Nigerian DisCos Reject NERC Directive on CapEx Provision Accounts
Nigeria's electricity distribution companies are challenging a new NERC directive mandating capital expenditure provision accounts, citing regulatory overreach and risks to investor confidence.
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Nigeria’s electricity distribution companies (DisCos) have formally rejected a recent directive from the Nigerian Electricity Regulatory Commission (NERC) requiring the establishment of capital expenditure (CapEx) provision accounts, warning the move could undermine investor confidence and disrupt utility operations.
According to reports from Business Day, the DisCos argue that the directive constitutes regulatory overreach, with This Day quoting industry representatives stating that NERC is now “dabbling in internal admin of utilities.” The new requirement mandates that DisCos set aside a portion of revenues specifically for capital investment, a function traditionally managed internally or in coordination with financiers and shareholders.
The DisCos contend that the directive disrupts financial planning, particularly for companies already burdened by market debts. This Day reported that affected utilities are left with only 15% of residual revenue for operational expenditures (OPEX) after accounting for debt obligations and other regulatory levies, raising concerns about their ability to maintain service delivery while complying with the new CapEx rules.
Industry pushback centers on the assertion that NERC’s intervention blurs the line between regulatory oversight and corporate governance. Analysts note that investor confidence in Nigeria’s power sector hinges on predictable regulatory frameworks, and unilateral directives risk deterring future capital inflows. As of now, NERC has not issued a public response to the DisCos’ objections.