Asoko Sector Brief – Nigeria Power and Utilities Q2, 2016

To overcome the challenges utilities companies face with payment collection, two of Nigeria’s eleven power distribution companies, the Abuja Electricity Distribution Company and the Port Harcourt Electricity Distribution Company have committed to rolling out over 200,000 electricity meters for retail customers.

The Abuja and Port Harcourt utilities have committed to installing ‘smart’ electricity meters for 100,000 and 110,000 households respectively, spread across a combined total of seven states and the Federal Capital Territory. It is anticipated that the roll out will be complete by the end of 2016, pushed back from its original deadline of Q1 2016. Asoko research indicates that each project is expected to cost between $3.25 million and $3.58 million.

A number of other distribution companies (DISCOs) are in the process of installing new meters, including Jos DISCO, which is currently installing a network of 180,000 units in Plateau, Gombe, Bauchi and Benue states. Eko DISCO is placing another 200,000 meters in households across the southern part of Lagos state and Agbara in Ogun state.

The meter roll out is the result of a recently-signed joint service agreement between the industry regulator, the Nigerian Electricity Regulatory Commission (NERC), and the DISCOs, which compels the companies to meter a majority of their consumers before the year’s end.

Historically, DISCOs have struggled to recover payment from their customers, in part a result of poor usage monitoring. It is hoped that the adoption of ‘smart meters’, which constantly communicate with a central server, will not only assist in enforcing payment, but will also ensure consumers are not over-charged. The meters will also help to stem theft and pirated electricity.

The installation of the meters should help improve the overall health of the power sector. Poor payment recovery has been one of the primary obstacles facing Nigeria’s electricity providers, with limited revenues contributing to a lack of financing for generation, transmission and distribution infrastructure, and limiting the ability of DISCOs to service debt. The Association of Nigerian Electricity Distributors (ANED) estimates the sector faces a funding shortfall of $40 billion in total.

The non-payment is not only a result of poor monitoring and enforcement, but in some cases a protest against poor quality of service by DISCOs. ANED predicts that a transmission load of 160,000MW would be necessary to ensure reliable, nationwide provision of electricity; the peak reached by the Transmission Company of Nigeria, which manages the national grid, is just 5,074MW (achieved in February 2016).

As a result, according to Asoko’s database, of the DISCOs profiled, 60% of them receive less than 500MW from the national grid at its peak transmission. This has required many DISCOs to pursue partnerships with independent electricity generators/transmitters to ensure more reliable distribution of power. The incumbent government hopes to achieve additional transmission of 10,000MW by 2019.

Source: Asokoinsight