In a move aimed at increasing local supply, Nigeria’s power regulator has directed the grid operator to reduce supplies to consumers abroad.

The Nigerian Electricity Regulatory Commission (NERC) said in a directive last Friday that the grid operator’s current supply management strategy has severely harmed Nigerians since supply under bilateral contracts—including export to foreign customers—takes precedence over supply to domestic customers.

With effect from May 1, the regulator announced that it would cap the total amount of grid generation accessible to foreign off-takers at 6% for the following six months.

Nigerian power companies have electricity delivery contracts with neighbouring African nations, which provides them with foreign exchange to cover sub-economic tariff revenue. These businesses haven’t always paid their invoices on schedule, though.

Because of a lack of electricity, power outages are frequent in Nigeria, but they have recently gotten worse. Power companies have increased their rates for certain household customers who are expected to receive 20 hours a day or more of power, but the supply cannot keep up with the demand.

Nigerian power companies have bilateral contracts with large domestic users, including industry and government offices, which give them priority supply over normal customers, in addition to agreements with nations like Niger, Togo, and Benin.

The foreign sales cap, according to analysts, may confuse the industry. According to Mikolaj Judson, an analyst with international risk consultancy Control Risks, “operationally, it will require power generation companies to adjust production and distribution, and potentially modify contracts on short notice.”

He added that it will probably make things more difficult financially because it will mean less money coming in from foreign clients and more work for power distribution businesses, many of which already owe big sums to power-producing corporations.

Following the decision on Saturday, the national system’s electricity supply has surged beyond 4,700 megawatts, according to grid service data, after remaining below 3,000 megawatts for a few weeks. On typical days, local customers often receive less than 4000MW.

According to the regulator, off-takers regularly went beyond their agreed levels during peak operations at the expense of other grid users, and current bilateral and international contracts have loose conditions. It further said that penalties for breaking grid rules are not applied.

For 15% of consumers who should have received greater supply but the power companies have not been able to satisfy the stipulated 20 hours, NERC increased prices by 230% last month.

The incapacity of such clients to make timely debt payments may have also played a role in the regulator’s decision to reduce supply to foreign clients.

International consumers owe Nigerian power firms a total of $12.02 million in unpaid debt for services delivered, according to a report released by NERC in the fourth quarter of 2023.