The Nigerian Independent System Operator (NISO) has rejected payment proposals submitted by some electricity distribution companies (DisCos) for the settlement of their outstanding obligations to the Nigerian Electricity Market and other service providers.
The decision followed a four-day public hearing held from September 1 to September 4 to examine the debts owed by the distribution companies and assess their proposed plans for clearing the outstanding balances.
The hearing was overseen by a five-member committee chaired by NISO’s Executive Director, Market Operations, Edmund Eje.
At the end of the review, the committee determined that some of the proposals submitted by the DisCos were inadequate, particularly given the size of the debts involved and how long the obligations had remained outstanding.
According to NISO, the payment frameworks proposed by some of the companies did not provide sufficient measures to address their accumulated market obligations.
The system operator also noted that the Federal Government had already netted off approximately 97 per cent of the DisCos’ outstanding obligations incurred between 2015 and 2020.
With a significant portion of the historical debts already addressed through the government’s intervention, the committee stressed the need for the affected DisCos to take immediate steps to settle their remaining liabilities.
NISO said it would now move to the next phase of the process, which could include the imposition of sanctions prescribed under the Nigerian Electricity Market Rules.
However, the system operator said the rejection of the proposals did not signal an end to discussions with the affected companies, stressing that it remained committed to resolving the issue through engagement, transparency and due process.
The four-day hearing provided an opportunity for NISO and the DisCos to examine the financial obligations accumulated across the electricity market and consider repayment arrangements designed to liquidate debts that have increasingly become a challenge to the stability and development of the power sector.
The process also brought renewed attention to concerns over financial discipline among market participants and the inability of some companies to meet their obligations to other players in the electricity value chain.
“This is a situation that has continued to affect service providers and the sustainability of the power sector,” NISO said.
DisCos caught between market debts and unpaid customer bills
The latest development adds to a long-running debt problem within Nigeria’s electricity sector, where financial obligations have accumulated at different points along the power supply chain.
While NISO and other industry stakeholders continue to press DisCos to settle their debts to the electricity market, the distribution companies have themselves complained about difficulties recovering payments from some customers, including government institutions.
In 2025, the Association of Nigerian Electricity Distributors (ANED) accused the Nigerian Air Force (NAF) of failing to settle an electricity debt of N4.34 billion, despite alleging that the agency had the financial capacity to pay the outstanding bills.
The dispute followed the disconnection of a NAF facility over unpaid electricity bills. According to an earlier report by Nairametrics, personnel of the Air Force subsequently attacked and vandalised the headquarters and a business unit of Ikeja Electric in Lagos.
The incident underscored the broader financial pressures facing DisCos as they attempt to recover revenue from customers while simultaneously meeting their obligations to other participants in the electricity market.
DisCos require sufficient cash flow to pay for electricity supplied to them and to fund the maintenance, operation and expansion of distribution networks. Persistent gaps in collections, therefore, have consequences beyond individual companies and can affect the wider electricity value chain.
Kaduna DisCo debt crisis
The financial difficulties in the distribution segment have also triggered regulatory intervention.
The Nigerian Electricity Regulatory Commission (NERC) recently took control of Kaduna Electricity Distribution Company (KAEDC) and dissolved its board amid a debt crisis involving approximately N456.5 billion in cumulative market obligations.
The intervention highlights the scale of the financial challenges confronting some electricity distributors and the growing pressure on operators to demonstrate greater financial discipline.
The issue is particularly significant because unpaid market obligations can have a cascading effect across the electricity industry. When DisCos fail to collect enough revenue from customers or remit payments as required, generators, transmission operators and other service providers can face difficulties receiving payments for the services and electricity they provide.
Billing shortfalls compound the pressure
Recent industry data also point to continuing challenges in revenue collection.
Electricity distribution companies recorded an aggregate billing efficiency of 82.03 per cent in the fourth quarter of 2025, while reporting billing shortfalls of N174.12 billion.
Collection efficiency, which measures the proportion of electricity bills successfully recovered by DisCos from customers, remains a critical indicator of the financial health of the distribution segment.
Lower collection efficiency constrains the amount of money available to DisCos to meet their obligations and can ultimately reduce payments flowing to generation companies, the Transmission Company of Nigeria (TCN) and gas suppliers.
The latest action by NISO therefore places renewed focus on the need for stronger financial discipline across the electricity market.
With some DisCos’ repayment proposals already rejected and sanctions now potentially on the table, the next stage of the process is expected to determine how the affected companies will address their outstanding liabilities while maintaining their ability to provide electricity distribution services to millions of Nigerian consumers.