NERC’S CAPEX MANDATE: CAN NIGERIA’S DISCOS INVEST THEIR WAY OUT OF FAILURE?
For years, Nigeria’s electricity Distribution Companies have operated in a loop of poor service, huge losses, and minimal investment. On September 4, 2026, the Nigerian Electricity Regulatory Commission decided to break that loop by force. NERC issued a new order compelling DisCos to set aside a fixed portion of their earned Non-Administrative Operating Expenditure for capital projects. For debt-free DisCos, that means 50% from August 2026, rising to 60% from February 2027. The funds must go into NERC-approved network rehabilitation, reinforcement and expansion, and DisCos are required to report quarterly on how every naira is used.
The reason for the hard line is clear in the numbers. In the last quarter of 2025, DisCos recorded an average Aggregate Technical, Commercial and Collection loss of 34.9%. That is almost 15 points worse than the 20.5% target in the Multi-Year Tariff Order. In plain terms, more than one out of every three units of electricity sent into the distribution network never gets paid for. It is lost to faulty equipment, illegal connections, poor billing, or customers who refuse to pay. The financial damage from that inefficiency was N139.2 billion in lost revenue in 2025 alone. NERC’s review of DisCos’ revenue use in the same year appears to have confirmed what consumers have long suspected: too little of the money earned by DisCos was being reinvested in the wires, transformers and meters that actually deliver power.
The logic behind NERC’s mandate is straightforward. If DisCos are forced to invest internally generated funds into the network, technical losses should drop, collections should improve, and service reliability should get better. Over time, that should also mean less reliance on generators for homes and businesses that currently spend heavily on diesel to fill the grid gap. But the policy also creates an immediate strain. By locking away half to three-fifths of Non-Admin OpEx for capital projects, NERC is reducing the cash DisCos have for day-to-day operations. That covers everything from paying field staff and buying spare parts to running vehicles and customer service centers. For DisCos already struggling with liquidity, this is a tough trade-off. They are being asked to sacrifice today’s operations for tomorrow’s infrastructure, without any guarantee of quick financing to bridge the gap.
There is also the reality of timing. Network projects are not switched on overnight. Procuring materials, awarding contracts, and executing rehabilitation across 11 franchise areas will take months, and in some cases years. So consumers should not expect fewer outages next month because of this order. The benefits, if they come, will be gradual and will depend heavily on how well projects are planned and executed.
What makes this directive different from past policies is enforcement. Previously, capital expenditure was part of DisCos’ Performance Improvement Plans, but compliance was weak and reporting was inconsistent. Now the allocation is mandatory, tied to each DisCo’s debt profile, and subject to quarterly reporting to NERC. That shifts the regulator from setting targets to actively policing spending. It also creates an incentive structure. Debt-free DisCos face the highest 60% allocation, which pressures indebted DisCos to clean up their books if they want more flexibility. In effect, NERC is trying to make investment non-negotiable.
But money alone will not fix distribution. Nigeria’s ATC&C loss problem is not just about old cables. It is about estimated billing that drives customers away, widespread energy theft, weak collection systems, and political pressure that makes it difficult for DisCos to disconnect defaulters or implement cost-reflective tariffs. If those issues are not addressed alongside the CapEx push, the new funds could simply disappear into projects that do not reduce losses. There is also the risk of governance failure. With NERC approving projects and DisCos reporting on them, the process must be transparent. Without independent verification, there is a danger that CapEx becomes another channel for inflated contracts and poor-quality work.
For consumers, the short-term implication will likely be complaints from DisCos about tight cash flow, and renewed calls for tariff adjustments to cover operational costs. In the medium to long term, however, if the money is actually spent on replacing dilapidated feeders and installing meters, we should see improvements in voltage, fewer outages, and better revenue collection. For the sector, this is a test of whether regulation can compel performance. NERC will have to resist pressure to grant waivers, and DisCos will have to prove they can deliver projects on time and within budget.
Ultimately, NERC has told DisCos that they can no longer treat network investment as optional. That is the right signal. But an order is not a business model. Until DisCos operate as truly commercial entities, with consequences for failure and rewards for efficiency, Nigeria will keep announcing good policies and living with bad power. The next 18 months will show whether this CapEx mandate becomes the turning point for distribution, or just another rule that gets diluted in implementation.
