Energy billing in Nigeria has always been a challenge as issues of inadequate power generation, transmission and distribution infrastructure coupled with inefficient energy metering result in residential energy consumers being billed unfairly. The huge bills that customers get for energy that they did not use, had prompted the need for the Nigerian Electricity Regulatory Commission (NERC) to push for prepaid meters, which will allow energy consumers to actually pay for what they use. According to analysis provided by Nigeria Electricity Regulatory Commission (NERC), the current metering gap in the Nigeria Electricity Supply Industry (NESI) – based on recent customer enumeration data – is over 10 million, this comprises of unmetered customers as well as customers with obsolete meters that need to be replaced.
Meeting financing needs to speed the introduction of the service-based tariff (SBT) in the Nigeria Electricity Supply Industry (NESI) which became effective from 1st September 2020 has put increased emphasis on the need to close the metering gap in the NESI. The closing of this gap will enhance efficiency of revenue collection by Distribution Companies (DisCos) and thereby facilitate meeting their obligations to other upstream market participants. To deal with this, President Muhammadu Buhari approved the National Mass Metering Programme (NMMP) implementation.
The framework of the NMMP as released by the Central Bank of Nigeria (CBN) recently outlines the operational modalities of the apex bank financing support to the DisCos (Downstream) and Local Meter Manufacturers (Upstream). Key objectives of the NMMP according to the framework are to increase Nigeria’s metering rate, eliminate arbitrary estimated billing as well as strengthen the local meter value chain by increasing local meter manufacturing, assembly and deployment capacity. It is also aimed at supporting Nigeria’s economic recovery by creating jobs in the local meter value chain, reduction of collection losses and increasing financial flows to achieve 100 per cent market remittance obligations of the DisCos and improve network monitoring capability and availability of data for market administration and investment decision making.
The framework defined Discos as bodies saddled with bulk purchase of energy and onward retail to electricity customers, collection of tariff and charges and remittance of payment to the market and retail energy related data for the industry as well as ownership and management of electricity distribution infrastructure including meters and metering infrastructure. For DisCos, NMMP CBN facility is restricted to the procurement and deployment of meters and the associated infrastructure (software and hardware) to support the metering network. They are also allowed to procure NERC approved meters, pay for installation and deployment of meters, procure other metering infrastructure related production and service provision as may be prescribed by NERC in relevant orders or by prevailing rules and regulations as well as backend metering platform and data management systems and customer enumeration services. The framework however prohibits them from buying fully assembled meters from overseas is prohibited except meters imported by Meter Asset Providers (MAP) already in the country as at September 30, 2020 and verified by NERC and importation of related metering infrastructure that are currently being produced in the country. Under the framework, DisCos are can access facility with a maximum tenor of 10 years but not exceeding 2030 and a moratorium on the principal amount for a period not exceeding 24 months from date of loan disbursement.
“The facility shall be administered at an “all-in” interest rate of not more than nine per cent per annum or any other rate as may be specified by CBN. As part of the Bank’s Covid-19 relief package, the interest rate to be charged up to 28 February 2021 shall not exceed five per cent per annum. “Interest shall be payable by the loan beneficiaries in accordance with the approved repayment schedule outlined in the Transaction Documents. NERC’s approval of a DisCos loan request as a regulated debt obligation to be charged against all energy collections for the Nigeria Electricity Supply Industry (NESI) as the next line charge in the payment waterfalls of each DisCo below the existing payment to the Nigeria Electricity Market Stabilization Facility (NEMSF), will serve as a collateral for the lending.”
The framework also made provisions for local meter manufacturers engaged in manufacturing of electricity meters and its components as well as assembly of completely and/or Semi Knock Down components into meters. Local meter manufacturers are allowed to access the NMMP facility for the purpose of procurement of manufacturing or assembly equipment for Meters, setting up or expansion of manufacturing or assembly facilities, procurement of production data management and software systems and for working capital.
The facility for local meter manufacturers can however not be used to finance the importation of fully assembled meters. According to the framework, to be eligible for the facility, local meter manufacturers should be able to demonstrate verifiable evidences of technical capacity which include both brownfield and Greenfield. Brownfield eligible manufacturers must demonstrate a track record of experience in manufacturing of key meter components up to the quality standards instituted by the Nigerian Electricity Regulatory Commission (NERC) and/or Nigerian Electricity Management Services Agency (NEMSA) and/or Standards Organizations of Nigeria (SON) while Greenfield must have bankable business plans acceptable to the PFIs.
Also, local meter manufacturer must demonstrate financial capacity to repay the loan through a sufficient debt service current ratio (DSCR), must be Nigerian-owned entities or consortiums involving a minimum of 70 per cent local ownership. Likewise in line with the program’s job creation objectives, eligible manufacturers must demonstrate commitment to employing local talent with a detailed vocational and technical training plan. For local meter manufacturers, the framework stated that “facilities granted shall have a maximum tenor of up to 10 years as determined by the project’s cash flow profile but not exceeding 31st December 2030.
Kabir is a public affairs analyst