Recent media reports hailing an “improved” performance in Nigeria’s power sector, following claims that electricity distribution companies (Discos) achieved an 80.7 percent revenue collection rate in the third quarter, have been widely celebrated. According to the Nigerian Electricity Regulatory Commission (NERC), Discos collected ₦570.21 billion out of ₦706.61 billion billed between July and September 2024—an increase of 4.63 percentage points over the previous year.
At face value, the figures suggest progress in an industry long plagued by inefficiency. However, a closer examination of the data reveals that the optimism may be premature and, in some respects, misleading.
Collection Efficiency vs. Operational Efficiency
Revenue collection, while it is important, is only one component of the Aggregate Technical, Commercial and Collection (ATC&C) losses that define the health of the electricity market. What consumers and stakeholders would find more reassuring is evidence of a significant reduction in overall ATC&C losses—an indicator of real efficiency gains across generation, transmission, and distribution.
Without corresponding data on technical and commercial losses, improved collection efficiency risks becoming a narrow metric that masks deeper structural problems. Simply put, collecting more money does not necessarily mean delivering electricity more efficiently.
Uneven Performance Across Discos
Another critical gap in NERC’s presentation is the lack of granular data. Nigeria has 11 Discos with vastly different operational realities. High-performing Discos such as Eko and Ikeja, which serve economically vibrant areas and account for a substantial share of sector revenue, may be skewing the national average. Lumping them together with weaker Discos such as Yola or Benin creates an illusion of sector-wide improvement that may not exist in reality.
A breakdown of individual Disco performance—particularly in ATC&C reduction—would provide a clearer picture of where progress is being made and where failures persist.
Subsidies and the Tariff Paradox
The reported gains also raise uncomfortable questions about the logic of Nigeria’s electricity subsidy regime. Under the service-based tariff system, Band A customers—allegedly receiving up to 20 hours of supply daily—pay the highest tariffs. Ironically, these customers are typically cheaper to serve due to stable demand and better infrastructure.
This pricing model appears less rooted in cost-reflective economics and more in perceived ability to pay. In effect, high-usage consumers are charged more not because they cost more to serve, but because they are deemed financially capable. This undermines the fundamental justification for subsidies, which is to bridge the gap between cost and affordability.
Who Is Really Being Subsidised?
More troubling is the suggestion that consumers are effectively subsidising inefficiency. With ATC&C losses still extremely high, the true cost of electricity remains inflated. Rather than inefficiencies being eliminated, they are passed on through tariffs and government subsidies.
If NERC were able to compel operators to meaningfully reduce losses, the gap between cost and tariff would narrow naturally—leading to lower prices and reduced subsidy obligations. The potential savings for both government and consumers would be substantial.
The Numbers Still Don’t Add Up
Even by NERC’s own figures, the gains are modest. Projected over a full year, collection losses alone would amount to approximately ₦546 billion. And collection losses are just one component of ATC&C losses; total losses would be significantly higher if technical and commercial losses were fully accounted for.
This raises doubts about celebrating marginal improvements while systemic weaknesses remain largely unaddressed.
A Dangerous Policy Signal
Perhaps most concerning is the implicit policy direction suggested by the report—that higher tariffs are the primary solution to sector challenges. This approach risks further burdening households and businesses, weakening economic competitiveness, and deepening energy poverty. The real solution lies not in repeated tariff hikes but in tackling the root causes of inefficiency, particularly technical losses in transmission and distribution networks, where a large proportion of energy is lost before reaching consumers. While improved revenue collection is not insignificant, it is far from proof that Nigeria’s power sector has turned a corner. By focusing on partial metrics and aggregated figures, NERC risks presenting a rosier picture than the facts justify.
A transparent reporting of total ATC&C losses—disaggregated by Disco—would offer a more honest, albeit less flattering, assessment of the industry. Until efficiency gains, not just revenue gains, become the norm, claims of power sector recovery will remain open to serious question.
