During the first quarter of 2024, Nigeria faced financial pressure as international customers refused to settle about $14.19 million in Electricity bills. According to a report from the Nigeria Electricity Regulatory Commission (NERC), all international clients failed to make payments in this timeframe. This has resulted in significant debt accumulation by countries like Niger, Benin Republic, and Togo, with Nigeria’s Market Operator (MO). The increasing financial tension underscores the nation’s difficulties in overseeing its power industry and upholding regional energy partnerships.
Experts in the electricity sector have highlighted the ongoing concern of international clients needing to fulfil their financial commitments, emphasising the urgent need for the country to take action in order to prevent the further expenditure of its funds. The NERC report further shows a comparable trend across the local customers. Domestic customers engaged in bilateral agreements were invoiced a collective amount of ₦1.86 billion during the specified period but failed to meet their payment obligations.
MO reports reveal local customers owe ₦1,860.11m in unpaid energy bills.
The 2024/Q1 report from the MO indicates that no payments were received from any of the four international bilateral customers for the $14.19 million invoice for services provided during that period. Similarly, the bilateral customer in the country has yet to pay the total invoice amount of ₦1,860.11 million that the MO sent them for services provided in the first quarter of 2024. Despite noting some progress in clearing previous debts, the report stated that two international customers could settle about $5.19 million, and eight domestic customers paid about #505.71 million from past quarters.
While this is a positive development, the ongoing challenges of meeting current payment obligations further increased the nation’s financial situation. In Q1 2024, the country’s Distribution Companies (DisCos) faced an extensive bill of ₦114.12 billion for services provided before distribution. This includes ₦65.96 billion for Power Generation expenses and ₦48.16 billion for transmission and administrative duties on the home front. Although facing a major billing issue, DisCos successfully transferred ₦110.62 billion, resulting in a deficit of ₦3.50 billion.
NERC advised govt to prioritise local distributors over foreign clients.
However, their impressive remittance rate of 96.93 percent is a significant move from the 69.88 percent reported in the last quarter, showcasing a more focused approach to resolving financial challenges within the industry. Outstanding international electricity debts remain a significant concern. As of 2023, the federal government disclosed that international customers owed $51.26 million for electricity supplied from the country. In May 2024, the government restricted the amount of electricity exported to foreign customers, rounding it off at 6 percent of the total grid generation per hour.
In contrast, the NERC has spoken out against favouring international customers over local distribution companies during grid imbalances. Criticising this method as inefficient and unjust, the commission has called for a reassessment of priorities; as a result of a new directive, Electricity Generation companies are now obligated to limit international off-takers to no more than 10 percent of their generation capacity within the next six months. The nation faces challenges in its electricity sector due to outstanding debts from international sources and within the country. These debts can potentially destabilise the sector and worsen the national financial problems.
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On the other hand, the nation’s future Economic Stability is at risk due to the ongoing electricity debt crisis, which poses a significant threat to foreign Investment and public finances. The accumulation of outstanding invoices from clients at home and abroad can reduce investor trust and the national appeal of foreign investment. The financial burden can worsen the nation’s budget shortfall, shifting funds away from essential Infrastructure and social programs. Moreover, the increasing debt could weaken its reputation in the global market, resulting in elevated interest rates for borrowing and limited availability of external financial assistance.