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The Nigerian Electricity Regulatory Commission (NERC) has directed electricity Distribution Companies (DisCos) to allocate up to 60% of their earned Non-Administrative Operating Expenditure (Non-Admin OpEx) to capital expenditure (CapEx) from February 2027.
The directive is contained in a new Order issued by the Commission, signed by NERC Chairman Musiliu Oseni and Vice Chairman Yusuf Ali.
Under the framework, DisCos without outstanding debts will be required to remit 60% of their earned Non-Admin OpEx to dedicated CapEx provision accounts from the February 2027 market cycle, while 40% will go to their operation accounts.
For DisCos with outstanding debts, 30% will be remitted to the CapEx account and 20% to their operational accounts, while the remaining 50% will be applied toward outstanding obligations to the Nigerian Bulk Electricity Trading Plc (NBET) and the Market Operator (MO), where applicable.
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What the NERC is saying
NERC said the directive follows an April 2026 review of DisCos’ utilisation of earned Non-Admin OpEx during the 2025 market cycle.
The review found that while many DisCos did not generate enough revenue to meet their upstream market obligations, some recovered revenues above those obligations, enabling them to earn significant portions of other components of their approved revenue requirements.
The Commission said improvements in Aggregate Technical, Commercial and Collection (ATC&C) losses had helped some DisCos generate enough revenue to fully cover their Administrative Operating Expenditure (Admin OpEx), with additional funds available from other revenue requirement components.
NERC said the new framework is necessary because DisCos face difficulties accessing external financing, making it important to deploy internally generated resources toward network investment.
- “Non-Admin OpEx is deployed for network improvement and expansion to ensure improved reliability of supply,” the Commission said.
The directive will take effect from the August 2026 market cycle, with a transitional allocation framework running until January 2027 before the higher CapEx allocation takes effect from February.
From August 2026 to January 2027, DisCos without outstanding debts are required to allocate 50% of earned Non-Admin OpEx to the CapEx Provision Account and retain 50% in their DisCo Operation Account.
For DisCos with outstanding debts, 25% will be allocated to the CapEx account, while 25% will be retained for operations. Where a DisCo owes either NBET or the MO, but not both, the applicable share for the outstanding obligation will instead be remitted to the dedicated CapEx account.
Get up to speed
In July, NERC directed DisCos to dedicate a significant portion of their surplus operating revenues to capital expenditure and market debt repayment while obtaining NERC’s approval before the funds can be spent.
- Nairametrics reported that the order triggered a major dispute within Nigeria’s power sector.
- In August, the regulator took over Kaduna Electricity Distribution Company (KAEDC), dissolving its board of directors over a mounting debt crisis that has left the utility owing about N456.5 billion in cumulative market obligations.
- NERC inaugurated a five-member interim board for KAEDC, days after dissolving the company’s board over persistent financial and operational failures.
The regulator said KAEDC’s cumulative market obligations had reached about N456.5 billion as of May 31, 2026. This comprised N415.5 billion owed to the Nigerian Bulk Electricity Trading Plc (NBET) and N41 billion owed to the Nigerian Independent System Operator (NISO), while the company also had N14.26 billion in other statutory and third-party obligations.
What you should know
Nigeria’s 12 electricity distribution companies collected about N2.16 trillion from electricity customers in 2025, based on quarterly collections of approximately N406.51 billion in the first quarter, N551.35 billion in the second quarter, N570.25 billion in the third quarter, and a record N630.93 billion in the fourth quarter.
- In the first quarter of 2026, the DisCos collected another N597.56 billion out of N756.93 billion billed to customers, representing a collection efficiency of 78.95%. About N159.37 billion in electricity bills remained uncollected during the quarter.
Nairametrics reported that the regulator issued 194 licences, permits and certifications across Nigeria’s electricity market in 2025, representing a 15.5% increase from the 168 approvals recorded in 2024.
