The collection by electricity distribution companies will drop this year on the back of the COVID-19 pandemic, a new report by Agusto & Co has said.
The credit rating agency said since the privatisation of the power sector in 2013, the sector remained constrained by insufficient revenues, weak cash flows, high leverage and low liquidity due largely to unreflective tariffs and low generating capacity.
It noted that the Nigerian government’s financial support provided through energy programmes of the Central Bank of Nigeria was estimated at N1.1tn as at December 2018.
The report said, “While electricity demand is estimated at 25,790 megawatts, the highest power generation has stagnated at about 5,375MW. Unreflective tariffs also impede the ability of the industry operators to generate sufficient cash flows and heighten the liquidity challenges in industry.
“As a result, the Nigerian Electricity Regulatory Commission has introduced several policies to curb some of these fundamental limitations such as the Meter Asset Provider regulation, which is a means to liberalise the distribution market while resolving the challenges surrounding estimated billing and collections.”
The agency, however, noted that while the number of customers was growing at an average rate of 75,000 new customers every month, metering penetration had decreased from about 45.3 per cent in January 2017 to 40.6 per cent in December 2019.
It said, “Inadequate metering and limited technology in remote meter monitoring continue to contribute to the Discos’ high loss levels.
“Agusto & Co expects a decline in collections in year 2020 given the significant slowdown in the economy following the outbreak of the coronavirus pandemic with the attendant lockdown order imposed by the Federal Government on economic activities in the first half of 2020.
“Our pessimism for Discos’ collections is based on several factors including the ‘no disconnection’ measure implemented by the Discos during the COVID-19 lockdown period. We believe that the ‘no disconnection’ stance will affect internally generated revenues such as disconnection and reconnection fees.”