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Nigerian Power Sector Watch - 2020 Q1 Edition

Nigerian Power Sector Watch - 2020 Q1 Edition

The COVID-19 pandemic has presented a severe health challenge for countries across the globe. Every country has been impacted in one way or the other as the world struggles to come to terms with it. Unfortunately, the impact has extended beyond the health sector to every facet of our lives. The world is on the throes of a recession with all aspects of the global economy impacted.

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Nigeria is not immune from all of these, with the power sector also affected. This newsletter focuses on the potential impact the global crisis may have on the power sector in Nigeria.

  • Significant Reduction in Revenue and Cash Inflows
    Commercial customers and Government & its Agencies
    constitute a significant customer base for the power
    sector. The majority of these organisations are currently
    on full or partial lockdown, which would impact the
    value of energy consumed. The energy may be diverted
    to residential customers, whose consumption would
    obviously have increased due to the stay at home order.
    However, the tariff payable by this group is less than
    that payable by industrial consumers. Consequently,
    Distribution Companies (DisCos) should expect to
    receive less revenue for the same amount of power
    distributed during the lockdown.
    There is also the issue of collection losses, which are
    typically higher amongst residental consumers than with
    industrial customers. Government and its Agencies may
    pay late but the chances are that the bills will eventually
    be settled rather than be totally lost as is the case with
    many residental customers. DisCos will, therefore, have
    to deal with the twin issues of reduced revenue and
    lower collections.
    The collection issue may be worsened by the closure
    of banks and other financial institutions in some states
    and reduced operations in others. Most residential
    customers make payments for energy consumed
    through designated banks or at the DisCos’ designated
    agents that may also be closed or inaccessible as a
    result of the lock down. This may impact the ability of
    customers to quickly settle established bills, even when
    they have the resources.

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© 2020 KPMG Professional Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

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