being settled through external support, such as the World Bank PSRO, have also been dampened due to other market participants’ inability to meet their respective Distribution Linked Indicators (DLIs) as enshrined in the Power Sector Recovery Programme (PSRP).”
Explaining how the debts was accumulated, Col. Bello (rtd) said bills collection by the group dropped to below 30% in 2024, adding that 2025 is not any better, a situation which have affected GenCos’ ability to meet financial obligations severely, even as high corporate income tax, concession fees, royalty charges, and new FRC compliance obligations are further straining their revenue.
“GenCos are currently owed about N4 trillion (N2 trillion for 2024 and N1.9 trillion in legacy debts). No possible solutions, including cash payments, financial instruments, and debt swaps are in sight. The 2025 government budget allocates only N900bn, raising concerns about its adequacy to cover arrears and future payments.”
They, therefore, demanded an immediate implementation of payment plans to settle all outstanding GenCo invoices, reprioritization of payments under the waterfall arrangement to give full priority to a 100 percent payment of GenCos’ invoices as at when due and a clear financing plan to backstop the exposures in the NERC’s Supplementary Order to the MYTO and the DRO 2024.
Cycle of corruption and other debtors
The burden bedeviling the sector does not emanate from the Federal Government only, the GenCos are also losing about 35 percent of revenue from electricity distributed (DisCos) due to their customers from Aggregate Technical and Commercial losses (AT&C).
For instance, latest data released by the industry regulator, the Nigerian Electricity Regulatory Commission, revealed that electricity consumers across the country failed to pay about 22.1 percent of the total value of power consumed in February.
The figure translates to N54.18 billion loss to the industry via DisCos in a single month.
According to NERC’s Factsheet for February 2025, the 12 DisCos spread across the country recovered N191.75 billion out of the N245.93 billion total billings for the month.
This represents 77.9 percent collection efficiency and a 6.56 percent increase compared to January 2025.
NERC also disclosed that 2,583.19 gigawatt-hours was the total energy received in February, while 2,137 GWh was the total energy billed. This represents a billing efficiency of 82.73 percent and an increase of 1.81 percent month-on-month.
Similarly, the allowed average tariff was N116.18 per kilowatt-hour, but the DisCos were able to collect an average of N88.21 per kWh, being 75.9 percent recovery efficiency. It is 10.5 percent higher than that of January.
A breakdown of the analysis showed that Aba Power has the highest allowed tariff of N200.88 per kWh, but its actual average collection for the month was N127.58/kWh.
The utility company had N6.44 billion in total billings. However, it was able to collect N3.47 billion, representing 53.90 percent collection efficiency, the lowest for the month.
It was noted that Abuja DisCo had the highest collection efficiency of 89.03 percent, having recovered N31.7 billion of the N35.67 billion billed in February.
Eko DisCo followed Abuja with a collection efficiency of 88.76 percent. EKEDC recovered N36.6 billion of the N41.24 billion billed.
Similarly, Enugu Disco had total billings of N17.95 billion but collected N15.88bn from its customers, representing 88.47 per cent collection efficiency.
Ibadan DisCo, operating in seven states, billed its customers N26.88 billion and collected N19.28 billion, which was 71.72 percent. Ikeja had N41.18 billings but recovered N33.35bn from customers, having an 81 percent collection rate.
Speaking on the issue, an energy analyst, Henry Adigun said commercial losses and low recovery rates remain a major concern to investors in the power sector.
“The inability of the utility companies and the government to meter all customers has also been blamed for the low cost recovery.
“With over seven million unmetered customers, there are usually disputes between a customer and the DisCo over the actual cost of consumption, as estimated billings have failed to give customers the real cost of electricity consumed at a given time,” Adigun said.
He noted that the sector may remain handicapped until the government and consumers are prepared to pay for electricity.
Adigun added that the underpayment and debt burden is responsible for gas power generating plants that made up 85 percent of the Nigerian electricity generation mix to harness its full potential.
According to Adigun, hydropower plants that make up the 25 percent of the mix are not spared, as the illiquidity in the sector has made it difficult for the players to raise money from international and domestic investors to prop up aging infrastructure for the country to meet up its energy needs.
The expert warned that if the GenCos should go ahead with shutting down, the economy would be very seriously impacted negatively.
“You know the economy revolves around energy, biblically the first thing God called for at creation was light. That gives an insight into the priority even divinity placed on energy. History has shown that electricity leads to development in every aspect of human endeavour. Nigeria must tackle its energy problems if it wants to make progress,” he stated.
Government’s stands
The Minister of Power, Adebayo Adelabu, has in his own capacity promised severally to settle the debt portfolio accruing to government, but that as usual remains a promise until it is perfected.
His Special Adviser, Strategic Communications and Media Relations, Bolaji Tunji, recently said the government is aware of rising debt but insisted that it emanated from the government’s commitment to provision of subsidy.
“Parts of the debts are legacy debts, which were on the ground before the Minister of Power assumed office. The Minister of Power has repeatedly harped on this, knowing the implication of such debts to the operations of the various power sector stakeholders, especially the GenCos. The Minister of Power is very much concerned. The issue is being discussed with the Ministry of Finance, making a case for how the debt must be paid. We expect the Ministry of Finance to take action on this soon,” Tunji stated.
Adelabu has severally insisted that the government cannot continue to sustain the subsidy regime as currently obtained in the sector.
The idea seems to have been accepted by the President Bola Tinubu’s administration as top officials of government outside the sector have stated advocacy in this regard.
The Senior Special Adviser to President Tinubu on digital media, O’tega Ogra, took to his official X handle last week to justify the latest move by the government to further increase electricity rates.
O’tega’s advocacy is coming on the heels of recent claims by government and multinational agencies that the pricing of electricity remains the bane of absence of fresh investment into the sector.
Analysing developments in the sector on X, O’tega wrote, “If you are wondering why your electricity bill has gone up and what has changed, these may be the answers for you. NERC, the electricity regulator in Nigeria, has effected a minor restructuring of electricity tariffs in April 2024. This change aims to reduce the huge amount of money the government spends on subsidizing electricity which was set to hit N3.2 trillion this year alone (more than the cumulative spent from 2015 to 2023 & about 12% of the annual national budget) and to improve the quality of electricity service.
“Under the new tariff structure, only 15% of customers (called Band A) will pay close to the actual cost of producing electricity. This will be based on how much electricity they receive (20-24hours) and how reliably they receive it. The remaining 85% of customers including the most vulnerable (Bands B-E) will continue to receive government subsidies, so they will not see any change in their bills. I am aware some discos have erroneously charged some users who are not part of the revised Band A customers (see NERC website for details) the new rates. All affected DisCos have been ordered to effect a refund of electricity credits to those affected by the erroneous charges.
“Band A customers are those who receive at least 20 hours of electricity per day from their electricity distribution company (DisCo). They were selected based on the quality of service they receive, and also, some feeders (lines) that were not providing the minimum required service have been removed from the Band A category.
“If you are a Band A customer, you can find out by visiting the Nigerian Electricity Regulatory Commission (NERC) website from tomorrow and entering your account number.”
Choice of alternative power source
To further justify the move, O’tega wrote, “You might also be wondering… does this make grid electricity expensive? Actually, compared to diesel or petrol generators, grid power in Nigeria is cheaper. While grid power is charged at N225/kWh for Band A customers, diesel and petrol generator costs are much higher, at N500/kWh and N417/kWh, respectively. It’s worth noting that the Band A tariff has only increased from N67 to N225, which is a 235% increase. However, even with this new price, it’s still a better deal compared to alternative sources.
“For instance, let’s say you used to receive 10 hours of grid power per day, and now you use a diesel generator for 14 hours per day with a consumption rate of 10kw daily. In this case, your cost of electricity would be 10x225x10 = N22, 500 (grid) compared to 14x500x10 (diesel generator) = N70, 000 per day (diesel). This makes a total of N92, 500 per day.”
“Analysts have also noted that the problem with the sector is more insincerity on the part of operators which gives rise to absence of consumer trust and confidence in the ability to deliver”
He noted that, “With the new tariff structure and monitoring mechanisms to guarantee the supply of at least 20 hours of grid power daily, a Band A customer receiving 20 hours daily and using only 4 hours of diesel generated power will be spending 20x225x10 = N45, 000 (grid) and 4x500x10 = N20, 000 (diesel) making a total of N65, 000 for a consumer in band A will pay under the new tariff. This means that with more grid power, even Band A customers will spend less on power under the new tariff.
“If you are a Band A customer and you don’t receive at least 20 hours of electricity per day for two consecutive days, your DisCo will have to issue a public notice and a remediation plan according to NERC’s order. If this continues for seven consecutive days, your feeder will be automatically downgraded, and your tariff will be reduced. If your feeder doesn’t receive 20 hours of electricity per day on average over a month, you will receive free energy units to compensate for the shortfall. If the DisCo’s inability to maintain the service is expected for a month, NERC is now empowered under the. New
“For customers in Bands B-E, their tariffs will remain frozen at the rates approved in December 2022, and the government will continue to subsidize the difference between these rates and the actual cost of production.
“Before this tariff restructuring, the government was spending a huge amount of money on electricity subsidies.
“With the new tariffs, the government will still provide subsidies, but at a much lower amount than before. This is because the government wants to reduce the overall amount it spends on subsidies and to direct the subsidies to those who need them the most.
“I hope this helps you understand why your electricity bill has changed, and what you can do if you are affected by the new tariff structure.”
The presidential aide commended the team at NERC for what he called “their exceptional handling of the issue.” Submitting that, “They have been proactive in working with stakeholders at all levels, ensuring a seamless transition and providing transparent statements. It is not often that you see such a high level of professionalism and transparency from government agencies.”
By implication, Nigerians need to come to the reality of the importance of electricity and be prepared to pay the right price for it.
However, some analysts have also noted that the problem with the sector is more insincerity on the part of operators which gives rise to absence of consumer trust and confidence in the ability to deliver.
A case in point is the fact that over seven million electricity customers remain unmetered despite several efforts by the government to do so.
The DisCos which normally should provide the required infrastructure such as meters, prefer to issue estimated bills, an issue that usually results in disputes between a customer and the DisCos over the actual cost of consumption, as estimated billings have failed to give customers the real cost of electricity consumed at a given time.
Recently, NERC sanctioned eight DisCos for overbilling their customers. But this too has not improved the situation as DisCos too point to electricity thrift through meter bypass as a challenge for them.