The Nigerian Electricity Regulatory Commission, NERC, has introduced tighter controls on how electricity distribution companies, DisCos, can use surplus operational revenue, directing a larger share of the funds towards network expansion and rehabilitation.
The revised framework requires the 11 DisCos to transfer a fixed portion of their earned non-administrative operating expenditure into dedicated capital expenditure accounts.
The directive is contained in Order No. NERC/2026/062A, titled “Revised Order on Successor Distribution Companies’ Utilisation of Earned Non-Administrative Operating Expenditure.”
The order, dated September 4, 2026, replaces the earlier Order No. NERC/2026/062 issued on June 30.
The revised arrangement is expected to improve the amount of money available for approved investments in electricity distribution infrastructure.
DisCos to retain 50 per cent initially
Under the new framework, debt-free DisCos will retain 50 per cent of their earned non-administrative operating expenditure for operational needs between August 2026 and January 2027.
The remaining 50 per cent will be transferred into dedicated capital expenditure provision accounts.
From February 2027, the operational share will fall to 40 per cent, meaning that 60 per cent of earned non-administrative operating expenditure will be required to go into capital expenditure accounts.
The funds are expected to support approved projects aimed at improving distribution infrastructure and strengthening the reliability of electricity supply.
The order was signed by NERC Chairman Musiliu Oseni and Vice Chairman Yusuf Ali.
Focus on network rehabilitation
The commission’s decision comes amid persistent concerns over the condition of Nigeria’s electricity distribution networks.
Many communities continue to experience poor supply, overloaded transformers, inadequate feeders, damaged infrastructure and technical losses.
Although generation and transmission constraints remain major challenges, weaknesses in distribution infrastructure also contribute to the poor quality of electricity delivered to consumers.
NERC’s revised framework is intended to ensure that a greater proportion of DisCos’ earned operational revenue is invested in the assets required to improve service delivery.
Such investments could include transformer upgrades, feeder rehabilitation, metering infrastructure, network extension and other approved capital projects.
The commission’s position is that DisCos must balance their immediate operational needs with the long-term investments required to improve the electricity market.
Utilities object to new framework
The revised order was introduced despite objections from electricity distribution companies.
DisCos have previously argued that they require sufficient operating revenue to cover maintenance, staffing, energy procurement, technical losses and other expenses associated with their operations.
The utilities may also face increased financial pressure as they are required to allocate more funds to capital expenditure.
However, NERC’s revised position suggests that the commission believes existing revenue utilisation arrangements have not produced sufficient investment in distribution infrastructure.
The new framework therefore seeks to impose greater discipline on the use of earned non-administrative operating expenditure.
Implementation and accountability
The success of the policy will depend on the commission’s ability to monitor compliance and ensure that funds transferred into capital expenditure accounts are used for approved projects.
NERC will also need to assess whether the new arrangement gives DisCos enough liquidity to maintain daily operations while meeting their investment obligations.
The electricity market continues to face financial and structural challenges, including tariff disputes, liquidity shortages, energy theft, collection losses and disagreements among market participants.
The revised revenue framework is part of the broader effort to improve the financial sustainability of the distribution segment.
For consumers, the expected benefit is improved electricity reliability if the funds are effectively deployed.
However, the impact may not be immediate, as network rehabilitation projects often require planning, procurement and construction before they translate into better service.
NERC’s decision underscores the growing emphasis on ensuring that electricity distributors direct more of their revenue towards infrastructure development rather than relying primarily on existing networks.
