“If I have to fix anything within my franchise, I will need to revert to NERC. This is not done anywhere. This poses extra strain on the operations of the DisCos,” one operator said
The Nigerian Electricity Regulatory Commission (NERC) has tightened its control over the revenues of electricity distribution companies (DisCos), directing them to commit a larger share of their operating funds to capital projects.
The move has triggered fresh concerns among some DisCos, which argue that the new financial controls could weaken their ability to run their businesses, respond to emergencies and make independent investment decisions.
Under the revised arrangement, debt-free DisCos will, from August 2026 to January 2027, retain 50 per cent of their earned non-administrative Operating Expenditure (OpEx), while the remaining 50 per cent will be transferred into dedicated Capital Expenditure (CapEx) Provision Accounts.
From February 2027, the amount available to the DisCos for operations will fall to 40 per cent, with 60 per cent going into the CapEx accounts.
The new directive is contained in Order No. NERC/2026/062A, titled Revised Order on Successor Distribution Companies’ Utilisation of Earned Non-Administrative Operating Expenditure.
It replaces the earlier order issued in June, which required the DisCos to transfer 70 per cent of the funds to CapEx accounts and retain only 30 per cent for operations.
NERC said the measure is aimed at ensuring that more money is channelled into improving Nigeria’s weak electricity distribution infrastructure.
The commission wants the funds used for projects contained in the DisCos’ approved Performance Improvement Plans, including feeder rehabilitation, network expansion, metering and other investments designed to improve electricity supply.
The funds will be kept in dedicated CapEx accounts and can only be withdrawn for projects approved by NERC.
The commission has also introduced several layers of approval, including project identification, a “No Objection” from NERC, procurement approval and subsequent monitoring of project implementation.
But some DisCos are unhappy with the arrangement.
They argue that companies which have improved revenue collection, reduced losses and invested in their networks should have greater freedom to determine how their funds are deployed.
An operator who declined to be named said the regulator was going too far by seeking to control the day-to-day financial decisions of privately owned companies.
The operator said the DisCos understand NERC’s responsibility to regulate the sector but questioned why the commission should determine how companies spend funds after meeting their statutory and market obligations.
The companies are also worried that the approval process could slow down urgent repairs and other operational decisions.
“If I have to fix anything within my franchise, I will need to revert to NERC. This is not done anywhere. This poses extra strain on the operations of the DisCos,” one operator said.
The disagreement reflects a deeper problem in Nigeria’s electricity sector.
NERC wants DisCos to invest more of their revenues in infrastructure and believes tighter financial controls are necessary to achieve that objective.
The DisCos, however, believe the regulator should focus on performance targets rather than control their spending decisions.
They argue that NERC already has other tools—including tariffs, performance monitoring and penalties—to ensure that DisCos meet their investment and service obligations.
For the operators, the concern is that excessive restrictions could leave them with insufficient working capital to maintain their networks, deal with emergencies and meet other operational costs.
For NERC, the priority is ensuring that money generated in the electricity market is not diverted from the investment needed to improve a distribution system that remains one of the sector’s biggest weaknesses.
The dispute could therefore become a major test of how far the electricity regulator can go in controlling the finances of privately owned DisCos while still expecting them to attract investment and improve service delivery.
