- Nigeria’s power sector remains under financial strain, with MDAs owing over N100 billion in unpaid electricity bills, despite a N15 billion government allocation to address legacy debts.
- DisCos faces pressure to meet NERC’s remittance targets while struggling with estimated billing, leading to widespread dissatisfaction and increasing energy theft.
Nigeria’s power sector continues to face significant financial strain as federal ministries, departments, and agencies (MDAs) grapple with outstanding debts despite the government’s recent allocation of N15 billion to address legacy debt issues. The federal government’s debt to electricity distribution companies (DisCos) remains a key obstacle, exacerbating the financial crisis as generation companies struggle with delayed payments for electricity invoices.
Last year, the government allocated N40 billion to reduce these debts, but this year’s allocation has been reduced by N25 billion, highlighting ongoing fiscal challenges. Meanwhile, subsidy payments for 2024 have surged to about N2.4 trillion, further intensifying the pressure on the power sector.
According to the Nigerian Electricity Regulatory Commission (NERC), the market shortfall for electricity users 2023 amounted to N385.7 billion. Despite efforts to improve bill collection efficiency, the sector still faces significant challenges. In the same report, NERC revealed that DisCos collected N1.07 trillion from customers from a total N1.4 trillion invoice, resulting in a shortfall of over N300 billion.
Government agencies, including military and paramilitary forces, remain the largest defaulters, with the Federal Government and its MDAs owing more than N100 billion in unpaid electricity bills. A notable portion of this debt includes N47.1 billion owed by 86 MDAs to the Abuja Electricity Distribution Company (AEDC). Last year, AEDC issued a 10-day disconnection notice to the agencies, including the Presidential Villa, which reportedly owed N1 billion.
DisCos are under increasing pressure to meet NERC’s minimum remittance order and avoid sanctions. However, many DisCos resort to estimated billing for private consumers instead of recovering debts from government agencies to cover the shortfall. This practice has sparked widespread dissatisfaction and led to increased energy theft, as consumers unable to afford the estimated charges seek alternatives.
NERC’s 2023 report revealed that estimated billing resulted in overbilling customers by N105 billion, prompting the regulator to impose an N10.5 billion fine on the defaulting DisCos. The inefficiencies in revenue collection have contributed to financial difficulties within the power value chain, affecting payments to gas suppliers and generation companies.
Stakeholders have underscored the need for improved revenue collection mechanisms to sustain the power sector. Legal practitioner Madaki Ameh warned that the continued failure to settle electricity bills undermines sector progress despite privatization and the introduction of prepaid meters. PwC’s Habeeb Jaiyeola emphasized the importance of expanding prepaid meter deployment to enhance revenue collection and minimize disputes, urging greater collaboration among stakeholders to ensure the long-term sustainability of Nigeria’s power sector.