NERC orders DisCos to channel 60% of operating funds into CapEx from 2027

The Nigerian Electricity Regulatory Commission (NERC) has mandated electricity Distribution Companies (DisCos) to allocate up to 60% of their earned Non-Administrative Operating Expenditure (Non-Admin OpEx) towards capital expenditure (CapEx) starting February 2027. This new directive, issued by NERC Chairman Musiliu Oseni and Vice Chairman Yusuf Ali, mandates DisCos without outstanding debts to remit 60% of their Non-Admin OpEx to dedicated CapEx provision accounts while retaining 40% for operations.

DisCos with outstanding debts will have 30% allocated to CapEx, 20% to operations, with the remaining 50% directed towards outstanding obligations to NBET and the Market Operator (MO). The directive arises from NERC's April 2026 review of DisCos' Non-Admin OpEx utilization during the 2025 market cycle, which revealed that while many DisCos lacked sufficient revenue to meet their upstream obligations, some earned significant portions of other revenue requirements.

NERC stated that the new framework is crucial as DisCos struggle to access external financing, necessitating the deployment of internally generated resources toward network investment. The directive will commence from the August 2026 market cycle, with a transitional allocation framework operating until January 2027 before the full CapEx allocation takes effect from February.

For the period between August 2026 and January 2027, DisCos without outstanding debts must allocate 50% of earned Non-Admin OpEx to CapEx and retain 50% for operations, while those with outstanding debts will allocate 25% to CapEx and 25% to operations. In July, NERC instructed DisCos to prioritize capital expenditure and market debt repayment using their surplus operating revenues, after obtaining NERC's approval.

As of May 31, 2026, Nigeria's 12 electricity distribution companies owed a total of approximately N456.5 billion to NBET and NISO, including N415.5 billion to NBET and N41 billion to NISO, and had additional statutory and third-party obligations amounting to N14.26 billion. DisCos collected about N2.16 trillion from electricity customers in 2025, with quarterly collections ranging from N406.51 billion in the first quarter to a record N630.93 billion in the fourth quarter.

In 2025, the regulator issued 194 licenses, permits, and certifications, representing a 15.5% increase from the 168 approvals granted in 2024.