Joseph Bakare
An analyst in Nigeria’s electricity industry has revealed that Nigeria’s electricity distribution companies (DisCos) are facing renewed pressure to sustain revenue growth and fund critical network investments.
The assessment comes after industry data showed that a significant portion of billed revenue went uncollected in March, reinforcing long-standing concerns over the financial health of the country’s power sector.
According to data from the Nigerian Electricity Regulatory Commission, power distribution companies collected N196.13 billion from customers in March, representing 79.6 per cent of the N246.43 billion billed during the month.
That left about N50.3 billion unrecovered across the 11 distribution companies, highlighting the sector’s persistent collection inefficiencies.
Speaking with CNBC, on the implications of the numbers, Ayo Deloni, partner at Bloomfield Law Practice, said the latest data points to only a marginal improvement in collections and remains far from what is needed to stabilize the market.
“Whilst energy flows from generation to transmission, distribution and consumers, money flows from consumers all the way up,” Deloni said in the interview. “If the generation companies don’t receive sufficiently, they can’t pay for gas.”
That dynamic remains one of the central structural weaknesses in Nigeria’s electricity market.
Because revenues collected by DisCos are meant to support payments through the value chain, shortfalls at the retail end can ripple upward, constraining the ability of generation companies to settle gas suppliers and limiting overall market liquidity. For a sector already weighed down by chronic underinvestment, tariff disputes, and infrastructure deficits, the March collection gap underscores how even modest gains in efficiency may still fall short of what is required.
Deloni described the N50 billion collection deficit as substantial, warning that the shortfall will continue to weigh on investments in metering, service delivery and network upgrades unless stronger recovery mechanisms are put in place.
A key obstacle, he argued, remains inadequate metering. Without widespread and accurate metering, distribution companies face difficulty billing customers transparently, curbing commercial losses and improving payment discipline. In turn, estimated billing continues to distort both consumption data and revenue assurance.
“Much more needs to be done around metering,” Deloni said. “You should only pay for what you consume and there’s no way to determine what you consume unless you are adequately metered.”
His comments reflect a broader industry consensus that metering is central to reducing what the sector classifies as aggregate technical, commercial and collection losses. While several metering programs have been launched over the years, execution has been uneven, with some initiatives delivering gains and others failing to achieve scale. That has left many consumers either unmetered or dissatisfied with billing practices, complicating collection efforts for the DisCos.
Even so, the interview suggested there are lessons from better-performing operators. Deloni pointed to the need for “local solutions,” including franchising arrangements and more decentralized supply models that move beyond traditional operating approaches. Some of the stronger performers, he said, have pushed to improve efficiency by getting closer to end-users, including through projects that sit outside the conventional transmission system.
He referenced embedded power and localized distribution initiatives within parts of the Ikeja network as examples of efforts to serve customers more directly and reduce bottlenecks. Such models, if expanded, could help improve reliability and collections by aligning supply more closely with customer demand and reducing dependence on strained central infrastructure.
Still, the revenue challenge is unfolding alongside another warning sign for the national grid: the growing migration of large electricity users toward captive and off-grid power solutions.
Deloni said the trend is particularly visible among major industrial and commercial customers that are highly sensitive to power disruptions and cannot afford repeated system trips or constrained supply. In Lagos, the state electricity regulator recently highlighted that 38 firms operate captive power plants with a combined capacity of nearly 600 megawatts without obtaining required state licenses.
While Deloni noted that some of these operators may already hold federal licenses and are now expected to localize them under the Lagos regulatory framework, he said the broader message is clear: many large consumers are seeking alternatives to the grid.
“It tells you that a lot of the big eaters, those maximum demand customers, a lot of them have left the grid,” he said.
That shift could create additional pressure for distribution companies. Large industrial and commercial users are often among the most attractive customers for DisCos because they consume substantial volumes and can provide steadier revenue than lower-income retail segments. If more of those users exit the grid or sharply reduce dependence on utility supply, the customer mix for DisCos could deteriorate further, weakening future collections even if headline billing rises.
The trend also raises questions about confidence in the reliability of the national system. According to Deloni, power-sensitive businesses increasingly prefer self-generation or off-grid arrangements because they cannot operate effectively under a system prone to recurring interruptions.
For investors and policymakers, the March figures offer a mixed signal. On one hand, collection efficiency near 80 per cent suggests some degree of resilience in a difficult operating environment.
On the other, the inability to recover one-fifth of billed revenue remains a major drag on liquidity across the electricity value chain.
Without stronger collections, improved metering and more reliable service, DisCos may struggle to generate the internal cash flow required to support capital expenditure, including meter rollouts, transformer replacements and broader network modernization.
And as more high-value customers consider alternatives outside the grid, the urgency of reform could become even more pronounced.
For now, Nigeria’s power market remains caught in a familiar cycle: inadequate collections weaken upstream payments, poor liquidity constrains investment, and weak service quality drives customers to seek independent solutions. Breaking that cycle, industry watchers say, will require not just marginal improvement, but a much deeper overhaul of how electricity is measured, billed and delivered.