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Daniel Adaji
Electricity Distribution Companies (Discos) have warned that uncoordinated tariff reductions by state regulators, such as the recent slash announced in Enugu State, could severely undermine the liquidity of Generation Companies (GenCos) and jeopardize the entire power sector.
The warning was issued in a statement signed by Sunday Oduntan, Managing Director and Chief Executive Officer of the Association of Nigerian Electricity Distributors (ANED), and made available to Pointblanknews.com on Thursday.
“The recent tariff reduction by the Enugu State Electricity Regulatory Commission (EERC) to N160/kWh for Band A customers in Enugu State, without adequate coordination with NERC and or other market participants raises significant concerns for the stability and liquidity of the Nigerian Electricity Supply Industry (NESI),” the Discos stated.
Following EERC’s move, Discos across other states are now under pressure from customers demanding similar cuts. Some customers have reportedly vowed not to pay their electricity bills until their tariffs are reviewed downwards.
The Discos acknowledged the need to make electricity more affordable but insisted that any reduction must be sustainable.
“It is not our intention to make life difficult for our loyal customers, and we have been aligning with the Federal Government to ensure provision of stable power supply. However, the cost reflective tariff is as a result of the economic realities of our nation,” the statement noted.
The group emphasised that while they are not opposed to subsidies, such financial interventions must be “transparently structured and promptly funded.” They warned that delays or lack of funding create cash flow problems, weaken investor confidence, and worsen the sector’s existing liquidity crisis.
They cited the Federal Government’s position, delivered by Minister of Power Chief Bayo Adelabu, that any state choosing to reduce tariffs must be financially responsible for the resulting subsidy burden. According to the Discos, nearly N5tn is already owed to GenCos and gas suppliers, further straining the system.
“It is already a fact today that the delay in the prompt payment of electricity subsidies has put the generation companies and gas suppliers under severe operational burden,” they said.
Despite regulatory changes that allow states to operate independent electricity markets, Discos stressed that Nigeria’s power market remains largely centrally coordinated, especially in terms of bulk energy purchases and market settlements. They warned that actions like the EERC’s could cause Discos to fall short of their Distribution Remittance Obligations, which would “put GenCos and other upstream service providers at further financial risk.”
The group also warned that neither the federal nor state governments have unlimited budgets for subsidies, especially given rising governance costs. “This underscores the importance of collaboration and a well-coordinated market-driven approach on tariff-related matters,” they said.
To stabilize the market and encourage investment, the Discos called for stronger coordination between the Ministry of Power, state regulators, and NERC; the establishment of a transparent, targeted, and fully funded subsidy framework; and the timely disbursement of subsidy payments to improve liquidity.
“While the goal of making electricity more affordable is shared by all, it must be pursued in a manner that preserves the financial health of the market, encourages long-term investment, and avoids policies that could erode progress toward stable, reliable electricity for Nigerians,” the statement added.