Tariff Hike Boosts Discos’ Revenue To N887bn

Nigeria’s electricity distribution companies (Discos) generated a total revenue of N887.86bn in the first seven months of 2024, following a tariff increase for Band A customers and improved revenue collection.

Despite ongoing complaints about poor power supply and high tariffs, the 11 Discos recorded a 46.96 percent increase in revenue compared to N604.15bn collected during the same period in 2023, from January to July.

This increase comes as stakeholders in the power sector reduced their borrowings from commercial banks by N28.82bn.

According to data released by the Nigerian Electricity Regulatory Commission (NERC), the Discos billed a total of N1.114tn during the review period but collected N887.86bn, achieving 79.7 percent revenue collection efficiency. In the corresponding period of 2023, they billed N797.18bn and collected N604.15bn.

After a two-year tariff freeze, the Federal Government increased electricity rates in April, raising the rate per kilowatt-hour from N68 to N225 for Band A customers, who reportedly receive 20 hours of daily power supply. Following public outcry, NERC later reduced the rate by 8.1 percent to N206.8/kWh for Band A customers, but many Nigerians continue to struggle with high energy costs.

Last week, Minister of Power, Adebayo Adelabu, hinted at a possible reduction in electricity prices in the coming months as efforts to increase power generation and distribution intensify. However, many Nigerians remain skeptical, as communities continue to appeal for removal from the highest-paying tariff categories, citing the negative impact on living costs and economic growth.

A breakdown of monthly revenue showed that N95bn was generated in January, N97bn in February, N100.44bn in March, N142.92bn in April, N139.23bn in May, N150.86bn in June, and N162.14bn in July. Comparing January’s revenue with May’s, there was an increase of N102.11bn, representing a 107.48 percent rise.

With this revenue collection pattern, the Discos have already surpassed their earnings for the entirety of 2020 and are on track to exceed records set in 2021, 2022, and 2023 by the end of 2024. According to the National Bureau of Statistics, revenue for the Discos has been on an upward trajectory: N526.8bn in 2020, N761.2bn in 2021, N828.1bn in 2022, and N1.1tn in 2023.

As revenue continues to rise, Discos are expected to reinvest a portion into improving infrastructure, an area where they have previously been criticized for underinvestment. Nigeria’s population of over 200 million people largely relies on self-generated power for homes and businesses, rather than the national grid.

In May, the government secured a $500m loan from the World Bank to support Discos in addressing critical distribution infrastructure issues, improving power supply reliability, and enhancing financial sustainability in the power sector.

Meanwhile, power sector players have reduced their commercial bank borrowings by N28.82bn, in response to increased debt servicing costs driven by high-interest rates. Central Bank data showed loans to the power sector decreased from N1.12tn in January 2024 to N1.08tn in June.