The Nigerian Electricity Regulatory Commission (NERC) has granted permission for power distribution companies (DisCos) in Nigeria to directly purchase electricity from generation companies (GenCos), marking a significant shift in the nation’s power sector.
Previously relying on the Nigerian Bulk Electricity Trading (NBET) as an intermediary for over a decade, DisCos are now allowed to engage in bilateral contracts with GenCos, streamlining the electricity supply chain, as reported by BusinessDay.
The privatisation of DisCos and GenCos in 2013 brought them under a vesting contract system overseen by NBET. However, this recent directive enables DisCos to move away from this system and procure electricity directly from GenCos. The objective is to enhance efficiency, accountability, and competitiveness in Nigeria’s electricity market by reducing intermediaries and establishing a more direct relationship between producers and distributors.
Effective January 1, 2024, DisCos are mandated to secure bilateral contracts to ensure a minimum energy purchase, mitigating energy-related risks and expediting the transition of customers to higher service bands. This change is anticipated to address longstanding liquidity challenges in the electricity industry and foster innovation through a more direct and accountable procurement system.
While there may be short-term challenges, including potential cost increases for residential customers, industry experts view this transformation as a game-changer. The shift has the potential to create a more competitive and efficient power sector, encouraging diversification of energy sources and laying the foundation for increased adoption of renewable energy in Nigeria.
