Half a decade has passed since Nigeria privatized its power sector. Substantial investments have been directed towards adding power generation capacity and upgrading the network, in efforts to improve the power supply situation in the country. Yet, the ordinary people feel only a marginal improvement, if any. While the distribution companies have introduced some modern systems such as innovative payment portals, pre-payment meters and user-friendly web interfaces, these improvements barely address the fundamental challenges the sector faces: the lack of basic electricity for people to survive and for businesses to flourish.
The underlying problem is the vicious cycle which cannot be ignored, yet little is done to take on the problem head on. There are three elements to this cycle:
The customers – while highly dissatisfied with the power supply and service, they feel cheated and refuse to pay the bills. Many customers, including the wealthy classes, resort to meter bypass and tempering. Most of the pre-paid meters in the country have been bypassed, thus completely undermining the purpose of such infrastructure. When faced with disconnection from supply for non-payment or for the theft of power, customers often express aggression, destruction and violence. The recent attack on Ikeja Electricity’s employee in Lagos, is just one such example.
The power distribution companies – unable to collect the money for supplied electricity, they are unable to invest into the network, improve services or pay the power generators for the allocated energy. Faced with widespread theft of power and faulty meters, pushes the utilities to disregard the meter readings and resort to estimated billing. Due to insufficient customer information, the estimated bills are often either too high or too low, causing customer resistance and loss of revenues, respectively.
The government – only a fraction of government’s electricity consumption is paid for. Even when the federal government allocates the budget to respective entities, those fail to pay the distribution companies. For instance the army, police, hospitals and schools are some of the biggest debtors to the power distribution companies and yet cutting off the electricity supply to such entities for non-payment, is deemed controversial. While some local governments encourage the customers to pay their bills, others fuel the customer groups to protest payments. Even certain regulations such as mandating pre-paid metering, which is not effective in the current reality, or deliberations on criminalizing estimated billing, do more damage than good to the survival of the crumbled electricity sector.
All of the above fuel the spiral of dysfunction: customers don’t pay due to poor service and the utilities cannot improve the service without the money. The government is angry at the distribution companies for not fulfilling their obligations but the government is yet to fulfill its part. The utilities have claims towards both, the customers and the government, yet little discipline is applied to non-payment, theft and rampant corruption in their own business units. Only a small fraction of the collected sums goes to the power generators who in turn cannot pay for gas supply.
This vicious cycle must break. The government is best positioned to start the process. The government's electricity bills can be settled directly by the federal ministries and debts can be offset against the tax bills or NBET payments. Instead of imposing crippling regulations, such as the individual pre-payment metering, perhaps for rural areas community metering would work better in the medium term, allowing customers to reconcile their own bills internally. Supporting the utilities in prosecuting energy theft and vandalism would also go a long way in enforcing the discipline. Utilities, on the other hand, should start limiting the power to non-payers and prioritizing the supply to paying customer groups. Instead of issuing arbitrary estimated bills, it is important they first study and enumerate their customers. Consumers, in turn, need to understand that the future of the nation, its social and economic development, rest on Nigeria’s ability to restore power supply in the country. They should be more efficient in how they consume the available power and must pay the bills in full. Neighbors should discourage each other from power theft because such actions have direct impact on others receiving higher bills to make up the loss.
To break this cycle, a painful process is warranted in the short term. Despite poor service, bills must be paid in full. Despite customer aggression, the utilities need to maintain the momentum. Despite sub-par performance of the privatized utilities, the government must help.
Utility Turnaround has been assisting some of the most distressed utilities globally in addressing their challenges. Now we are proud to be playing an active role in Nigeria’s path to the brighter future.