Nigeria's electricity distribution companies have rejected a regulatory order from the Nigerian Electricity Regulatory Commission, calling it an overreach that could scare off investors and damage confidence in the power sector.
The order, which took effect on July 1, 2026, forces distribution firms to set aside large portions of their earnings in dedicated capital expenditure accounts after paying upstream market obligations and running costs.
NERC says the move will boost investment in distribution infrastructure and improve service standards. The distribution companies disagree sharply.
Under the new rules, firms without outstanding debts to market operators must deposit 70 percent of their leftover revenue into the capital account, keeping just 30 percent for operations. The situation worsens for companies that owe money to suppliers.
Those with outstanding debts face harsher requirements. They must send 25 percent of residual revenue to Nigerian Bulk Electricity Trading Plc to cover what they owe, another 25 percent to the Market Operator, and 35 percent into the capital account, leaving only 15 percent for their own use.
If a distributor owes money to just one entity, the payment that would've gone to the other gets locked into the capital account instead.
"NERC is essentially controlling how we spend our surplus money," one utility boss told reporters. "A company with debts gets just 15 percent of leftover revenue for operations, while even debt-free companies retain only 30 percent.
Everything else goes to market participants or sits in a NERC account."
The complaint doesn't stop at revenue splits. Distribution firms must get NERC approval before accessing capital funds for projects listed in regulator-approved performance plans.
Each project needs a "no objection" letter from the commission. Firms must secure clearance before signing contracts and before each payment stage during execution.
Distribution operators say this crosses a line. "This order doesn't regulate—it administers," a northern distributor said.
"It assumes control of our boards."
According to the utility, NERC has abandoned its regulatory duty and become a financial controller. "The commission dictates exactly where earned revenue goes, in what percentages, into which accounts, and requires approval before spending a single naira," the company stated.
The distributor acknowledged that regulators can set investment obligations and performance targets. However, it argued that operational decisions about capital deployment should remain with company leadership.
Distribution companies warn that this level of control will discourage private investment in Nigeria's power infrastructure at a time when the sector desperately needs capital.
