On July 12, 2024, the Nigerian Electricity Regulatory Commission (NERC) concluded its regulatory intervention in Kaduna Electric (KE). The Special Board, led by Rahila Thomas, the first female chairperson of a Nigerian Electricity Distribution Company, handed over the reins to ASI Nigeria Ltd, with Aminu Abubakar Suleiman stepping in as the new chairman.
Over six months, the Special Board made significant strides in addressing the myriad challenges facing Kaduna Electric, setting a precedent for other distribution companies in Nigeria.
Navigating challenges
When the Special Board assumed control in January 2024, the company faced a complex organizational structure, low employee morale, and poor compliance with regulatory, health, safety, and environmental (HSE) standards. Critical issues included zero 33kV feeder metering, which indicated poor energy accounting, and alarming Aggregate Technical, Commercial, and Collection (ATC&C) losses of 71%.
Additionally, widespread non-compliance with the government’s cashless policy facilitated pilfering and resulted in monthly market shortfalls of ₦2.9 billion. The high cost of revenue collection, standing at 7.5%, and numerous material court cases claiming over ₦150 million against Kaduna Electric compounded the challenges.
Premium customers had moved off KE’s network, equivalent to a loss of ₦1.5 billion per month, and state governments were either not paying or making minimal payments. The Standard Transfer Specification (STS) migration of electricity meters was at a mere 5%, and the company grappled with severe environmental and social issues, including extreme insecurity in some locations and a very poor public image.
Developing a sustainability plan
To tackle these challenges, the Board and Management Team formulated a comprehensive sustainability plan, implemented between January and June 2024. This plan brought about significant improvements compared to the second half of 2023.
One of the most notable achievements was reducing ATC&C losses from 71% to 64%, a 7% decrease that underscored the Board’s commitment to enhancing operational efficiency.
Financial and operational improvements
The sustainability plan also led to notable improvements in billing and collection efficiency. Average billing efficiency increased from 51% to 56%, while collection efficiency rose from 61% to 64%.
These improvements translate into higher revenue recovery per unit of electricity sold, which jumped from ₦17.19/kWh to ₦24.67/kWh.
The market remittance obligation increased substantially from 13% to 46%, a critical factor initially triggering the regulatory intervention. By May 2024, KE’s revenue collection had reached an unprecedented ₦5 billion, the first since the company was privatized in 2014.
This milestone reflected the effectiveness of the Board’s financial recovery strategies. The gross profit margin improved dramatically, shifting from a negative 163% to a positive 3%.
The current ratio, which indicates the company’s ability to settle short-term obligations, improved by 122%, while the cash ratio soared by 1,483%. These financial metrics demonstrated KE’s enhanced liquidity position, which had previously hindered its operations, causing delays in salary payments and other critical expenditures.
The opening cash bank balance in January 2024 was ₦40.9 million. By the end of the Special Board’s tenure, this figure had surged to over ₦1.5 billion, underscoring the success of the financial recovery and stability measures implemented during the six months.
Close-up shot of achievements and future implications
During its six-month oversight, the Special Board achieved several milestones:
- Reduction in ATC&C losses: From 71% to 64%
- Record revenue collection: Reaching ₦5 billion in May 2024
- Improved billing efficiency: From 51% to 56%
- Enhanced collection efficiency: From 61% to 64%
- Increased market remittance: From 13% to 46%
- Metering gap closure: By 7,096 meters, achieving 2% growth
These accomplishments indicate a successful turnaround and provide a blueprint for other distribution companies in Nigeria. The financial stability and operational efficiency improvements highlight the impact of strategic leadership and targeted interventions.
Kaduna Electric’s experience under the Special Board’s leadership illustrates the importance of robust governance and strategic planning in the energy sector. Distribution companies across Nigeria face similar challenges, including high ATC&C losses, inadequate metering, and financial instability.
The success of KE’s turnaround demonstrates that these challenges can be effectively addressed through comprehensive sustainability plans, regulatory compliance, and improved operational efficiencies. As ASI Nigeria Ltd takes over, the onus is on them to build on these achievements and continue driving improvements.
The lessons learned from KE’s experience should guide other distribution companies, highlighting the need for better performance and sustained efforts to enhance Nigeria’s electricity distribution network.