The Nigerian Independent System Operator (NISO) has rejected debt repayment proposals submitted by several electricity distribution companies (DisCos) to settle their outstanding obligations to the Nigerian Electricity Market (NEM) and various service providers.
The decision follows a four-day public hearing conducted by NISO management in Abuja to review the financial standings of the distribution companies and their plans for settling long-overdue debts.
In a statement issued on Sunday, NISO warned that the failure to reach an acceptable agreement on debt settlement would lead to the imposition of sanctions against the defaulting companies.
The rejection indicates that the repayment schedules and terms offered by the DisCos were deemed insufficient or unrealistic given the scale of the outstanding liabilities and the need for financial stability within the power sector.
The ongoing dispute highlights a systemic liquidity crisis that has plagued the Nigerian Electricity Supply Industry (NESI) for years. The industry operates on a cash-to-cash cycle where GenCos produce power, the Transmission Company of Nigeria (TCN) moves it, and DisCos collect revenue from end-users to pay the upstream providers.
However, this cycle frequently breaks down due to high Aggregate Technical, Commercial and Collection (ATC&C) losses. Many DisCos struggle to collect payments from consumers, while others face challenges with tariff gaps that make it impossible to recover the full cost of the electricity they purchase from the market.
Liquidity Crisis Threatens Power Sector Stability
The financial instability caused by these debts has direct operational consequences. As the body responsible for the real-time operation of the national grid, NISO requires financial predictability to ensure system stability and manage the flow of electricity across the country.
When DisCos fail to remit payments, the resulting shortfall trickles up to the Generation Companies (GenCos). This often forces GenCos to reduce their power injection into the grid to manage their own financial risks, which manifests as load shedding or widespread blackouts for consumers.
The Nigerian Electricity Regulatory Commission (NERC) has previously attempted to address these imbalances through tariff adjustments and the implementation of the Market Stabilization Fund, but the gap between revenue collection and operational costs remains wide.
According to reports from Nairametrics, the public hearing was intended to provide a transparent platform for DisCos to justify their payment delays and present viable exit strategies for their debts.
The rejection of these proposals suggests that NISO is moving toward a more aggressive enforcement stance to prevent further erosion of market confidence. Potential sanctions could include regulatory fines or restrictions on the operational licenses of the offending DisCos.
Industry analysts suggest that without a fundamental shift in how DisCos manage their collection efficiency and a possible further review of the Multi-Year Tariff Order (MYTO), the cycle of debt and default is likely to continue.
The Transmission Company of Nigeria and other service providers continue to bear the brunt of these delays, which limits their ability to invest in critical infrastructure upgrades needed to reduce grid collapses.
The defaulting DisCos must now either revise their repayment proposals to meet NISO’s requirements or secure external financing to clear their arrears. Failure to do so will leave them vulnerable to the sanctions threatened by the system operator.
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