By Ikenna Omeje
Out of $13.22 million service charges and energy invoices issued to Benin Republic, Niger and Togo for electricity received by Market Operator and the Nigerian Bulk Electricity Trading PLC respectively, both countries only paid $6.66 million in the first quarter of 2020, the Nigerian Electricity Regulatory Commission (NERC) has said.
According to NERC in its first quarter 2020 report released recently, Niger made a payment of N1.6 billion ($5.27 million) as part of its outstanding bills for energy received while Benin Republic paid N0.43 billion ($1.39 million).
The report noted that the special customers — Ajaokuta Steel Company and its environs – did not make any payment in respect of N0.27 billion and N0.05 billion invoices issued by NBET and Market Operator respectively.
“It is noteworthy that the payment cycle for March invoices fell within the period of the outbreak of COVID-19 pandemic and the resultant macroeconomic impact of the policies to curtailing its spread in Nigeria have added to the challenge of low remittance to the market. The severity of the liquidity challenge in NESI (Nigerian Electricity Supply Industry) was reflected in the settlement rates of the service charges and energy invoices issued by MO and NBET respectively to each of the DisCos …, as well as the non-payment by the special and international customers for the services rendered by MO.,” the report said.
It explained: “During the quarter under review, the special customers (Ajaokuta Steel Co. Ltd and its environs) did not make any payment in respect of the N0.27billion and N0.05billion invoices issued by NBET and MO respectively. A total of N4.05billion (US$13.22million) invoices were issued by MO to international customers (i.e., Societe Nigerienne d’electricite – NIGELEC, Societe Beninoise d’Energie Electrique – SBEE and Energie Electrique – SBEE and Compagnie Energie Electrique du Togo – CEET). During the quarter, NIGELEC made a payment of N1.61billion (US$5.27million) as part of its outstanding bills for the energy received from NBET and services rendered by MO. Similarly, SBEE paid N0.43bilion (US$1.39million) in respect of services received from MO.
“It is noteworthy that tariff shortfall (represented by the difference between actual end-user tariffs payable by consumers and the cost-reflective rates approved by NERC) has partly contributed to liquidity challenges being experienced in the industry.”
According to the report, “However, the settlement ratio to the expected MRTs (minimum remittance thresholds), having adjusted for tariff shortfall, as represented indicates that DisCos need to improve on their performance. Whereas DisCos were expected to make a market remittance of 46.09 percent during 2020/Q1, only 32.53 percent settlement rate was achieved within the timeframe provided for market settlement in the Market Rules. Therefore, DisCos’ remittance level, regardless of the prevailing tariff shortfall, was still below the expected MRT.
“Thus, to ensure business continuity and improve sector liquidity, DisCos must continue to improve on effort towards reducing ATC&C losses to levels commensurate with their contractual obligations in the performance agreement. One of the contributory factors to high ATC&C losses, and hence poor liquidity, is non-settlement of energy bills by MDAs across the three tiers of government (i.e. Federal, State and LG). This issue must be urgently addressed as part of the ongoing Federal Government’s efforts towards ensuring financial sustainability of NESI.”
