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) effective from February 2027.
A new Order issued by the commission and signed by its Chairman, Dr. Musiliu Oseni and Vice Chairman, Yusuf Ali, ordered the DisCos without outstanding debts to remit 60% of their earned Non-Admin OpEx to dedicated CapEx provision accounts from the February 2027 market cycle, while the balance will go to their operation accounts
Under the framework, DisCos with outstanding debts are required to remit 30% 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.
According to the power sector regulatory commission, the latest directive was sequel to April 2026 review of DisCos’ utilisation of earned Non-Admin OpEx during the 2025 market cycle.
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The review showed that while many DisCos did not generate adequate revenue to meet their upstream market obligations while some recovered revenues above those obligations, thereby enabling them to earn substantial portions of other components of their approved revenue requirements.
The NERC stated that improvements in Aggregate Technical, Commercial and Collection (ATC&C) losses had helped some DisCos to generate adequate revenue to fully cover their Administrative Operating Expenditure (Admin OpEx), with additional funds available from other revenue requirement components.
The commission maintained that the latest framework had become imperative in view of the challenges the DisCos were contending with in accessing external funding, making it logical for them to deploy internally generated resources toward network investment.
Based on the implementation schedule, the NERC directed that compliance by the DisCos with the framework 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 the following month.
The directive further stipulated that effective from August 2026 to January 2027, DisCos without outstanding debts were required to allocate 50% of earned Non-Admin OpEx to the CapEx Provision Account and retain 50% in their DisCo Operation Account.
However, for DisCos with outstanding debts, 25% would be allocated to the CapEx account, while 25% would be retained for operations.
Also, the directive provided that where a DisCo owes either NBET or the MO, but not both, the applicable share for the outstanding obligation would instead be remitted to the dedicated CapEx account.
It would be recalled that the NERC had in July this year ordered the DisCos to dedicate a significant portion of their surplus operating revenues to CapEx and market debt repayment, which must be based on the commission’s prior approval.
