Nigeria's electricity distribution companies, known as DisCos, have left a significant revenue gap of N128.41 billion in July, according to the Nigerian Electricity Regulatory Commission (NERC). The 11 DisCos received electricity valued at N333.94 billion but only billed customers for N250.79 billion, leaving N83.15 billion unbilled. This cash-flow weakness in the power market threatens the ability of operators to pay for generation, invest in networks, and deliver reliable electricity to consumers.
The sector's performance in July showed that only 61.55 per cent of the value of electricity received was converted into cash collections. NERC reported an aggregate billing efficiency of 75.10 per cent and a collection efficiency of 81.95 per cent, with an overall revenue recovery efficiency of 74.91 per cent. The regulator also noted that the average allowed tariff was N130.15 per kilowatt-hour, compared to an actual average collection of N97.50, leaving a gap of N32.65 per kilowatt-hour.
The performance of DisCos varied sharply across the country, with Eko recording the strongest recovery efficiency at 94.67 per cent, followed by Port Harcourt at 84.95 per cent. In contrast, Kaduna and Jos posted weaker recovery rates of 39.71 per cent and 46.27 per cent, respectively. This disparity highlights the challenges faced by the power sector in ensuring consistent revenue collection.
The collection problem is significant, particularly as the Federal Government focuses on improving supply, metering, and market efficiency rather than immediately increasing electricity tariffs. The consequences of persistent liquidity weakness are broader than unpaid electricity bills, limiting investment in distribution infrastructure and reinforcing dependence on diesel and petrol generators.
NERC's data also point to a second problem: the sector is failing to monetise a substantial portion of the electricity already delivered to DisCos. This means that the challenge is no longer simply generating more power but ensuring that electricity supplied to the market is accurately metered, billed, and paid for.
The latest figures expose the central economic problem facing Nigeria's electricity market. Until the gap between power delivered, electricity billed, and cash collected is substantially narrowed, additional generation capacity alone may not produce a financially sustainable electricity industry or the reliable power needed to lower costs across the wider economy.
The issue has significant implications for consumers and businesses, with higher costs and limited investment in distribution infrastructure. The sector's struggles to convert billed electricity into cash also affect DisCos' ability to settle obligations to the Nigerian Bulk Electricity Trading Plc, generation companies, and other market participants.
Key points
- Nigeria's electricity distribution companies left a N128.41 billion revenue gap in July.
- The sector's revenue recovery efficiency stood at 74.91 per cent in July.
- The average allowed tariff was N130.15 per kilowatt-hour, compared to an actual average collection of N97.50.
