The 11 electricity distribution companies in Nigeria and other market operators in the sector collectively incurred a loss of N965bn due to technical and commercial inefficiencies in the 12 months of 2024, an analysis of the latest data from various industry reports showed.
Findings from the Nigerian Electricity Regulatory Commission’s quarterly reports indicate that the Discos lost N497.4bn due to inefficiencies in uncollected revenue, and an additional N467.6bn revenue was lost to energy transmission deficiencies.
The losses occurred despite the introduction of the Band A tariff, which boosted the Discos’ revenue to N1.699tn, along with other policy measures designed to ensure financial solvency within the sector.
The situation is against the backdrop of sluggish progress in end-user metering, which could improve revenue collection efficiency across Discos, with shortfalls reaching around N2tn in 2024 alone.
In the power sector, technical inefficiencies refer to losses that occur during the generation, transmission, and distribution of electricity due to factors like faulty equipment, outdated infrastructure, and power line losses.
Essentially, it’s the electricity that is “lost” because of problems in the system that prevent it from being delivered efficiently.
Commercial inefficiencies, on the other hand, are losses caused by non-technical factors, such as poor billing systems, meter tampering, theft of electricity, and a lack of proper data management.
This type of inefficiency happens when the power companies are unable to properly charge customers for the electricity consumed or when revenue is lost due to fraud or inadequate collections.
Our correspondent gathered that in July 2022, the regulatory commission initiated the Partial Activation of Contract to define the target volume of energy to be off-taken by Discos. Under the PAC regime, Discos have take-or-pay obligations on their PCC, which means that they must pay for available capacity irrespective of their offtake.
The policy was formulated considering the large disparity between the energy on the national grid and customer demand. It is expected that Discos will offtake 100 per cent of their available PCC at all times.
However, most distribution companies have failed in this obligation, defaulting on their full PCC due to a combination of technical limitations as well as load rejection by the Discos and deliberate reduction of energy supply to areas with high commercial and collection losses.
It is noteworthy that when Discos have offtake ratios below 100 per cent, they incur increased wholesale energy costs as they still have to pay Nigerian Bulk Electricity Trading/Gencos for unutilised capacity. The report stated that the tariff methodology utilised by the commission does not allow Discos to recover the resultant additional wholesale energy costs (relative to the volume of energy off-taken) from customers.
To resolve this challenge, the NERC activated a Performance Monitoring Framework Order (NERC/2024/086 – 096) issued on July 5, 2024, mandating that all Discos take at least 95 per cent of their available PCC each quarter or face regulatory sanctions. This threat hasn’t altered the situation. Only five DisCos surpassed the 95 per cent threshold in Q4.
Power experts noted that a Disco’s failure to fully use available capacity results in wasted energy and financial losses throughout the power value chain, from generation to transmission.
A quarterly analysis of NERC’s reports showed that in the first three months, the distribution companies collectively lost N166.31bn to these inefficiencies. This figure increased to N228.94bn in the second quarter, N296.19bn in the third quarter, and N273.56bn in the last three months of 2024.
A detailed breakdown revealed that these firms lost N89.28bn due to an 80.45 per cent billing efficiency, which impacted the amounts charged to customers. An additional N77.03bn was lost to poor revenue collection.
In the second quarter, a staggering N112.48bn in revenue was lost, with a billing efficiency of 82.34 per cent resulting in an additional loss of N116.46bn. Moving into the third quarter, the losses deepened, with N159.33bn in revenue lost, as an 82.15 per cent billing efficiency contributed to a further N136.86bn loss. By the fourth quarter, despite a slight improvement in billing efficiency to 84 per cent, N148.56bn in revenue was still lost, leading to a N125bn loss.
To determine the amount lost to billing waste per quarter, the billing efficiency percentage was divided by the electricity charges billed to customers
The report read, “The total energy offtake by all Discos in 2024/Q4 was 7,420.58 GWh, and the total energy billed was 6,207.84 GWh, which translates to a billing efficiency of 83.66 per cent. Comparatively, the total energy received and billed in 2024/Q3 were 7,606.84 GWh and 6,249.21 GWh, respectively, which translated to a billing efficiency of 82.15 per cent.
“The total energy offtake by all Discos in 2024/Q2 was 6,914.39 GWh, and the total energy billed was 5,693.11 GWh, which translates to a billing efficiency of 82.34 per cent. A billing efficiency of 82.34 per cent implies that for every N100 worth of energy received by DisCos in 2024/Q2, N17.66 was not billed to end users. Comparatively, the total energy received and billed in 2024/Q1 were 7,171.93 GWh and 5,769.52 GWh, respectively, which translated to a billing efficiency of 80.45 per cent.
“The total revenue collected by all Discos in 2024/Q4 was N509.84bn out of the N658.40bn that was billed to customers. This translates to a collection efficiency of 77.44 per cent. In comparison, the total revenue collected by all DisCos in 2024/Q3 was N466.69bn out of the N626.02bn billed to customers, which translates to a 74.55 per cent collection efficiency.
“The total revenue collected by all Discos in 2024/Q2 was N431.16bn out of the N543.64bn that was billed to customers. This translates to a collection efficiency of 79.31 per cent. In comparison, the total revenue collected by all DisCos in 2024/Q1 was N291.62bn out of the N368.65bn billed to customers, which translated to a 79.11 per cent collection efficiency.”
The report noted that the main contributors to billing inefficiencies are both technical and commercial in nature. It added that appropriate enforcement actions against DisCos that did not meet the minimum off-take requirement have commenced.
The report read, “Energy billed and billing efficiency measures the proportion of energy billed to customers (including metered and unmetered customers) relative to the total energy supplied to a given area over a period. The key drivers of billing losses are technical-energy loss along the distribution network and commercial Disco’s inability to account for 100 per cent of the energy supplied. Commercial losses could either be a result of theft on the part of the customer, i.e., a meter bypass, or other factors under the Disco’s control, such as poor customer enumeration and the proliferation of inaccurate meters.
“Discos have the responsibility of developing strategies to improve their billing efficiencies. These can include reinforcing Discos’ infrastructure to reduce technical losses, improving consumer enumeration and customer service, improving the metering rate, and rolling out initiatives to curb energy theft.”
“Pursuant to these provisions, the Commission has already commenced the appropriate enforcement actions against DisCos that did not meet the minimum off-take requirement for 2024/Q4,” the NERC Q4 2024 report noted.
Disco off-take performance is a key metric in Nigeria’s electricity market. It directly affects energy flow, liquidity within the Nigerian Electricity Supply Industry, and ultimately, end-user satisfaction.
Commenting on the situation, industry experts highlighted that the amount lost serves as a clear indication of the deep challenges the sector is currently entangled in, reflecting widespread inefficiencies, mismanagement, and systemic issues that hinder progress across all levels of the industry.
Speaking in separate interviews, the experts revealed reasons for the failures, stressing that these challenges are not new but have been longstanding issues, deeply ingrained in the system due to poor infrastructure, mismanagement, inadequate policy enforcement, and a lack of long-term strategic planning, all of which continue to undermine the sector’s ability to improve and function efficiently.
The Executive Secretary of the Electricity Consumer Protection Association of Nigeria, Uket Obonga, attributed the ongoing liquidity crisis in the electricity sector to the substantial technical and commercial waste being recorded by the country’s distribution companies.
Obonga explained that these companies are still recording high levels of Aggregate Technical, Commercial, and Collection losses, reaching as much as 40 per cent. This means that Discos are only able to collect 60 per cent of the revenue they should be generating, exacerbating the sector’s financial instability.
“The losses are directly responsible for the liquidity crisis in the market,” Obonga stated. He further criticized Discos for failing to reduce these losses since the privatisation of the sector.
Obonga also noted that the initial vesting contracts, which were established during privatisation, aimed to reduce technical and commercial losses to below 10 per cent, with some expecting a tolerance of up to 15 per cent. However, more than a decade later, losses remain above 40 per cent, undermining efforts to stabilize the sector.
An electricity market analyst, Lanre Elatuyi, in his expert opinion, emphasised aging infrastructure, energy theft, and inefficiencies in billing as the root causes of persistent losses in Nigeria’s power sector. He pointed out that outdated network infrastructure leads to significant losses on wires and conductors.
“The network infrastructure is aging, and many of the lines are joined together, which is where most of the technical losses occur,” he explained. “You can see these joints across your streets, and it’s in these areas that we experience major losses. The dilapidated nature of the network causes operators to record a lot of losses.”
He also identified energy theft as a significant problem, contributing heavily to financial losses within the sector.
Additionally, Elatuyi highlighted an overlooked aspect of energy losses: the reactive power factor. “There is a requirement in the grid code for industrial areas to maintain a power factor of 0.85 percent,” he explained. “When it exceeds this limit, it means they are drawing more energy than needed, and no charges are applied for that excess, resulting in unaccounted losses. Also, for each feeder lines, there should be a specified kilometers but this not being followed, leading to energy loss and low voltage.”
Furthermore, Elatuyi stressed that most distribution companies lack accurate customer data, which hinders proper indexing and efficient billing. “Without knowing every customer connected to their network, operators can’t bill effectively,” he said, adding that energy theft is another prevalent issue.
To address these challenges, Elatuyi called for significant investments in network upgrades and infrastructure. However, he pointed out that this is a major hurdle due to the limited financial capacity of the Discos. “They don’t have access to long-term capital because they are not considered bankable.
“Many Discos are even being taken over by their lenders due to financial difficulties. Operators must know every customer on their network to ensure accurate billing. Customer service is crucial for improving collection rates. If customers are satisfied with service and have their complaints resolved quickly, they are more likely to pay their bills, he explained.
However, the President of Nigeria Consumer Protection Network, Kunle Olubiyo, expressed strong concerns over the accuracy of data provided by the regulatory commission, arguing that the figures fail to reflect the true state of technical losses in the power sector.
Olubiyo emphasised that without proper metering and a more scientific approach to billing, the sector’s financial issues remain obscured.
“An important question that needs to be answered is: what percentage of customers are metered?” Olubiyo said. “If the customers are metered, you can accurately assess collection and revenue efficiency. For example, Eko Disco claims to have achieved a 95 per cent collection rate, but we don’t know if that was based on metered or unmetered customers. Is it even possible for estimated billing to reach such high levels of payment accuracy?”
Olubiyo also raised concerns about the lack of automation in Nigeria’s power grid, which he argues prevents the accurate tracking of energy transactions between generation and transmission.
He pointed out that over-invoicing is common, with some operators assigning billing targets based on projected energy generation rather than actual consumption. “When metered customers are accounted for, whatever is left is placed on estimated customers. This is not a scientific approach,” he explained. “The amount charged to consumers is not determined by actual energy inflow but by arbitrary estimates.”
He concluded by stressing that as long as the grid remains unautomated and billing practices are based on flawed data, the figures presented by regulators and operators cannot be trusted. “These numbers they’re presenting are not acceptable to us. They don’t reflect the reality on the ground,” Olubiyo stated. “The parameters used are not scientific enough.”
A senior Disco official who asked not to be named due to lack of authorisation to speak on the matter, acknowledged efforts to reduce these losses but noted that more work is needed. The official mentioned that the grid system is still vulnerable to tampering and requires more investment to address the issue.
The source said technical losses occur due to outdated infrastructure, while commercial losses are driven by energy theft, including meter bypasses and illegal connections. Collection losses are seen in cases where customers underpay bills, leaving significant amounts unpaid.
He said, “Technical losses occur on the lines as it travels before getting to its destination, and it’s more evident in any system where the infrastructure is old. Commercial losses happen as a result of energy theft, which is through meter bypass, illegal connection, and other fraudulent acts on the system where you can’t trace what happened to the energy.
“While collection losses are like the recent incident with the Air Force base in Ikeja and other places where people are owing. Even individuals get a N5,000 but pay N1,000. The remaining N4,000 is part of the receivables and can be a loss. It is energy that has been sold.
“Efforts have been made to reduce these losses, but we still have more to do. A lot of efforts have been made. Discos have made more efforts to collect revenue, but we are still having issues collecting when people are not paying. Non-payment leads to low investments, creating a vicious cycle.”
Meanwhile, the revenue collected by distribution firms for electricity charged to consumers dropped by 3.29 per cent to N178.68bn in January 2025.
According to a factsheet by the commission, consumers failed to pay N71.53bn from the N250.21bn electricity bills consumed, compounding the liquidity crisis affecting the power sector.
