Why Nigeria Is Experiencing Improved Supply of Electricity

Nigerians have been experiencing improved power supply in recent weeks as buttressed by data from the Transmission Company of Nigeria (TCN).

The daily tracker of Electricity generation in Nigeria shows supply peaked at a record high of 5,043 megawatts (MW) on Thursday, 1st September 2022, an 8.1% increase when compared to 4,664MW recorded a day before.

Electricity supply has been on an upward trend since the labour union strike action earlier in August, where electricity workers under the aegis of the National Union of Electricity Employees (NUEE) and the Senior Staff Association Electricity and Allied Companies (SSAEAC) grounded the operations of the TCN, leading to a nationwide blackout, a move which saw DisCos lose an estimated N2.94 billion in potential revenue.

In the month of August, an average of 93,183MWh of electricity was supplied to consumers, as against an average of 86,221MWh sent out in the previous month. In the same vein, energy production has also been ramped up with a daily average generation of 94,281.68MWh in August.

Meanwhile, on the first day of September, a total of 102,875.3MWh of energy was generated, while 101,630MWh was supplied, representing 98.8% of the total generated electricity. Furthermore, the highest frequency recorded on Thursday was 51.1Hz, while the lowest frequency was 49.8Hz.

Reports indicate some of the reasons for improved power supply are not unconnected to some of the recent policy changes introduced earlier in the year.

*Tariff Adjustments*

A reduction in tariff shortfalls which has been the bane of investments in the power sector has also been a major factor in improved power supply.

The first is the frequent increase in electricity tariffs which now complies with the requirements of the Multi-year Tariff Order (MYTO). Before now, electricity tariffs are increased only after the approval of the government leading to tariff subsidies or tariff shortfalls that have plagued the industry. However, since a policy review was conducted tariffs are increased every six months allowing the sector operates at a cost-reflective tariff.

*Partial Activation*

Industry sources also point to the Partial Activation of Power Purchase Agreements (PPA) which commenced in July as a major factor leading to an improved power supply.
Sources explain that Partial Activation requires players in the sector to meet their minimum requirements.
For example, the Power Generating Companies must generate as much power as is available in their contracted capacities. Failure to generate contracted power means they pay penalties. When power is generated, the Transmission company must be able to evacuate and wheel all the power generated. If they do not wheel all the power, they face penalties. And when power is wheeled, the distribution companies are expected to distribute all the power wheeled to them. Failure to meet that requirement exposes them to penalties. Details of the partial activation are detailed in this report from Oak Legal.

*Central Bank*

The final reason adduced for the improved power supply is billions of naira in central bank intervention funds lent to Discos for meters, CAPEX, and operational expenses.

The CBN explained in its monetary policy committee meeting that the Cumulative disbursement under the NEMSF-2 currently stands at N254.46 billion. The bank explained that the money was given to Distribution Companies (DisCos) for their Operational Expenditure (OpEx) and Capital Expenditure (CapEx), under the Nigeria Electricity Market Stabilization Facility – Phase 2 (NEMSF-2)A further N47.82 billion has been disbursed under the National Mass Metering Programme (NMMP), for the procurement and installation of 865,956 meters across the country.
Industry players indicate the funding has provided stability for Discos which is also resulting in improved power supply.

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