DisCos’ billing, collection failures undermining Nigeria’s power market – Experts

Nigeria’s electricity distribution companies (DisCos) supplied N3.68 trillion worth of power in 2025, but billed only N2.99 trillion and collected just N2.32 trillion, leaving a combined revenue shortfall of about N1.36 trillion, according to the Nigerian Electricity Regulatory Commission’s (NERC) 2025 Annual Report.

The figures show aggregate technical, commercial, and collection (ATC&C) losses of 37.03 per cent last year, almost doubling the 20.54 per cent benchmark set under the Multi-Year Tariff Order (MYTO). The gap, according to the report, points to a structural liquidity crisis that is eroding the bankability of the Nigerian Electricity Supply Industry (NESI), and thus discourages investors and threatens the sustainability of the privatised power market.

“In 2025/Q3, the average plant availability factor for all grid-connected plants was 39.86 per cent, i.e. at any point in time during the quarter, 60.14 per cent of the installed capacity across the twenty-eight grid-connected power plants was not available for dispatch onto the grid,” the report indicated.

Structural problems

A political economist, Adefolarin Olamilekan, acknowledges that Nigeria’s electricity crisis is a deep-seated structural problem that goes beyond the amount of money collected from consumers or the volume of funds injected into the power sector.

He told Blueprint Weekend that beyond the ATC&C losses, inefficiency, the opaque nature of the sector and the fraud surrounding the entire value-chain, the sector is responsible for some of the challenges highlighted in the NERC 2025 annual report.

He said, “While we must acknowledge the twin challenges of inadequate metering and network losses, we also need to call a spade a spade: the fundamental problem is not simply the absence of money, but the inefficient, opaque and, in some cases, fraudulent processes surrounding electricity billing, collection and revenue management.

 “The reported N669.4 billion in uncollected electricity revenue raises serious questions about the effectiveness of the sector’s collection architecture and the scale of electricity theft and revenue leakages. Even more troubling is the N694.8 billion attributed to energy losses through unbilled electricity.

“These figures point to a sector where significant economic value is being generated but is not being properly captured, accounted for or converted into sustainable revenue for investment.

“When you combine this with obsolete equipment, poor infrastructure, technical losses, weak distribution networks, and recurring grid failures, it becomes clear that Nigeria’s power problem is fundamentally one of governance, accountability, infrastructure and institutional efficiency.”

Olamilekan continued: “In my view, the publication of these figures by NERC is nevertheless commendable because transparency is the first step towards solving a structural problem. The report provides policymakers, investors and the public with a clearer picture of where the leakages exist.

“But disclosure must now be followed by action. Nigeria cannot continue to lose hundreds of billions of naira through inefficient billing, unmetered consumption, and electricity theft and network losses while simultaneously demanding more investment in the sector.

The numbers

Of the N3.68 trillion worth of electricity supplied to DisCos in 2025, only N2.99 trillion was billed to customers, translating to a gross billing efficiency of 81.14 per cent. That left roughly N694.8 billion in energy that was supplied but never entered the billing system.

Of what was billed, DisCos collected N2.32 trillion, a collection efficiency of 77.60 per cent, leaving about N669.49 billion in billed revenue that was never recovered from customers.

The combined effect of unbilled energy and uncollected bills produced the N1.36 trillion revenue gap for the year.

Performance varied sharply across the 11 DisCos.

NERC’s data show Kaduna Electric recorded the worst ATC&C losses at 71.88 per cent, followed by Jos DisCo at 62.15 per cent and Yola DisCo at 61.19 per cent. At the other end, Eko DisCo posted the best performance at 16.13 per cent, marginally below its MYTO target.

NERC described the gap between actual losses and MYTO targets of 16.49 percentage points as an inefficiency that “could compromise the long-term financial positions” of the DisCos.

It noted that, “The availability factor of a plant is measured as a ratio of the maximum rated output of the plant declared by the operator (available capacity) to the maximum rated output specified by the manufacturer (installed capacity). The available capacity of a plant may change from time to time due to several factors, including atmospheric conditions at the plant; mechanical availability of the plant (planned and unplanned outages) and feedstock availability, etc.

“Overall, 11 power plants had availability factors above 50 per cent, with Ikeja power plant recording the highest availability factor at 99.24 per cent. On the other end of the spectrum, Sapele Steam1 recorded a PAF of 2.66 per cent in 2025/Q3. Alaoji power plant was not available to dispatch any energy onto the grid throughout the quarter.

“Significant increases in PAF were recorded in Dadin-Kowa (+41.32pp), Zungeru (+33.29pp), and Okpai (+15.95pp) power plants across the two quarters. Conversely, the PAF of Ihovbor decreased significantly by 19.21pp during the quarter (78.16 per cent in 2025/Q3 compared to 97.38 per cent in 2025/Q2). Reductions in PAF were also recorded in Geregu (- 12.79pp), Ibom power (-10.34pp), and Geregu (-8.41pp) power plants.”

Liquidity crisis

The shortfall is not merely a book keeping concern. Unrecovered revenue at the distribution end of the value chain reduces the cash available to settle obligations to power generation companies (GenCos), gas suppliers and the Nigerian Bulk Electricity Trading Plc (NBET), reinforcing the sector’s long-running liquidity crisis and the cycle of under-investment that has kept electricity supply unreliable.

That cycle has direct consequences for how the market is perceived by lenders and investors.

Predictable, enforceable revenue streams are a basic requirement for project financing and debt servicing. A sector that loses more than a third of the value of the power it supplies to technical, commercial and collection losses struggle to offer that predictability.

Receivables owed by DisCos to upstream players in the electricity value chain are, in principle, a form of collateral for sector financing. Where billing and collection are weak, those receivables become unreliable, a factor that tends to push up risk premiums and borrowing costs for the sector as a whole.

The concern extends beyond the federal market structure. As more states move to establish their own electricity markets following the 2023 Electricity Act, industry watchers say the same underlying weaknesses: non-cost-reflective tariffs, weak metering infrastructure and poor collection discipline, could replicate the federal-level liquidity crisis at the sub-national level if left unaddressed.

Kaduna as cautionary case

The scale of Kaduna Electric’s underperformance, 71.88 per cent ATC&C losses alongside reported insolvency and limited capital investment has already drawn regulatory action, with NERC dissolving the DisCo’s board over the company’s financial position.

The case illustrates a point that has gained currency among sector analysts: that privatisation of the distribution segment in 2013 has not, on its own, resolved the commercial failures that plagued the sector under public ownership. Weak metering coverage, poor revenue assurance systems and governance lapses have persisted at some DisCos more than a decade after handover, even as others (Eko DisCo) among them have narrowed the gap to MYTO targets.

Investor confidence

Persistent revenue shortfalls of this scale reinforce a perception of the Nigerian power sector as high-risk and low-reward, a framing that has discouraged both equity and debt inflows needed to fund grid expansion, metering rollouts and loss-reduction projects.

That perception sits alongside a separate but related cost to the government: the N1.93 trillion in electricity subsidy bills recorded in 2025. Experts have argued that repeated tariff adjustments and subsidy outlays, without a commensurate improvement in DisCo billing and collection performance, feed scepticism about the sector’s capacity to enforce commercial discipline even where the political will to raise tariffs exists.

NERC’s report frames the revenue gap as a problem broader than non-payment. Of the N1.36 trillion shortfall, about N694.8 billion represents energy that was never billed at all, pointing to deficits in metering, network losses, electricity theft and weak data management rather than customer default.

The regulator also links the shortfall to a service-payment loop: poor service quality depresses customers’ willingness to pay, while inadequate metering makes accurate billing difficult, and the resulting under-recovery leaves DisCos with fewer resources to invest in improving service.

NERC’s report states plainly that these inefficiencies are “limiting the NESI’s ability to grow and attract new investments,” and cast the N1.36 trillion gap as a systemic constraint on the sector rather than a problem isolated to a handful of underperforming DisCos.

Closing the gap

Sector officials and analysts have periodically pointed to several measures with the potential to narrow the ATC&C loss gap: an accelerated metering rollout to close the estimated metering gap that leaves millions of customers on estimated billing; stronger loss-reduction incentives tied to DisCo performance under MYTO; stricter performance-based regulation with consequences for chronic underperformers, as seen in the Kaduna case; and, in the most severe cases, restructuring or recapitalisation of insolvent DisCos.

None of these measures is new to the policy conversation. What the 2025 figures add is a fresh, quantified baseline against which any claimed improvement or continued deterioration can now be measured going into 2026.

Metering

A consumer rights advocate, Dr. Aliyu Ilias, said to address the challenge, there is a need to meter electricity users.

Ilias told this reporter that the government should focus its energy on providing Nigerians with meters as it would go a long way to partly address the losses being suffered by DisCos.

“I think metering should be the major challenge because actually there is a creditor who actually uses electricity but doesn’t pay. It’s a different thing from people that never have the bill through the metering.

“I think the major thing is that everybody should be metered. If everybody is metered, if there’s any bypass, if there’s any unpaid bill, it can be traced later. That’s what I feel anyway,” he said.

Ilias added: “I think metering is a major thing that we need to look at very, very well because if you look at collection, collection is a function of the responsibility of the DisCos, but metering is collective responsibility of even the government itself, if there is no meter, people will be cheated and there will not be adequate accountability. Even though we are using a card pay method, it may not actually work. So, I think the major thing we should look at is metering.

Going forward

Going forward, Olamilekan said NERC “needs to fundamentally re-think the electricity revenue-collection architecture,” adding that “technology must become central to this process.”

According to the economist, advanced metering infrastructure, data analytics, artificial intelligence, and real-time monitoring can significantly improve consumption tracking, billing accuracy and revenue collection, while reducing opportunities for manipulation.

He said, “There must also be stronger enforcement against electricity theft. Electricity theft is not merely a consumer issue; it is an economic crime that weakens the financial sustainability of the entire power value chain. NERC and other relevant agencies need to demonstrate that there are credible consequences for illegal connections, meter bypasses and other forms of electricity theft.

“Most importantly, metering must remain at the centre of Nigeria’s power-sector reform agenda. You cannot build an efficient electricity market when a significant proportion of consumers are not accurately measured and billed for what they consume. Universal and transparent metering will improve accountability between consumers and distribution companies, reduce disputes and provide better data for planning.

“Finally, Nigeria must address technical and network losses while accelerating the rehabilitation and modernisation of critical power infrastructure. Generation, transmission and distribution cannot be treated as isolated problems.

“The sector requires an integrated approach that combines investment, technology, accountability, enforcement and institutional reform.”

Olamilekan also noted that the central issue isn’t about how much money Nigeria puts into the power sector, but how efficiently the sector captures revenue, accounts for resources, reduces losses and converts investment into reliable electricity.

“Until these structural weaknesses are addressed, additional funding alone will not solve our electricity crisis,” he added.

Last word

Whether Nigeria can close the N1.36 trillion gap before it locks the power sector into permanent dependence on subsidies and emergency interventions or not will depend on the extent to which regulatory enforcement, the kind applied to Kaduna Electric, is extended consistently across underperforming DisCos.

It’s also on whether or not metering and revenue-assurance investment can outpace the growth in ATC&C losses.

For now, NERC’s own data suggest that the gap is widening the distance between the market that MYTO envisages and the market that exists.

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