Electricity distribution in Nigeria is set to undergo improvements as the Nigerian Electricity Regulatory Commission (NERC), established in 2005 under the Electric Power Sector Reform Act, has urged Distribution Companies (DisCos) to develop a structure for identifying their assets and liabilities. Calling attention to the importance of this initiative, the commission stressed that transparency and a structured approach are crucial to enhancing the overall efficiency of the sector. In a statement shared on its official X page, NERC Chairman Sanusi Garba underscored the importance of addressing assets and liabilities within the context of ongoing reforms.
These reforms are geared toward decentralising electricity Regulation to enhance performance and service delivery. Garba noted that a clear structure for delineation would create a fair allocation of resources and liabilities among stakeholders, ensuring the smooth operation of the electricity market. At a recent workshop organised by the commission, participants engaged in robust discussions about best practices and challenges in implementing a delineation system. The event emphasised the necessity of harmonised methodologies involving collaboration between the NERC, state regulatory bodies, and the DisCos.
Workshop focuses on ownership structures and liability management.
A key feature of the workshop was the focus on actionable asset and liability delineation strategies. The first segment addressed defining ownership structures, valuation methods, and operational boundaries for DisCos’ assets, while the second segment concentrated on methodologies for managing liabilities, including financial obligations, outstanding debts, and compliance with regulatory standards. These discussions were integral to identifying solutions for the financial and operational challenges that often hinder the growth of distribution companies. The insights gathered are expected to guide future policy directions, ensuring a regulatory structure that is both fair and efficient.
Meanwhile, this aligns with the commission’s broader goals of enhancing transparency and operational efficiency in the electricity sector. The regulator aims to create a more stable and investor-friendly market structure by addressing the foundational issues of asset and liability management. The workshop also showcased their dedication to using these insights to shape future policies and strategies. As a result, the approach is expected to provide a roadmap for overcoming some of the persistent challenges in the country’s electricity sector, such as inefficient service delivery and financial instability.
Understanding the role of NERC and DisCos in Nigeria’s power sector.
However, NERC, as the primary regulator of the national electricity industry, plays a pivotal role in ensuring the sector operates efficiently and transparently. Its responsibilities include licensing operators, setting performance standards, establishing customer rights and obligations, and promoting a competitive market structure. This commission is funded through fees charged to market participants; the commission also monitors the performance of electricity operators to ensure compliance with established standards. Meanwhile, DisCos, on the other hand, are responsible for delivering electricity to homes and businesses. They form the final link in the electricity supply chain, connecting consumers to the grid.
Their duties include maintaining the distribution network, installing and reading meters, and collecting Revenue on behalf of all operators in the supply chain. Therefore, effective regulation of DisCos is crucial to achieving reliable and equitable electricity distribution in the country. Nigeria’s electricity supply chain comprises generation, transmission, and distribution. Generation companies (GenCos) produce electricity, while the Transmission Company of Nigeria (TCN) transmits it to the DisCos, who then distribute it to end-users. Each stage of this chain faces unique challenges that require targeted interventions.
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For DisCos, the lack of a clear structure for asset ownership and liability management often leads to inefficiencies and disputes. This issue underscores the importance of the new call for structured methodologies. By addressing these foundational gaps, stakeholders can ensure a more resilient and accountable electricity sector, ultimately benefiting consumers. However, as the commission continues to refine its regulatory strategies, the focus on transparency and collaboration is expected to yield significant benefits, empower state-level bodies and promote localised solutions to persistent challenges.