Nigeria’s electricity sector has been thrust into the spotlight following the implementation of the NERC CapEx Order, a new directive that requires electricity distribution companies (DisCos) to dedicate a significant portion of their surplus revenues to network upgrades and debt repayment. Effective from July 1, 2026, the order has quickly sparked intense debate across the industry, with stakeholders questioning both its financial implications and its impact on the evolving structure of Nigeria’s electricity market.
At the heart of the controversy is the Nigerian Electricity Regulatory Commission’s decision to require DisCos to obtain regulatory approval before deploying designated funds for capital expenditure. While NERC insists the measure is necessary to ensure revenues intended for infrastructure development are properly invested, critics argue it gives the regulator excessive control over the finances of privately owned companies. Industry sources indicate that several DisCos are unhappy with the directive, although discussions are currently ongoing behind closed doors to find common ground.
The dispute has expanded beyond the distribution companies, drawing in state electricity regulators, the Federal Ministry of Power, lawmakers, and other key stakeholders. The Forum of Commissioners of Power and Energy in Nigeria (FOCPEN) has openly challenged the order, arguing that states that have completed the transition process under the Electricity Act 2023 should have exclusive authority over electricity market activities within their jurisdictions. This disagreement has reignited questions about where federal regulatory oversight ends and state authority begins in Nigeria’s increasingly decentralized electricity sector.
Supporters of the NERC directive believe stronger oversight is long overdue. They argue that years of inadequate investment in transformers, feeders, and other critical infrastructure have contributed to persistent power outages across the country. According to NERC, some DisCos now generate revenues beyond their operating expenses and should be channeling more of those funds into improving service quality and expanding networks. The Commission maintains that the order is designed to ensure consumers ultimately benefit from better infrastructure and more reliable electricity supply.
However, several industry experts have warned that the approach could have unintended consequences. Concerns have been raised that tighter regulatory control over cash flows may discourage lenders and investors from supporting the sector at a time when liquidity challenges remain severe. With Nigeria’s DisCos collecting trillions of naira annually and a newly established multi-stakeholder committee set to review the dispute, the outcome could shape not only the future of the NERC CapEx Order but also investor confidence, regulatory relationships, and the long-term direction of Nigeria’s electricity market reforms.
source: nairametrics
