One of the most important elements of the power sector recovery programme (PSRP) needed to realize the economic recovery and growth plan (ERGP) of the Federal Government (FG) and the Ministry of Power is the reduction of non-technical losses in the Nigerian Electricity Supply Industry (NESI). Efficient, resilient and financially healthy power sector is a requirement for the economic development of any nation.

Every power network has losses, both technical and non-technical.

Distribution network losses refer to the difference between the electrical energy entering and leaving the distribution network for technical or non-technical reasons. These power or energy losses represent significant economic losses to the power value chain and must be measured, managed and mitigated for a successful power sector reform program.

Technical losses on the power network occur due to the physics of flow of electricity through the network. As current flows through power system components such as cables, overhead lines, switchgears, transformers, connection points, measurement systems and other equipment that carry energy to and from customers, energy is continuously dissipated, mostly transformed into heat and noise. These losses cost money and are usually included in the tariffs paid by the consumers. Technical losses can be variable (load related), fixed (non-load related) or due to uncontracted consumption of network equipment.

Non-Technical losses on a power network is the embodiment of electricity delivered and distributed via the network which cannot be measured or properly accounted for. They occur primarily due to unidentified, misallocated, and inaccurate energy flows, unmetered supplies, unpaid bills, electricity theft, illegal connection, estimated billing, inadequate metering, meter by-pass, etc. Non-technical losses are caused by actions that are external to the power system and in all cases, a poor level of management by the distribution company (DisCo) operating the network is to blame largely as a result of poor network equipment and information management systems, absence of robust energy data processing and management systems, or due to generally poor customer engagement and management processes. These losses relate to commercial and collection issues and are so named.

The aggregate technical, commercial and collection (ATC&C) losses in the NESI is huge and this has the potential to deter any passionate investor from the sector. Hence, it will not be out of place if the sector can be provided with adequate financial, technical, institutional and commercial interventions to ensure its optimal performance and reduction in non-technical losses in the distribution network.

During the privatization of the power industry in Nigeria by the Bureau of Public Enterprises (BPE) and the National Council on Privatization (NCP), one of the criteria that was used to select the preferred bidders for the DisCos is the ability to reduce technical and non-technical losses as this has the potential to impact on the power sector positively. The non-performance of DisCos in this regard is therefore a significant breach of the license conditions and performance agreements they signed to.

The reduction in the aggregate technical, collection, and commercial (ATC&C) losses in the NESI is fundamental to the survival of the electricity market and therefore the realization of incremental, stable and uninterrupted power supply in Nigeria. A systematic approach based on the output measure technique is about the only means available in the world of power systems to achieve a performance driven development of an efficient and functional electricity distribution system in the NESI.


Improvement in processes & systems

There are a number of solutions that can assist with the reduction of non-technical losses on the distribution network. One solution is in the improvement of systems and internal processes by the adoption of international standards such as Standard Transfer Specification (STS) for prepayment systems via hosted services. Losses from payment systems and internal processes of DisCos are largely ignored and can be quite significant. Ghost vending is popular in the market but the Nigerian Electricity Regulatory Commission (NERC) appears to be unaware of it or at best not doing anything to stem the tide of the ugly occurrence. This is a situation where third parties who have access to the STS codes of DisCos carry out illegal sales of tokens. Robust monitoring an oversight by NERC is absent even as the illiquidity and debt profile of the NESI grow astronomically. In addition, a data driven system of processes must be implemented in NESI immediately to ensure that most information does not go unrecorded.

Smart Metering

Another solution is the deployment of smart metering technologies at all consumer terminals. Advanced Metering Infrastructures (AMI) technology for example will enable the deployment of Automatic Meter Reading (AMR) in network clusters and this can lead to a more effective billing system. Automatic Meter Reading (AMR) is the technology for automatically collecting consumption, diagnostic, and status data from energy metering devices and transferring that data to a central database for billing, troubleshooting, and analyses. This technology will save DisCos the expense of periodic trips to each consumer property to read a meter. Another advantage is that billing can be based on near real-time consumption rather than on estimates which are based on past or predicted consumption levels. This timely information coupled with analyses can help both DisCos and customers better manage power flows and consumption. Additional benefits include increased efficiencies, outage detection, tamper notification and reduced labour cost as a result of automated readings, connections and disconnections, opportunity to offer new innovative products in addition to customizing packages for customers, more flexible billing cycles for customers who will have opportunities to manage their energy consumption and change from one supplier to another with actual meter data, demand side management (DSM), distributed energy resources (DERs) etc.

The deployment of smart metering should be seen as a national emergency. The present crop of “investors” in the NESI does not have the financial backbone to deliver this project without any financial intervention from the Government who can later claw back this investment via regulatory mechanisms. The roll out of Smart Metering technology will be a game changer in view of the fact that electricity is a major driver of industrialization in any economy.

The effective and efficient implementation of the smart metering project will not only lead to a viable and reliable NESI but also increased productivity in agriculture & labour, improvement in delivery of health & education, access to communications (radio, telephone, television, mobile), improved lighting after sunset, increased public safety through outdoor lighting and more. On a more social level, studies have shown that household electrification also increases the likelihood that women would get more empowered to study and earn income.

Corruption is the bane of the power sector as well as the wider Nigerian society. Everyone everywhere looks for a way to exploit the system. The collusion of staff of electricity companies with consumers to by-pass meters, the paradox of estimated bills, entrenched poverty in the society, the believe that electricity should be a social service to be provided by the government, poor network infrastructure are some of the highlighted reasons for having up to 50% losses on the power network. Much can be done to reduce electricity theft by using technology such as e-metering.

The perennial excuse of lack of affordability or ability to pay for electricity consumed by citizens attendant to the general poverty levels in the society, sheer ignorance, impunity for theft, endemic corruption in the NESI and the wider Nigerian society, the believe that electricity should be provided as a social obligation from the government of an oil “rich” Nigeria are some of the reasons why power theft is rampant.

Eradicating electricity theft will align with the objectives of both PSRP and ERGP as this will boost the economy. Power theft is not unique to Nigeria. Only the scale of widespread is alarming here. Electricity robbers make all consumers pay more and worsen the legacy of on-going debts in the NESI. Unmetered customers get involved in power theft but e-metering/smart metering is part of the solution to this menace. Yes, power theft is a global challenge, albeit to a larger scale in Sub-Sahara Africa. We can learn from the experiences of South Africa, Mozambique and Botswana on how to tackle this ugly headed cankerworm!

Licensing of Meter Operators

Alternatively, as it is the case in the United Kingdom and elsewhere, utility metering can be handled by certified and licensed professionals called Meter Operators. These service providers will work with the DisCos to install and maintain the smart meters at the customer premises for a predetermined fee. In this case, the role of the Federal Government of Nigeria is reduced to providing the enabling environment by way of funding, legislations and regulations for this set of service providers and investors alike to proffer solutions to the teething problems bedevilling the power sector in Nigeria.

Energy Efficiency

Energy Efficiency is also an underlying solution to energy deficiencies and collection losses. Implementing practical energy efficiency projects such as the free replacement of existing bulbs with energy saving equivalents, enlightenment campaigns such as the energising education programme (EEP), energy audit, School-to-School training etc can be very apt in reducing losses when combined with power system planning, and load balancing. Yes, the availability of reliable, quality and affordable power helps with the rapid growth in agriculture while guaranteeing the industrial and overall economic development of the nation.

Rural Electrification and off-grid solutions

Presently, power supply in rural areas in many parts of the country is inadequate and unreliable. In the rural areas, the agricultural and non-agricultural loads (domestic and non-domestic) are typically catered for through common distribution networks. The distribution utilities resort to frequent load shedding in rural areas to mitigate the gap between supply and demand which affects power supply to agricultural settlements as well as non-agricultural consumers owing to their shared piece of distribution network. Yet, the demand of electricity in rural areas is increasing day by day due to increase in customer base, changes in lifestyle and consumption pattern which requires continuous strengthening of the distribution network, necessary to ensure reliable and quality power supply in rural areas with the potential to transform and improve the future energy situation in Nigeria. Deployment of renewable-based off-grid solutions such as Solar Homes, Solar-Hybrid, micro-grids etc will be apt for the rural areas as well as underserved communities in Nigeria.

Load balancing

Feeder separation in rural areas to ensure supply of electricity to agricultural based and non-agricultural consumers are differentiated through dedicated feeders is in order. This arrangement will allow the DisCos to ensure adequate and reliable power to farmers as well as to rural households resulting in high productivity and farm security. Besides, when the non-agricultural rural households get regular and uninterrupted power supply, there will be an improvement in the quality of life in rural areas, a panacea for boosting economic activity. Load balancing across the three-phases of a distribution network reduces negative sequence currents and therefore losses on the network.

Regulatory Intervention

NERC should as a matter of urgency develop an adequate incentive for loss reduction by setting realistic loss targets, penalties and bonuses. Also to be included are schemes that reward effective customer engagement and stakeholder management processes with the goal of reducing losses and energy theft.

True, the cost of loss reduction may be high but the benefits far outweigh the cost. Therefore, the aforementioned strategies can be of help in reducing the high level of non-technical losses being experienced within the NESI so as to forestall further loss of revenue which is the main attraction for would-be investors.

I am very optimistic that suggested measures and more, when implemented, will facilitate the reduction of non-technical losses to the barest minimum within the distribution network in the NESI and investors will not continue to shy away from investing in the NESI.




  1. Great article with concise analyses and doable solutions. For the real time energy consumption reading and efficiency in preventing energy losses, government also needs to invest heavily on fiber optic cables across the nation which will facilitate the movement of data at a much faster pace. We, as a nation, cannot continue to shy away from all those technologies modernity has come to offer.


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