Can better regulation improve the Nigerian power sector?

Question: Can better regulation improve Nigeria's power sector?

My answer: Is the problem really one of regulation or a lack of proven investment opportunities in widespread electricity distribution in Nigeria? Running a DISCO (distribution company) in Nigeria does not add any real value if you do the regression analysis.

Why? The top energy consumers in Nigeria (Dangote Cement, BUA Cement, etc.) are not connected to the national grid. These large industrial companies generate more than 30% of sales. The second level – the top commercials – has found solutions for itself. They take another 20% off. This means that every DISCO in its area of ​​responsibility loses potential revenue of at least 40%!

The rest – commercial and private customers in the lower price range – have hardly any means to pay, which makes debt collection extremely difficult. The measurement is debatable, but the root cause is more than that.

So if you look at the opportunities, today more than 90% of the profits in the power sector are captured by the generation. So Transcorp Power, Geregu Power etc are better companies because they have a great customer – the Nigerian government through NBET who buys in bulk. These companies are listed companies worth trillions of naira. You get the idea: when there is clarity about customers, investors will come to invest.

My point: you can regulate all you want, but it's about economics and DISCOs will struggle in Nigeria for decades! Nigeria should not expect the DISCOs to find these resources because those who are expected to give them the funds do not see the paying customers, especially given that the interest rate does not truly reflect. I mean, have the tariffs been adjusted to the new USD exchange rate and fuel prices as these vectors actually impact the power sector?

This is why more than 80% of DISCOs in Nigeria are either bankrupt, already taken over by banks or simply disappearing. Electricity distribution is a catalyst for commerce and governments must do this until we have companies with greater resources to run it.

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