The CBN Framework for financing of National Mass Metering Programme (NMMP): An Opportunity for Local Meter Manufacturers in Nigeria

The CBN Framework for financing of National Mass Metering Programme (NMMP): An Opportunity for Local Meter Manufacturers in Nigeria

Introduction

In August 2020, President Muhammadu Buhari directed the introduction of mass metering programme with the aim of bridging Nigeria’s metering gap – an estimated 6.25 million customers remain unmetered. As an indication of the Federal Government’s (FG) commitment to the mass metering programme, the Central Bank of Nigeria (CBN) recently released the Framework for financing of National Mass Metering Programme (the Framework). The Framework outlines the operational modalities of the CBN’s financing support to the electricity distribution companies (DisCos) and local meter manufacturers in Nigeria.

The National Mass Metering Programme

The NMMP announced by the FG has the following objectives:

• Increase of Nigeria’s metering rate.
• Elimination of arbitrary estimated billing.
• Strengthening of the local meter value chain by increasing local meter manufacturing, assembly, and deployment capacity.
• Supporting of Nigeria’s economic recovery by creating jobs in the local meter value chain.
• Reduction of collection losses and increasing financial flows to achieve 100% market remittance obligations of the DisCos.
• Improve network monitoring capability and availability of data for market administration and investment decision making.

Historical Analysis of the NMMP Framework and the Metering Sector in Nigeria

Since its electricity sector was liberalised in 2005, Nigeria has faced severe metering challenges in addition to other challenges facing the Nigeria Electricity Supply Industry (NESI). This has adversely impacted the collection efficiencies of DisCos. The unavailability of meters has meant the prevalence of estimated billing practices across the NESI. Estimated billing often results in customers paying for more power than they consume as their bills are not directly tied to the exact amount of energy they consume extracted from metered readings. The agitation by electricity customers to be metered in order to pay for actual power consumed resulted in the FG undertaking the following initiatives – the promulgation of the Meter Asset Provider (MAP) Regulation in 2018; the declaration of a national mass metering programme in 2020 in order to fast-track the deployment of meters and close the metering gap; and the grant of a one-year waiver on the import levy imposed on imported electricity meters.

Thus, the emergence of a nationwide mass metering programme is the FG’s response to the problems of arbitrary estimated billing and metering gap in the country.

The Meter Asset Provider (MAP) Regulations 

The MAP Regulations were promulgated in 2018 to create a framework for more private sector participation in the NESI through the introduction of MAPs. In particular, the MAP Regulations was promulgated to encourage the development of independent and competitive meter services in the NESI; eliminate estimated billing policies in the NESI; attract private investment to the provision of metering services in the NESI; and close the metering gap through accelerated meter roll out in the NESI.

The MAP Regulations require MAPs to ensure that local meter manufacturers are patronized. Paragraph 9 of the MAP Regulations mandates MAPs to source a minimum of 30% of their contracted metering volumes from local meter manufacturing companies in Nigeria. NERC estimates that there exists a 6.25 million metering gap deficit across the country. Thus, of the over 6million meters to be procured to fill the metering gap, 1.8 million meters should ordinarily be purchased from local manufacturers. To encourage the local metering manufacturing sector, the Federal Government imposed an additional import levy of 35% on imported meters. However, the local meter manufacturing sector has been plagued with funding challenges which has rendered the sector incapable of providing the numbers needed to bridge the metering gap. The inability of local meter manufacturers to meet local demand however resulted in the FG granting a one-year waiver on the payment of import levy on fully built meter units.

Analysis of the NMMP Framework

Participants in the local metering manufacturing sector admit that funding and financial incentives is one of the major challenges facing the sector. However, there exists some concern that the FG’s waiver of import levy will stall the growth that the sector has experienced during the imposition of the import waiver. In response to this concern, the government has adopted a dual approach – permit a waiver on import levy for a period of 12 months and create a framework for financing the local meter manufacturing sector. The Framework introduced by the CBN recently, sets out the operational modalities of the CBN’s financing/ facility support to the DisCos and local meter manufacturers.

Click here to access and read the complete article.