DISCOs should stop preying on consumers

Nigeria's power sector privatisation in 2013 was heralded as transformational. Policymakers promised that shifting from state monopoly to private distribution would unlock efficiency, lower tariffs, and expand grid access. Over a decade later, the reality tells a different story. Distribution companies (DISCOs) have become a paradox: they demand payment like commercial enterprises, yet operate with monopolistic opacity that no competitive market would tolerate. For investors and consumers alike, this contradiction is eroding confidence in Africa's largest economy.

## Why are Nigerian DISCOs treating consumers as captive markets?

The fundamental problem lies in the regulatory architecture. Nigeria's DISCOs operate in franchise zones with zero competition. Consumers cannot switch providers—they must accept whatever service, tariff, or billing practice their regional DISCO imposes. This eliminates the market discipline that should accompany privatisation. When the Multi-Year Tariff Order (MYTO) allows tariffs to rise, DISCOs implement increases immediately. When distribution losses exceed 40% on some networks (technical and commercial), the cost burden shifts to paying customers through inflated unit rates. A household in Lagos pays not just for its consumption, but effectively subsidises non-paying users and network inefficiencies.

Billing opacity compounds the problem. Many Nigerian consumers receive bills with minimal itemisation—no meter readings, consumption breakdowns, or demand-side detail. Estimated billing remains endemic despite regulatory directives to install prepaid meters. This asymmetry of information makes consumers vulnerable to overcharging and erodes trust. International investors watch this dysfunction closely. If DISCOs cannot maintain transparent billing systems or invest in metering infrastructure, how can confidence in broader sector reform be sustained?

## What does the investment case look like under current DISCO practices?

For renewable energy developers, manufacturing firms, and tech companies planning expansion in Nigeria, DISCO reliability directly impacts project economics. An investor cannot forecast energy costs with precision when billing practices lack transparency or tariffs shift unexpectedly. The World Bank and African Development Bank have flagged DISCO operational efficiency as a critical barrier to achieving Nigeria's renewable energy targets and industrial competitiveness. When potential investors benchmark Nigeria against Kenya, South Africa, or Ghana, they weigh regulatory predictability heavily. DISCOs' cavalier approach to consumer billing signals weak regulation—a red flag for long-term cost certainty.

The human cost is equally telling. Electricity is priced beyond reach for millions of Nigerians, yet those connected pay unsustainably high tariffs to subsidise operational inefficiency. This dynamic—privatisation without competitive discipline—repeats across African utilities. Unless Nigeria's National Electricity Regulatory Commission (NERC) enforces metering mandates, standardises billing formats, and introduces penalties for overcharging, the sector will continue to underperform investor expectations and public welfare.

## What must change for the sector to recover credibility?

Real reform requires three elements: mandatory smart metering within 24 months, transparent tariff-setting with quarterly public reviews, and independent audits of DISCO billing accuracy. Without these, Nigeria risks repeating the pattern that haunted the pre-2013 state monopoly—a utility sector that neither serves customers nor attracts serious capital.