NISO rejects DisCos’ debt plans, moves to sanctions over unpaid

The Nigerian Independent System Operator (NISO) has rejected repayment proposals submitted by some electricity distribution companies (DisCos) to settle outstanding obligations to the Nigerian Electricity Market, warning that sanctions may follow as financial pressures continue to weaken Nigeria’s power sector.

NISO disclosed this after a four-day public hearing held from September 1 to 4, 2026, in Abuja to review the DisCos’ outstanding debts and assess proposed arrangements for liquidating them.

A five-member committee chaired by NISO’s Executive Director, Market Operations, Edmund Eje, reviewed the submissions and found some of the payment frameworks unacceptable, particularly given the size and age of the outstanding obligations.

NISO said the Federal Government had already offset about 97 per cent of the DisCos’ obligations incurred between 2015 and 2020, leaving the affected companies to settle the remaining balances.

The system operator said the DisCos must now take immediate steps to clear the outstanding debts, failing which it would apply sanctions provided under the Market Rules.

NISO, however, said it remained committed to engagement, transparency and due process in resolving the obligations.

The latest development highlights the liquidity crisis running through Nigeria’s electricity value chain. Persistent payment shortfalls by DisCos constrain their ability to meet obligations to generation companies, transmission operators and gas suppliers, potentially affecting electricity supply and sector investment.

The DisCos themselves face revenue-recovery challenges, including unpaid bills from major customers and government institutions.

In 2025, the Association of Nigerian Electricity Distributors (ANED) accused the Nigerian Air Force of owing about N4.34 billion in unpaid electricity bills. The dispute followed the disconnection of an NAF facility and later escalated into the reported vandalisation of facilities belonging to Ikeja Electric in Lagos.

The episode highlighted the difficult position of DisCos, which must collect electricity revenues while also financing distribution operations and settling obligations across the electricity market.

The financial strain has also affected individual operators. The Nigerian Electricity Regulatory Commission (NERC) recently assumed control of Kaduna Electricity Distribution Company (KAEDC) and dissolved its board over a debt crisis involving about N456.5 billion in cumulative market obligations.

Meanwhile, DisCos recorded aggregate billing efficiency of 82.03 per cent in the fourth quarter of 2025, alongside billing shortfalls of about N174.12 billion.

Weak collection means that electricity billed to customers is not fully converted into cash, leaving less money available for payments to GenCos, the Transmission Company of Nigeria and gas suppliers.

NISO’s latest move therefore signals a tougher push for financial discipline in the power market. But while sanctions could compel defaulting DisCos to improve payment compliance, the wider liquidity problem will persist unless the sector achieves stronger collections, better metering, improved billing efficiency and more sustainable cash flows across the electricity value chain.