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Writer's pictureAdekoya Favour Tosin

The Financial Burden of Estimated Billing in Nigeria's Electricity Sector




Every month, countless Nigerian households and businesses brace themselves for their electricity bills—not anticipating, but with a sense of foreboding. Many consumers are subjected to estimated billing, where charges are based on assumptions rather than actual consumption. This practice leaves consumers overcharged, financially strained, and distrustful of utility providers. Despite an installed capacity of over 13,000 MW, the Nigerian electricity sector is plagued by systemic challenges. Gas supply constraints, outdated infrastructure, and high distribution losses mean that actual generation falls far short. To cope, providers rely on estimated billing, a stopgap for the lack of prepaid meters. However, this often inflates charges based on historical data or average consumption from similar consumers, straining household budgets and business operations. Efforts by the Nigerian Electricity Regulatory Commission (NERC) to implement metering have been slow, leaving many consumers caught in a cycle of unfair billing.

 

Unpacking the Estimated Billing Process

To grasp the depth of the issue, we need to explore how the estimated billing system operates and why it fails consumers. At its core, this system calculates charges using historical data, regional averages, or customer categories—tools that often fail to capture real consumption patterns.  Distribution companies (DisCos) rely on methodologies that evaluate past usage trends, apply seasonal assumptions, or compare similar customers in the same geographic area. These generalizations frequently result in inflated bills, penalizing households that may have actively reduced their consumption. Even when adjustments are made after customer disputes, they rarely account for the accumulated financial strain. The widespread reliance on estimated billing paints a bleak picture. Recent reports indicate that over 85% of electricity consumers in Nigeria still depend on this system due to a glaring shortage of prepaid meters. Urban centers often face a higher prevalence of estimated billing, with DisCos prioritizing commercial hubs and affluent neighborhoods for metering. Meanwhile, rural areas, where infrastructure is less developed, remain stuck with unreliable billing practices. Efforts to transition to metering have been slow and uneven.

The high cost of meters and limited availability under initiatives like the Meter Asset Provider (MAP) scheme have left millions unmetered. For many consumers, particularly in economically disadvantaged areas, estimated billing is more than just an inconvenience—it’s an unsustainable financial burden. The Nigerian Electricity Regulatory Commission (NERC) has attempted to address these challenges through several regulations. Key interventions include mandating that DisCos meter all consumers, introducing capping orders to prevent excessive charges for unmetered customers, and setting strict guidelines for estimated billing methodologies. Despite these measures, enforcement has been a persistent issue. Many DisCos cite financial constraints, operational inefficiencies, and power theft as significant barriers to compliance. For consumers, the promises of fairer billing often feel hollow as deadlines for metering are repeatedly extended without tangible results. Initiatives like the MAP scheme have made strides, but significant gaps remain, leaving millions of Nigerians at the mercy of a flawed billing system.

 

The Financial Burden of Estimated Billing on Nigerians

For many Nigerians, the consequences of estimated billing are deeply personal, affecting day-to-day living standards and business sustainability. Consumers are frequently overcharged by DisCos, with the discrepancies reaching alarming levels. For instance, In Q2 2024, estimated customers rose by 10.04% from the previous quarter, reaching 7.07 million. On a year-on-year basis, the increase was even more pronounced at 17.86%. This sharp rise contrasts with the meager 0.25% growth in metered customers over the same period, leaving millions unmetered and exposed to inflated charges. While the total revenue collected by DisCos rose by 34.34% quarter-on-quarter to ₦391.72 billion, electricity supply actually declined by 2.72%. This disconnect highlights a troubling reality—consumers are being overcharged for services not delivered. For many households, the inflated electricity bills are unaffordable. While the average Nigerian household spends an estimated ₦4,155.8 on electricity monthly, estimated billing often results in charges far beyond actual usage, forcing families to cut back on essential needs like food and healthcare. This financial strain deepens poverty and erodes living standards. Small businesses, too, face the brunt of overcharging. They struggle with unpredictable electricity costs, disrupting cash flow and reducing profitability. With these inflated bills, business owners are left with hard choices—raise prices or scale back services, which can damage customer loyalty and hinder growth. As overcharging persists, trust in DisCos has been shattered. Consumers increasingly view the billing system as unfair, weakening cooperation with regulatory initiatives and further complicating efforts to improve metering systems. This widespread frustration highlights the urgent need for reform in Nigeria's electricity sector.

 

 

This data paints a vivid picture of Nigeria’s electricity billing challenges, showing steady growth in total customers, but a troubling disparity in metering. While total customers rose from 11.47 million in Q2 2023 to 12.99 million in Q2 2024, metered customers increased only slightly, from 5.47 million to 5.92 million. Meanwhile, estimated customers surged from 6.00 million to 7.07 million, leaving millions stuck with unpredictable billing. This imbalance highlights the struggle to bridge the metering gap, with many households still at the mercy of the flawed estimated billing system. The data tells a clear story: while more Nigerians are gaining electricity access, the reliance on estimated billing continues to strain trust and finances, underscoring the urgency for faster and more inclusive metering initiatives.


Potential Solutions to Address Estimated Billing

The heavy financial burden caused by estimated billing can be alleviated with practical, consumer-focused measures. The first step is closing the metering gap. With over 6.25 million unmetered customers, initiatives like the National Mass Metering Programme (NMMP) and the Meter Asset Provider (MAP) regulations are crucial. Accurate metering ensures consumers pay for what they use while restoring trust in DisCos. Strengthening the regulatory framework is equally important. Regular audits, stricter penalties for non-compliance, and incentives for meeting metering targets can hold DisCos accountable. When transparency is prioritized, trust is rebuilt. Empowering consumers is another key step. Transparent billing practices and accessible dispute-resolution mechanisms enable customers to challenge unfair charges. Public awareness campaigns and collaborations with advocacy groups can amplify consumer rights and push DisCos toward fair treatment.

 

Conclusion

Addressing the challenges of estimated billing in Nigeria’s electricity sector is more than a technical fix—it’s about protecting households, rebuilding trust, and creating fairness. Initiatives like the National Mass Metering Programme and MAP regulations offer hope for closing the metering gap and ensuring accurate billing. Regulatory reforms, coupled with stricter penalties for non-compliance and robust consumer feedback mechanisms, can enforce transparency and accountability among DISCOs. Public awareness and advocacy also play a critical role in empowering consumers to demand fair treatment. Collaboration between government, DISCOs, and advocacy groups is essential to turn these plans into lasting change. The question remains: will stakeholders rise to the challenge and transform electricity billing into a system that works for everyone? The opportunity is here, and the time to act is now.

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