Electricity Regulator May Take Over DisCos Over Liquidity Crises

• As the liquidity situation worsens, more energy distribution companies (DisCos) could face regulatory takeover
• DisCos are at risk of filing for bankruptcy due to their inability to pay their debts, according to an inquiry
• The primary cause of the problem is their inability to accurately estimate and collect income

Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

An intensifying liquidity crisis puts more electricity distribution firms (DisCos) in danger of being taken over by regulators.

A BusinessDay investigation revealed that DisCos are in danger of going bankrupt because they are unable to pay their debts, operating expenses, and revenue collections.

Their incapacity to precisely measure and collect income is the main source of the issue. Millions of consumers continue to get projected bills, which causes general discontent and hesitancy to pay.

DisCos revenue collection low

According to a fact sheet published by the Nigerian Energy Regulatory Commission (NERC), DisCos only collected N177.96 billion of the N238.21 billion they billed customers for energy used in December 2024. With a collection effectiveness of only 74.71%, a significant N60.25 billion gap remained uncollected.

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The data also demonstrated how different each DisCo's performance is. Notably, several DisCos reported collection efficiencies that were lower than the national average, pointing to serious difficulties in collecting taxes.

“This level of revenue loss is unsustainable,” stated Aisha Mohammed, an energy analyst at the Lagos-based Centre for Development Studies. “The DisCos need to significantly improve their collection efficiency to ensure the financial viability of the power sector.”

According to the NERC, among other issues, consumers' unwillingness to pay bills on time, dissatisfactory DisCo services, and insufficient customer metering are the main causes of the notable under-recovery of the invoices sent to clients by DisCos.

Experts react to findings on DisCos

Speaking to BusinessDay on the dearth of investment in the industry, particularly concerning the value chain of electricity distribution, Lanre Elatuyi, a power sector expert based in Abuja, stated that DisCos are unable to obtain long-term financing due to their continued unbankability.

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Elatuyi claimed that the power distribution firms' income base has continued to underperform, which is a significant deterrent to luring capital.

“Many of them are indebted to banks and some are being taken over by the banks. The issue is that many of the private owners do not have enough personal equity to invest even from the beginning.

“So, they do not have enough money to spend on capital expenditure. And if a businessman does not have equity, it is often difficult to attract capital from investors,” he said.

Elatuyi lamented that investors find it challenging to receive consistent returns on their investments due to the current market conditions.

He said that the market is not set up to draw in capital.

Adetayo Adegbemle, executive director of PowerUp Nigeria, also told BusinessDay that the government has to restructure the industry, pointing to regulatory shortcomings, inconsistent policies, and low equity from DisCos as the main problems that need to be resolved.

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He claims that a large number of the distribution companies' original investors have sold out, leaving the businesses to new owners.

“We have heard stories of people, who are not financially fit, invest in this business from the beginning because they thought it was a channel for quick cash, but it is obvious that many of them are out of the business now.

“Unless we address the issues of regulatory flaws and policy inconsistency, we may continue facing these issues in the sector. We need to approach the power sector as the bedrock of the economy,” he said.

DisCo bars electricity customers from recharging old metres

Legit.ng earlier reported that as part of the Federal Government Metre Acquisition Fund (MAF) program, Ikeja Electric declared that it would no longer support the Unister card metre and other outdated card metres.

In a public notice published on Sunday, February 2, 2025, the company informed its consumers that the Unistar card meter and other obsolete meters might no longer be supported by its technology.

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The power business claims that as part of the Federal Government/NERC MAF effort, all qualified Band A consumers would receive a free metre replacement.

Proofreading by James Ojo, copy editor at Legit.ng.

Source: Legit.ng