System inefficiencies, particularly significant Aggregate, Technical and Commercial (ATC&C) losses, outdated infrastructure, poor customer relationship management, and a history of lower cost-reflective prices have hampered the sector’s growth eight years after it was privatized in Nigeria.
According to a new analysis featured in Nextier’s quarterly report on the Nigerian Electricity Supply Industry, this is the case.
The distribution companies (DisCos) were blamed in the research, which was published in the EmPower journal, for the difficulties threatening the profitability and advancement of Nigeria’s electrical business.
The paper highlighted that the Nigerian power supply business has a funding difficulty, adding that the capital structure of purchase, debt, and expansion financing created a challenge for infrastructure assets run under a regulated utility, and offered remedies.
“Raising the requisite long-term patient capital linked to long-lived infrastructure assets has proven difficult for the sector.” As a result, the enterprises have found it difficult to service their debts, meet their rehabilitation and expansion promises, enhance efficiencies, and pay their upstream payments to other market participants and administrative agencies all at the same time.”
It criticized the Multi-Year Tariff Order (MYTO), a tool for regulating prices and rewarding industry operators’ performance. revealing that, while bi-annual minor reviews allow for changes in the parameters that determine rates, actual generation is constrained by factors such as gas availability, water management, and transmission infrastructure capacities.
According to the paper, while some upstream expenses are avoided due to the lack of energy supply, system limits nonetheless result in revenue and profit losses.
“Ideally, a DisCo’s operational planning and budgeting should include enough capital and operating expenditure (CapEx and OpEx) to grow, upgrade, reinforce, and maintain existing equipment.”
“These efforts are critical for distribution organizations to meet the changing and expanding demand.” Unfortunately, most have been unable to invest in the infrastructure required to make meaningful and permanent improvements due to a lack of funding and excessive collection losses. As a result, inadequate operational planning and implementation compound ATC&C losses and customer dissatisfaction,” the company stated.
It asked for better performance and customer service, especially now that the federal government has made steps to close old tariff gaps, allowing enterprises to raise the funds they need to upgrade infrastructure and performance.
According to the report, after considerable changes in industry characteristics, the implementation of CapEx expansions, which were accommodated by the Performance Improvement Plans (PIPs) in the MYTO following its extraordinary assessment, required urgent evaluations to ensure industry viability.
According to the research, inconsistent data availability and quality will impede advancements in the electrical industry as well as the regulator’s ability to monitor performance and compliance.
“As a result, it is critical that NERC plans and implements a coordinated effort to guarantee that information systems are connected to each DisCo so that real-time data on DisCo performance may be received.”
“If the NESI is to reach its full potential, it will need to take a holistic approach to addressing the sector’s difficulties.” Furthermore, resolving the DisCos’ issues will aid in the creation of a more competitive electrical market,” it stated.
