Business

NERC presses DisCos to buy power directly from Gencos

Published

2 years ago

August 13, 2024

Nigerian Electricity Regulatory Commission (NERC)

NERC presses DisCos to buy power directly from Gencos

The Nigerian Electricity Regulatory Commission’s (NERC) recent directive for Distribution Companies (DisCos) to transition away from the single-buyer model contract with energy generation companies (GenCos) has sparked significant controversies in the power sector.

This shift has raised questions about the contract breach and the potential disruptions it may cause within the sector, with implications that could ultimately affect end-user customers.

The order which was introduced in July by the regulatory body is part of the unbundling of the electricity value chain, the Nigeria Electricity Supply Industry, also known as NESI.

Under the new directive, DisCos are now required to establish direct contracts with power Generation Companies GenCos, bypassing the government-owned Nigerian Bulk Electricity Trading Company (NBET).

Although this initiative appears to be a straightforward solution to streamline contract agreements within the power value chain, officials from the DisCos who spoke to Nairametrics believe the issue is far more complex.

Contract Obligations with the FG to be taken up by DisCos

With the elimination of the Nigerian Bulk Electricity Trading (NBET), the Distribution Companies (DisCos) are now expected to take on the responsibility of fulfilling certain contracts originally initiated by the federal government with generating companies.

A source who spoke to Nairametrics revealed that the DisCos will now bear the burden of certain contracts that gas companies had entered into with the federal government. These contracts must be fulfilled by the DisCos, even if there are other available options, the source said.

The source said, for instance, the federal government’s obligatory contract with the Azura power plant will have to be continued by DisCos, which is relatively more expensive than other gas and hydro companies.

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“Azura has a more specific guarantee with the federal government. With its 437 MW capacity, DisCos will have to fulfil the contract with the company, even before turning to other alternatives,” the source told Nairametrics.

Minimum Power Outage Requirements

In the new bilateral power arrangement, Discos will also prioritize purchasing power from GenCos based on a structured approach that begins with their minimum power uptake requirements.

For instance, power generated by hydroelectric plants, which typically offer the most cost-effective electricity, will be the first choice for DisCos.

However, to prevent any single DisCo from monopolizing this affordable resource, each Disco will only be permitted to purchase a proportionate share of the hydroelectric power, corresponding to their grid allocation.

“For example, if a DisCo is responsible for 10% of the total power consumption from the grid, it will only be allowed to purchase 10% of the available hydroelectric capacity, which stands at around 1,500MW,” a top official from a DisCO informed Nairametrics.

This rigid structure might distort the market by limiting Discos’ ability to negotiate better deals or pursue more competitive power sources.

This could reduce operational flexibility and create financial risks for Gencos that are less utilized, such as those with higher costs.

“If you pay close attention to what the federal government, that is, NERC is saying, you’d realize that they’re saying they don’t want to pay for any form of electricity subsidy anymore with this new arrangement,” an official from Ikeja Electricity, speaking on condition of anonymity, told Nairametrics.

Infrastructural Challenges

In addition, the new arrangement could also result in infrastructure challenges, as the existing transmission and distribution systems may struggle to handle the varying power sources efficiently, leading to inefficiencies or power losses.

“This is the most important one if you ask me,” said a source.

“The issue isn’t just about power generation, but whether the grid has the capacity to handle an increased power output. Without significant investment in expanding substations nationwide, the entire system risks collapsing if the Distribution Companies (DisCos) receive more power than the grid can support,” the source said.

Phasing Out of Electricity Subsidy

The gradual elimination of NBET, a government-owned trading company, means the DisCos move to a “take-or-pay” contract, directly dealing with the gas companies.

By “take-or-pay” contract, NERC means the payment for gas will now be cost-reflective with little or no government assistance in balancing the receipt of either party.

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“This is why it is a bilateral agreement. It’s between the two parties only.

“It is near matured because the market is still being supported by FG subsidy and other PSRP funding support which the market will be waned off from time to time,” Babajide Akintoye, an official in Eko DisCo told Nairametrics.

For Akintoye, such a free-market, cost-reflective contract would mean the federal government doesn’t have to step in to cover the loss of DisCos, which currently struggles with operational losses as well as inadequate revenues.

“Ordinarily, this arrangement wouldn’t have been a concern for the Discos in view of the subsidy portion of Disco revenues that the FG intends to provide to partially support monthly invoices issued to Discos from GENCOS with activated PPAs.

“But with the government finding ways to reduce its current electricity subsidies, this new agreement means whether DisCos current escrowed revenues will be sufficient to pay the invoices issued under proposed bilateral arrangements,” he added.

Electricity Subsidy no Longer Sustainable

Indeed, the government still has a huge influence in the power sector paying a huge bailout of subsidy to DisCos to help cover operational loss and poor billing of customers.

According to recent data from the new tariff plan for the eleven DisCos across the country, the federal government is projected to provide N1.7 trillion in electricity subsidies to the DisCos in 2024.

However, the Minister of Power, Adebayo Adelabu, has consistently stressed that this level of government subsidy is unsustainable.

He has advocated for the sector to transition from a subsidy-driven model to a more cost-reflective approach.

“What most people fail to realize is that while DisCos are responsible for the collection of electricity tariff, a huge bulk of it still goes to the GenCos and TCN. Only about 20% of all tariff collected is given to DisCos to run its operations.

“Another misconception is that we set tariffs, which we don’t. People easily blame us for an increase in their tariff because we’re the ones they see. But it’s the federal government that sets the tariff,” a top official in Abuja DisCo said.

“With this new order, DisCos will have to depend on its own meagre revenue and loans from banks to fund its own contract with the gas companies,” Olumide Jerome, another official from Abuja DisCo said.

More Customers to pay more for Electricity

The federal government has already excluded about 15% of electricity end-user customers from any form of subsidy.

These end-users, dubbed Band A customers, now pay a cost-reflective tariff on their electricity, paying N206.80/kWh from the N66/kWh, a more than 250% increase in tariff.

According to NERC, the federal government would have budgeted about N3.2 trillion to subsidise electricity in 2024 without a tariff hike.

But this is not the end of the increase in tariffs for customers. The goal is to extend the tariff to more and more customers who the federal government believes need to pay their fair share of electricity usage.

“I think both NERC and federal government are putting the cart before the horse. You see, most of the people under Band A and even most of the customers do not have a meter.

“How then do the government determine what they consume? They use an estimated billing model which is not always reflective.

“What I think the government should do is to meet the metering gap first then unbundle NBET. You can’t ask DisCos to get power from say Zungeru power plant without any assistance from the government and not expect them to increase tariffs or their revenue collections.

“It simply means you want people to pay more. I’m not just talking about Band A customers, but everyone will eventually start paying more if the DisCos have to balance their books,” energy expert, Oni said.

NERC presses DisCos to buy power directly from Gencos

nairametrics

Business

Dangote Draws Battle Lines as Fuel Import Fight Heads Back to Court

Published

6 hours ago

September 30, 2026

Trends Admin

Dangote Draws Battle Lines as Fuel Import Fight Heads Back to Court

Aliko Dangote, President of Dangote Industries Limited, has said he is prepared to face legal challenges as the dispute over fuel imports, domestic refining and import licences intensifies in Nigeria.

Dangote spoke amid renewed litigation involving the Dangote Petroleum Refinery and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) over the continued importation of refined petroleum products into Nigeria.

The latest development followed a Federal High Court ruling in Abuja directing the NMDPRA to continue granting, extending or renewing fuel import licences for Matrix Energy, A.A. Rano and AYM Shafa, provided the companies meet the relevant legal and regulatory requirements.

Justice Inyang Ekwo ruled that the regulator’s handling of the companies’ applications did not comply with provisions of the Petroleum Industry Act (PIA). The court also held that the NMDPRA has a responsibility to promote competition in the midstream and downstream petroleum sectors.

The ruling did not give the three companies unrestricted authority to import petroleum products. Their operations remain subject to applicable regulatory and statutory requirements.

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The judgment has added fresh momentum to a wider dispute over whether Nigeria should continue granting petrol import licences as domestic refining capacity expands.

The Dangote Refinery, which has a stated capacity of 650,000 barrels per day, has challenged the continued issuance or renewal of some import licences in a separate case.

The refinery’s position is that continued imports should be restricted where domestic refining capacity is available to supply the local market. The case remains before the court.

The NMDPRA, however, has continued to approve import permits, citing the need to safeguard petroleum supply and energy security.

The regulator approved permits covering about 830,000 metric tonnes of petrol for several marketers for the fourth quarter of 2026. The beneficiaries included Matrix Energy, A.A. Rano, AYM Shafa, NIPCO, Pinnacle Oil and Gas and Bono Energy.

The development has intensified debate over competition in Nigeria’s downstream oil sector, particularly as the Dangote Refinery expands its contribution to domestic fuel supply.

Dangote’s comments also came as his business interests face other legal challenges outside Nigeria.

In Kenya, a court has ordered the preservation of the existing status quo over land earmarked for Dangote’s proposed 700,000-barrel-per-day refinery in Lamu, following a dispute involving residents who claim ancestral rights over part of the proposed project site.

Dangote has maintained that he is prepared to defend his investments through the legal process.

The businessman has also said Africa could largely eliminate its dependence on imported refined petroleum products by 2030, as new refineries come on stream across the continent.

In Nigeria, the continuing dispute places domestic refining, fuel imports, competition, petroleum regulation and energy security at the centre of an increasingly significant legal and commercial battle.

The competing positions have not been finally resolved, with the various court cases still ongoing.

Dangote Draws Battle Lines as Fuel Import Fight Heads Back to Court

Business

NNPC Profit Rises to N7.2tn Despite Revenue Decline

Published

21 hours ago

September 29, 2026

Trends Admin

Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Company Limited (NNPCL), Bayo Ojulari

NNPC Profit Rises to N7.2tn Despite Revenue Decline

The Nigerian National Petroleum Company Limited (NNPC Ltd) recorded a N7.2 trillion profit after tax in 2025, representing a 33.3 per cent increase from the N5.4 trillion it reported in 2024, despite a significant decline in revenue.

NNPC Group Chief Executive Officer, Bayo Ojulari, disclosed the figures on Tuesday while presenting the company’s audited financial results for the 2025 financial year in Abuja.

The company recorded N34.5 trillion in revenue in 2025, down from N45.1 trillion reported for 2024. Despite the revenue decline, profit increased as NNPC attributed the stronger bottom-line performance to improved operational efficiency and financial discipline.

Ojulari said lower international crude oil prices and reduced petroleum product sales, following changes in the downstream petroleum market, put pressure on revenue during the year.

However, improved operational performance helped cushion the impact, allowing NNPC profit to rise to N7.2 trillion.

The company also reported N22.33 trillion in taxes, royalties and other remittances to the Federal Government, representing a 39 per cent increase compared with the previous year.

The results also showed stronger production performance across the company’s upstream operations.

According to NNPC, crude oil and condensate production reached an average peak of 1.77 million barrels per day in 2025, the company’s highest level in five years.

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Domestic gas supply also rose to a three-year high of 7.2 billion standard cubic feet per day, reflecting increased gas production and supply to the Nigerian market.

NNPC said the financial performance demonstrated the impact of efforts to improve asset management, increase production and strengthen efficiency across its businesses.

The company’s latest results come as Nigeria continues to seek higher crude oil production, increased domestic gas supply and greater investment across the petroleum value chain.

NNPC, which became a commercial company under the Petroleum Industry Act (PIA) in 2022, has been pursuing a strategy focused on increasing oil and gas output, expanding gas monetisation and strengthening its downstream operations.

The company said its future growth strategy would require continued investment in infrastructure, workforce development and operational capabilities.

NNPC also highlighted investments in digital capabilities and artificial intelligence as part of efforts to improve efficiency and strengthen its workforce.

More than 1,000 newly recruited professionals joined the company in 2025 and underwent a one-year internship and training programme before being deployed across its operations.

The company also reported that women now occupy more than 23 per cent of its leadership positions, compared with an industry average of 17 per cent.

The 2025 results come against the backdrop of major changes in Nigeria’s petroleum sector, including the removal of petrol subsidy and increased private-sector participation in fuel supply.

NNPC said the improved profitability had strengthened its capacity to invest in operations, contribute to government revenue and support Nigeria’s energy security.

The company’s performance will continue to be closely watched as Nigeria seeks to raise oil production, expand gas utilisation and increase the economic contribution of the oil and gas sector.

NNPC Profit Rises to N7.2tn Despite Revenue Decline

Business

Crude Oil Prices Ease After Monday Spike, Fuel Price Cuts Loom

Published

1 day ago

September 29, 2026

Trends Admin

Crude Oil Prices Ease After Monday Spike, Fuel Price Cuts Loom

Global crude oil prices eased on Tuesday after a sharp rally triggered by renewed uncertainty over the possibility of a ceasefire between the United States and Iran, offering some relief to an oil market that has remained highly sensitive to geopolitical developments.

Brent crude, the international benchmark, fell to about $105.04 per barrel, while US West Texas Intermediate (WTI) declined to $92.24 per barrel, according to Reuters. The prices had risen sharply earlier amid concerns over possible disruptions to Middle East oil supplies.

The latest movement is particularly significant for Nigeria, where changes in international crude prices are increasingly reflected in the domestic petrol market following the removal of petrol subsidy and the operation of a largely market-driven downstream petroleum sector.

Nigeria has in recent weeks witnessed significant fluctuations in petrol prices as international crude prices rose on the back of Middle East tensions.

Dangote Petroleum Refinery, which has become a major source of domestic petrol supply, raised its gantry price to N1,350 per litre earlier in September before subsequently reducing it by N25 to N1,325 per litre as crude prices eased.

The impact has also begun to filter through to some retail outlets. Recent checks showed petrol selling at varying prices across the country, with some marketers reducing pump prices by between N20 and N25 per litre in response to lower wholesale costs.

In Abuja, for instance, MRS reportedly reduced its pump price from N1,395 to N1,370 per litre, while other marketers also adjusted their prices downward.

However, the latest fall in crude prices does not necessarily translate into an immediate or uniform reduction at filling stations.

This is because the price motorists pay is influenced by several factors, including the cost of crude, refining and wholesale prices, transportation and logistics, exchange-rate movements, and the margins of individual marketers.

Nigeria’s dependence on crude oil makes developments in the international petroleum market particularly important to the domestic economy.

Although the Dangote refinery has substantially increased local refining capacity and reduced reliance on imported petrol, international crude prices remain an important factor in determining the cost of feedstock and, ultimately, petroleum products.

The recent volatility has therefore kept motorists, transport operators and businesses on alert, with any sustained decline in crude prices potentially creating room for further reductions in petrol prices.

The latest crude movement followed reports of renewed diplomatic tension between Washington and Tehran.

Iran had reportedly proposed a seven-day truce, but US President Donald Trump rejected the proposal, triggering fresh concerns about the outlook for regional stability and oil supplies.

Crude prices surged during Monday’s trading session before retreating as investors reassessed the immediate supply risks and continued to monitor diplomatic efforts.

For Nigerian consumers, the key issue now is whether the downward movement in international crude prices will be sustained long enough to translate into broader and more significant reductions in petrol prices at filling stations.