Nigeria’s electricity regulator has ordered distribution companies to reserve up to 60 per cent of eligible operating revenue for approved network rehabilitation, reinforcement and expansion projects.
The Nigerian Electricity Regulatory Commission has directed electricity distribution companies to commit half of eligible operating revenue to projects aimed at improving the country’s power distribution network. Under the revised directive, debt-free distribution companies must transfer 50 per cent of their earned non-administrative operating expenditure into dedicated capital expenditure accounts from August. The requirement will rise to 60 per cent in February 2027.
The measure is expected to increase funding for the rehabilitation, reinforcement and expansion of electricity infrastructure as complaints about unreliable supply and weaknesses in the distribution network persist. The directive is contained in an order titled “Utilisation of Earned Non-Admin Opex by Successor DisCos,” which was released on Wednesday. It was signed by NERC Chairman Musiliu Oseni and the commission’s Vice-Chairman, Yusuf Ali.
Earned non-administrative operating expenditure refers to the portion of operational revenue generated by distribution companies outside basic office administration costs. Under the new framework, part of that revenue must be reinvested in projects approved by the regulator. Capital expenditure covers investments in long-term infrastructure, including the rehabilitation, expansion and upgrading of electricity distribution networks.
NERC said the directive was designed to accelerate network improvements, strengthen the reliability of electricity supply and ensure that available revenue was directed towards critical infrastructure. The regulator instructed the distribution companies to establish and maintain dedicated capital expenditure provision accounts. Money transferred into the accounts must be used for approved projects involving network rehabilitation, reinforcement or expansion.
The proportion of revenue to be reserved will also depend partly on the debt position of each electricity distribution company. Companies without outstanding market debts will be required to comply with the 50 per cent allocation from August before moving to the higher 60 per cent threshold in February 2027.
NERC also introduced safeguards governing how the money may be spent. Distribution companies must obtain the commission’s approval before financing any project through the dedicated accounts. They will also be required to submit quarterly reports explaining how funds transferred to the accounts have been used. The reporting obligation will allow the regulator to monitor expenditure and determine whether projects comply with previously approved plans.
Distribution companies indebted to the Nigerian Bulk Electricity Trading Company and the market operator face additional requirements under the order. Affected companies have been given 180 days to conclude the reconciliation of their debts and submit repayment arrangements approved by NERC.
The Nigerian Bulk Electricity Trading Company purchases electricity from power-generating companies and resells it to distribution companies, while the market operator carries out administrative and settlement responsibilities within the electricity market. Outstanding debts involving electricity distribution companies have remained a concern because they affect the movement of funds across the power-sector value chain.
By tying the amount set aside for infrastructure to the financial position of each distribution company, NERC is seeking to combine network investment with stronger payment discipline in the electricity market. The commission said the revised arrangement would help strengthen distribution infrastructure, improve service delivery and promote greater financial discipline among the companies. The order took effect on September 4 following a regulatory review of the way distribution companies used revenue during the 2025 electricity market cycle.
Its implementation will require the companies to balance their existing operational obligations with mandatory investment in networks serving customers across their franchise areas. The distribution segment connects electricity generated and transmitted through the national grid to residential, commercial and industrial consumers. Deficiencies in that final stage of the supply chain can limit the amount of electricity delivered to customers even when power is available elsewhere in the system.
NERC’s directive places responsibility on the distribution companies to devote a defined share of eligible operating funds to infrastructure instead of leaving the scale of such investment entirely to their discretion. Compliance will be measured through dedicated accounts, prior approval of proposed projects, and quarterly expenditure reports submitted to the commission.