THE Nigerian Electricity Regulatory Commission (NERC) has directed electricity Distribution Companies to ensure third-party revenue collectors are licensed by the Central Bank of Nigeria (CBN).
To this effect, the regulator unveiled a regulatory framework on the use of third-party collection service providers (CSPs) by electricity distribution companies (DisCos).
According to NERC, the new regulatory guideline is aimed at tightening revenue assurance, eliminating leakages, and strengthening financial transparency across the sector.
The new regulation, titled “Guidelines on Registration and Engagement of Third-Party Collection Service Providers by DisCos, 2025″, was signed by Vice Chairman Musiliu O. Oseni.
It took effect from November 1, 2025, with all existing contracts mandated to comply fully on or before December 31, 2025.
Under the new regulatory framework, DisCos are barred from engaging any Collection Service Provider (CSP) that does not possess the appropriate licence or permit from the Central Bank of Nigeria (CBN).
Also, NERC has declared that every third-party collection contract must be submitted to the Commission for approval and registration before a provider can begin operations.
The regulator also directed all DisCos to migrate to more efficient and cost-effective collection methods, hinting at digital channels, automated collections, and standardised financial switching methods as preferred alternatives.
It also introduced a major shift in contract structuring that all collection contracts must be prefunded.
This means that CSPs must remit revenue up-front before collecting payments, except in the case of providers offering banking and switching services.
The NERC also mandated that all funds arising from prefunded collection services shall be remitted through dedicated accounts maintained solely for each DisCo.
It maintained that every contract must also clearly state the transaction account details, with any additions or revisions to be immediately filed with the Commission.
It further directed that engagement agreements must contain clear and measurable performance indicators, which DisCos are required to evaluate regularly to ensure compliance and efficiency.
A key clause is the prohibition of third-party involvement in collections from Maximum Demand (MD) customers, who contribute some of the highest revenue across the electricity market.
The NERC, however, ordered that collections from MD customers must not be contracted to agents.
“Payments must be made directly to DisCo-dedicated bank accounts. No commission shall be paid to any CSP for MD customer collections,’’ the regulation stated.
The commission stated that DisCos and CSPs that fail to comply risk sanctions under NERC’s enforcement powers, including suspension of contracts and financial penalties.
The ICIR reports that most DisCos have been battling insolvency crises despite the privatisation of Nigeria’s power sector in 2013. For instance, their debt to banks has surged to over N2.6 trillion, which has led to the Federal Lawmakers’ summoning of officials of the DisCos in August.
Notably, the CBN, since 2020 escrowed DisCos’ accounts in order to monitor cash flow and settle outstanding debts to banks and other relevant stakeholders.
According to NBET documents submitted to the House of Representatives Committee on Public Accounts, as of September 30, 2020, the 11 Discos collectively owed N2.6 trillion. The breakdown is as follows:
Abuja Electricity Distribution Company (AEDC) – N330.4 billion; Eko Electricity Distribution Company – N231 billion; Benin Electricity Distribution Company – N233.2 billion; Enugu Electricity Distribution Company – N258.3 billion; Ibadan Electricity Distribution Company – N325.7 billion.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.