Nigeria’s electricity regulatory body, the Nigerian Electricity Regulatory Commission (NERC), has instructed the grid operator to curtail electricity exports to bolster domestic availability.
In a directive released last Friday, NERC highlighted that the current approach to managing supply has led to considerable hardships for Nigerians, as supply commitments to international customers, under bilateral contracts, take precedence over domestic requirements.
Effective from May 1, NERC has imposed a 6% cap on the total grid generation available for international off-takers for the next six months.
Nigerian power firms have established contracts with neighboring African nations to provide energy, securing foreign currency to supplement revenue from tariffs that are below cost-recovery levels. However, these firms have faced challenges with timely payments from these customers.
Nigeria frequently experiences power shortages, exacerbated recently by escalating demand. Despite tariff hikes for some domestic consumers promising increased daily supply, power companies struggle to meet these commitments.
Alongside agreements with neighboring countries like Niger, Togo, and Benin, Nigerian power firms have bilateral contracts with domestic heavy users such as industries and government entities, prioritizing them over regular consumers.
Industry analysts foresee potential operational disruptions due to the cap on overseas sales, requiring adjustments in production, distribution, and possibly contract renegotiations at short notice. This move is anticipated to compound financial strains by reducing revenue from international clients and necessitating power distribution firms, already burdened with substantial debts to power generation companies, to expedite debt repayment.
Following the directive, grid service data indicates a rise in electricity supply from the national grid, surpassing 4,700 megawatts since Saturday, compared to the usual daily allocation of less than 4000MW for local consumers.
NERC criticizes the lax terms of existing international and bilateral contracts, noting instances where off-takers exceed contracted levels during peak periods, disadvantaging other grid users. The commission also highlights the lack of enforcement of penalties for violating grid regulations.
The decision to curtail supply to international customers may also stem from their delayed settlement of outstanding debts. According to a report by NERC in the last quarter of 2023, international customers collectively owe Nigerian power companies approximately $12.02 million in unpaid dues for services rendered.
