In a directive issued last Friday, the Nigerian Electricity Regulatory Commission (NERC) said the grid operator’s current approach in managing supply has caused significant hardship for Nigerians because supply under bilateral contracts, including export to international customers, takes priority over supply to domestic customers.
The regulator said it was placing a cap of 6% on the total available grid generation to international off-takers for the next six months, effective from May 1.
Nigerian power firms have contracts with neighbouring African countries to deliver energy, which gives them foreign currency to support revenue from sub-economic tariffs. However, these companies have not always paid their bills on time.
Power cuts are common in Nigeria due to a shortage of electricity but they have become worse recently. Power companies recently raised tariffs for some domestic customers who are supposed to get more power daily, or 20 hours a day, but the power companies are unable to meet the supply.
As well as having contracts with countries such as Niger, Togo and Benin, Nigerian power firms have bilateral contracts with big users at home including industries and government departments that get priority supply over regular customers.
Analysts said the cap on overseas sales could create uncertainty in the sector. “Operationally, it will require power generation companies to adjust production and distribution, and potentially modify contracts on short notice,” said Mikolaj Judson, an analyst at global risk consultancy Control Risks.
He also said it will likely increase financial challenges by reducing revenue from overseas customers and will require power distribution firms, many of which already owe sizeable debts to power generation companies, to step up paying back their debts.
Electricity supply from the national grid had hovered below 3,000 megawatts for several weeks but has risen above 4,700 megawatts since Saturday after the directive, grid service data showed. Usually, local customers get less than 4000MW on normal days.
The regulator said current international and bilateral contracts have lax terms and off-takers frequently exceeded their contracted levels during peak operations at the expense of other grid users. Penalties for violating grid regulations are also not enforced, it said.
Last month, NERC raised tariffs by 230% for 15% of customers who are supposed to get more supply, but the power companies have been unable to meet the contracted 20 hours.
The regulator’s decision to cut back supply to international customers may have also been prompted by those customers’ inability to settle debts on time.
In a report issued in the last quarter of 2023, NERC said international customers owed Nigerian power companies a combined $12.02 million in unpaid debt for services rendered.
*Isaac Anyaogu; editing: Susan Fenton – Reuters
