IN a bid to address the persistent power shortages plaguing Nigeria, the nation’s electricity regulator, the Nigerian Electricity Regulatory Commission (NERC), has issued a directive to the grid operator to curtail supplies to customers overseas, prioritising domestic needs.
NERC’s directive, issued last Friday, aims to alleviate the hardships faced by Nigerians due to erratic power supply, exacerbated by the grid operator’s prioritisation of bilateral contracts with international buyers over domestic demand.
According to NERC, the current approach has resulted in significant challenges for Nigerians, as supply to international customers, including neighbouring African countries, takes precedence over domestic consumers. To rectify this, NERC has imposed a 6 percent cap on total available grid generation for international off-takers for the next six months, effective from May 1.
Nigerian power firms have longstanding contracts with neighbouring African nations to export energy, bolstering revenue from sub-economic tariffs. However, delays in payment from these international buyers have strained the finances of Nigerian power companies.
Analysts warn that the cap on overseas sales could introduce uncertainty into the sector. Mikolaj Judson, an analyst at Control Risks, cautioned, ‘Operationally, it will require power generation companies to adjust production and distribution, and potentially modify contracts on short notice.’
Moreover, the decision is expected to compound financial challenges by reducing revenue from overseas customers, exacerbating the burden on power distribution firms already grappling with substantial debts to power generation companies.
NERC’s move comes amid escalating power shortages in Nigeria, with electricity supply from the national grid hovering below 3,000 megawatts for weeks. However, since the directive, grid service data indicates a rise above 4,700 megawatts, signalling a potential improvement in domestic supply.
The regulator also highlighted lax terms in current international and bilateral contracts, with off-takers frequently exceeding contracted levels during peak operations without facing penalties. Last month, NERC raised tariffs for a segment of customers, aiming to provide more supply, but power companies have struggled to meet contracted hours.
Furthermore, NERC’s decision may stem from international customers’ failure to settle debts promptly. A report from the last quarter of 2023 revealed that international customers collectively owed Nigerian power companies a staggering $12.02 million in unpaid debt for services rendered, underscoring the financial strain on the sector.
