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A REVIEW AND ANALYSIS OF THE NERC GUIDELINES ON THE REGISTRATION AND ENGAGEMENT OF THIRD-PARTY COLLECTION SERVICE PROVIDERS
Overview of NERC Guidelines on Registration and Engagement of 3rd Party Collection Service Providers
In response to persistent challenges in revenue collection challenges within the Nigerian Electricity Supply Industry (NESI), the Nigerian Electricity Regulatory Commission (NERC), pursuant to its mandate under section 226 of the Electricity Act 2023 issued the Guidelines on the Registration and Engagement of Third-Party Collection Service Providers, which became effective from the 27th May 2025. These guidelines aim to standardize the engagement of agents by electricity distribution companies (DisCos) for the collection of payments from electricity consumers, while promoting efficiency, transparency, and accountability in billing and revenue collection while protecting consumer rights.
Key Requirements for Registration as a 3rd Party Collection Service Provider
To register as a third-party collection service provider, applicants must meet requirements like being a registered company showing tax compliance, demonstrating technical capability proving financial soundness, and having no record of regulatory breaches or criminal activities. To be eligible for registration, a prospective third-party collection service provider applicant must several requirements which include:
i. Corporate Registration: The applicant must be a registered company with the Corporate Affairs Commission (CAC) of Nigeria.
ii. Tax Compliance: Evidence of current tax clearance and registration with relevant financial authorities is required.
iii. Technical Capability: The applicant must demonstrate the ability to manage collections, maintain secure interoperable payment platforms, and integrate with DisCo systems.
iv. Financial Soundness: A clean financial record and evidence of solvency are mandatory. v. Regulatory Compliance History: Applicants must not have a record of regulatory breaches or involvement in criminal activities.
Engagement Process for 3rd Party Collection Service Providers
The engagement process involves submitting a proposal to the distribution company, undergoing due diligence, signing a service agreement and notifying the regulatory commission. This prevents unlicensed or informal agents from operating.
The engagement process involves:
i. Application Submission: Prospective service providers submit their proposal directly to the electricity distribution company (DisCo).
ii. Due Diligence: The DisCo verifies the service provider's qualifications and references.
iii. Execution of Agreement: A formal service-level agreement (SLA) outlining the scope, commission structure, obligations, duration and performance terms is executed.
iv. Regulatory Notification: The DisCo must notify NERC of all third-party engagements and obtain necessary clearance.
This engagement process promotes transparency and prevents the emergence of unlicensed or informal revenue agents.
Analysis of the Guidelines and Implications for Electricity Distribution Companies
For distribution companies, the guidelines offer a structured approach to revenue assurance, but also impose new compliance burdens. Key implications include:
i. Enhanced Revenue Assurance: By outsourcing collections, DisCos can focus on core operations and optimize cash flows through streamlined collections, while improving payment cycles.
ii. Oversight Obligations: DisCos remain responsible for third-party compliance and must ensure robust supervision.
iii. Liability Exposure: Misconduct by agents may expose the DisCo to regulatory sanctions, thus necessitating strict controls and requiring strengthened vendor risk management protocols.
These implications compel DisCos to re-evaluate their vendor management and oversight structures.
Compliance and Monitoring of 3rd Party Collection Service Providers
The guidelines mandate DisCos to establish robust compliance and monitoring frameworks to prevent leakages, fraud and misappropriation of customer payments. The Guidelines require DisCos to implement strong oversight frameworks including:
i. Real-time Monitoring: Collection service providers must use digital platforms that enable real-time tracking of transactions.
ii. Regulatory Reporting: DisCos are required to file periodic compliance reports to NERC.
iii. Audit and Investigative Access: NERC reserves the right to inspect the records and systems of collection of all engaged service providers.
This framework seeks to reduce leakages, fraud, and misappropriation of customer payments.
Role and Responsibilities of 3rd Party Collection Service Providers
Third-party collection providers are responsible for collecting payments, promptly remitting funds to the distribution company providing customer service support and protecting customer data privacy. They are prohibited from disconnecting customers or enforcement activities.
Third-party collection providers act as intermediaries between customers and DisCos. Their responsibilities include:
i. Customer Payment Collection: Accepting and processing payments via authorized channels.
ii. Remittance of Funds: Prompt and accurate remittance of collected funds to the DisCo.
iii. Customer Service Support: Providing receipts and resolving basic billing inquiries.
iv. Compliance with Data Privacy: Ensuring customer data Protection in compliance with the Nigeria Data Protection Act (NDPA).
The service providers are expressly prohibited from carrying out disconnections or enforcement activities, which remain the exclusive sole responsibility of the DisCos.
Impact of the Guidelines on Electricity Consumers
For consumers, the guidelines offer potential benefits like increased payment channels, reduced risk of fraud from unauthorized agents and improved service delivery from distribution companies. However, the extent benefits depend heavily on the transparency and professionalism of the engaged service providers. Weak oversight may result in customer dissatisfaction or abuse.
i. Increased Payment Channels: Consumers have more access points for bill payment, including digital and mobile platforms.
i. Reduced Risk of Fraud: Only authorized providers may collect payments, reducing the incidence of illegal agents.
ii. Improved Service Delivery: With outsourced collections, DisCos may improve their customer service turnaround.
Enforcement Mechanisms in the Guidelines
NERC can blacklist non-compliant providers impose fines and sanctions or terminate engagements. This aims to maintain discipline and integrity in revenue collection.
The Guidelines outline enforcement measures to ensure compliance; the Guidelines empower NERC to:
i. Blacklist Non-compliant Providers: Defaulting collection agents may be barred from future engagements.
ii. Impose Fines and Sanctions: DisCos and their agents may face regulatory penalties for breach.
iii. Terminate Engagements: NERC can direct the immediate disengagement of non-compliant or unethical providers.
Compliance Challenges for Implementing the NERC Guidelines
Compliance challenges include:
i. Limited capacity of DisCos to monitor multiple vendors.
ii. Inconsistent technology integration between providers and DisCos.
iii. Weak internal controls in some regions, especially rural areas.
Addressing these challenges may require capacity-building programs, standardized APIs for integration, and stricter procurement vetting processes.
Challenges and Opportunities for 3rd Party Collection Service Providers
Challenges of 3rd Party Collection Service Providers include:
i. High compliance costs and regulatory expectations.
ii. Limited margins due to commission caps.
iii. Reputational risks if DisCos are viewed poorly by customers.
Opportunities:
i. Expansion of fintech and digital payment platforms.
ii. Potential for multi-sector utility collection services.
iii. Strategic partnerships with banks and mobile network operators.
The market for third-party collectors could grow significantly with the right innovation and regulatory support.
The Impact of the Guidelines on Consumer Protection and Debt Collection Practices
The Guidelines strengthen consumer protection by eliminating illegal agents, mandating receipts and dispute mechanisms, and requiring data privacy compliance. However, consumer education and effective grievance redress remain crucial to real impact.
The Guidelines strengthen consumer protection through:
i. Elimination of Illegal Agents: Only verified and registered agents can collect payments.
ii. Receipt and Dispute Mechanisms: Customers are entitled to instant receipts and complaints must be resolved promptly.
iii. Data Protection Compliance: Agents are required to comply with data privacy laws, enhancing consumer trust.
Collection Channels and Approved Rates for Third-Party Collection Service Providers
The NERC Guidelines permit licensed third-party collection service providers to operate through secure and verifiable channels including bank branches, agent banking outlets, mobile money platforms, POS terminals, and web-based or app-enabled payment systems. These channels must be interoperable with DisCo billing systems, provide real-time transaction visibility, and issue electronic receipts to consumers. Collection service providers are compensated through a commission-based model funded by the DisCos, typically capped between 0.75% and 1.5% of the collected sums. All rates must be negotiated, transparently disclosed to NERC, and reflected in the governing Service Level Agreements. Providers are strictly prohibited from imposing additional charges on electricity consumers. NERC retains oversight through monitoring, audit rights, and approval of any rate deviations or platform modifications.
Recommendations for Effective Implementation of the NERC Guidelines
i. Establish a national registry of approved third-party agents accessible to the public.
ii. Mandate quarterly compliance reports from DisCos detailing agent performance.
iii. Adopt API-driven integration for payment monitoring and reconciliation.
iv. Launch public education campaigns on identifying approved agents.
v. Encourage whistleblower mechanisms to report unauthorized collection activities.
These measures will support NERC's vision of transparent and efficient collections.
As NESI evolves, potential areas for refinement of the Guidelines include:
i. Inclusion of minimum technology standards for digital integration.
ii. Periodic licensing renewal based on performance and compliance history.
iii. Introduction of consumer satisfaction metrics into SLA assessments.
These revisions could help future-proof the framework and accommodate innovation in utility payments.
Conclusion
The NERC Guidelines on Registration and Engagement of Third-Party Collection Service Providers represent a commendable step towards persistent revenue inefficiencies in NESI. By formalizing engagement processes, setting clear standards, and mandating oversight, the Guidelines promote transparency, greater efficiency, consumer protection, and financial discipline. However, the success of this initiative hinges on effective implementation, continuous oversight, robust compliance mechanisms, and an openness to adapt as new challenges and technologies emerge.
A REVIEW AND ANALYSIS OF THE NERC CODE OF CORPORATE GOVERNANCE FOR THE NIGERIAN ELECTRICITY SUPPLY INDUSTRY
Introduction
To improve efficiency, accountability, & transparency in the Nigerian electricity supply sector, the Nigerian Electricity Regulatory Commission (NERC) introduced the Code of Corporate Governance for the Nigerian Electricity Supply Industry (NESI) in 2025. The code lays out standards & guidelines for corporate governance practices with the goals of preserving consumer interests, boosting sustainable development in the industry, and fostering investor confidence. It is applicable to both public and private sector participants as well as all organizations engaged in the production, transmission, distribution, and trading of electricity.
The Code addresses the urgent need for improved governance, it represents the Commission's effort to establish governance norms that are tailored to the technical, financial, and regulatory complexities of the industry. By establishing guidelines and expectations for corporate behavior, the code seeks to address and create a more conducive environment for sustainable growth and development within the sector. The code applies to all Licensees in the NESI (generation, transmission, distribution, system operation, trading licensees and independent system operators), applies to both public and private sector licensees.
Key Principles and Objectives of the NERC Code of Corporate Governance
The NERC Code of Corporate Governance is built on four core principles: transparency, accountability, fairness, and responsibility. Transparency ensures that relevant information is disclosed to stakeholders in a timely and accurate manner, allowing for informed decision-making and oversight. Accountability holds directors and management responsible for their actions and decisions, ensuring that they act in the best interests of the company and its stakeholders. Fairness promotes equitable treatment of all stakeholders, including shareholders, employees, and consumers, while responsibility emphasizes the need for ethical conduct and sustainable business practices. The key principles aim to promote ethical business practices, transparency, and accountability within the electricity supply industry.
These principles encompass a wide range of areas, including board composition and responsibilities, risk management, financial reporting, and stakeholder engagement. One of the primary objectives of the NERC Code is to enhance the overall performance and efficiency of electricity companies operating in Nigeria, this is achieved through the implementation of best practices in corporate governance, which are designed to improve decision-making processes, streamline operations, and optimize resource allocation. The Code is guided by several core principles drawn from both national and international best practices:
i. Board Effectiveness and Composition: The Code mandates clear delineation of responsibilities between the board and management, encourages the inclusion of Independent Non-Executive Directors (INEDs), and promotes gender and skills diversity. The code provides robust guidance on the roles of Board structure and independence:
a. Boards must include Independent Non-Executive Directors (INEDs), making up at least onethird of board members
b. The roles between the Board chair and CEO must be separate.
c. Appointment processes must be merit based, transparent, and aimed at fostering diversity.
Gender and Skills Diversity Requirements
The code promotes gender diversity and functional expertise on boards. Companies are expected to appoint directors with a broad range of skills and encourage gender balanced representation
Role and Responsibilities of the Board Chair and INEDs
The Board chair is required to foster open discussion, ensure board effectiveness, and uphold governance culture. INEDs, on the other hand, are tasked with offering independent judgement free from managerial or shareholder influence.
The independence of the INEDs is defined rigorously to avoid conflicts, they must have no recent financial employment or family ties to the licensee.
ii. Accountability and Responsibility: Boards are expected to uphold fiduciary duties, maintain proper internal controls, and make decisions in the best interest of shareholders and stakeholders.
iii. Risk Management and Compliance: Companies are required to adopt formal risk management frameworks and align business practices with license terms, statutory obligations and sector regulations.
iv. Transparency and Disclosure: Regular disclosures of financial, operational, and governance-related information are emphasized and required to foster stakeholder confidence and regulatory trust in areas such as: Financial reporting, operational performance and governance structures and remuneration. Disclosures must adhere to relevant accounting standards and be accessible to stakeholders.
v. Ethical Leadership and Corporate Citizenship: Board members and senior executives must demonstrate integrity, professionalism, and commitment to the principles of good corporate citizenship. The code calls for zero tolerance for corruption; Transparent procurement processes and sound whistle blower protection mechanisms.
vi. Governance of Subsidiaries and Group Entities: Where holding companies or corporate groups exist, the Code mandates; Effective group-wide governance policies, independent boards for each regulated entity and Parent companies to ensure consistency across subsidiaries.
vii. Stakeholder and Community Engagement: The Code calls for a proactive stakeholder engagement framework. Licensees are required to: Engage regularly with customers, investors, communities, and regulators; Reflect stakeholder views in strategy and Build mechanisms for complaint resolution and performance feedback.
This marks a shift toward inclusive governance, although the absence of consumer board representation remains a noted gap.
The overall objective is to enhance the performance, sustainability, and public trust in the Nigeria's electricity market. By adhering to these principles, companies are expected to cultivate a culture of integrity and professionalism that ultimately benefits all parties involved in the electricity sector.
Additionally, the code seeks to bolster investor confidence by ensuring that companies maintain high standards of transparency and disclosure, thereby creating a more attractive environment for both domestic and foreign investment in the Nigerian electricity supply industry
Compliance Mechanisms of the Code
The Code adopts a "comply or explain" approach, where licensees are expected to either comply with the provisions or provide credible explanations for non-compliance.
The key compliance mechanisms include:
i. Annual Governance Reporting: Entities must submit annual compliance reports detailing their corporate governance practices.
ii. Board Evaluations: The Code mandates annual performance evaluations of boards and their committees.
iii. Internal Audit and Oversight: Licensees are expected to establish audit committees and internal audit functions that report directly to the board.
iv. Regulatory Inspections by NERC: NERC is empowered to monitor compliance, assess governance standards, and intervene where material breaches are identified.
Compliance and Implementation Challenges in the Nigerian Electricity Supply Industry
Compliance and implementation challenges of the NERC Code include resistance to change, lack of resources, and varying levels of understanding and commitment from industry stakeholders. The Code faces several hurdles in real-world application, including:
i. Weak Enforcement: The absence of clearly defined penalties or incentives undermines compliance efforts, especially among underperforming utilities.
ii. Capacity Deficits: Many licensees lack the internal capacity or expertise to operationalize the Code, particularly in governance evaluation and risk management.
iii. Conflicted Ownership Structures: State involvement in several utilities can lead to political interference, blurred governance roles, and resistance to reforms.
iv. Cultural Resistance: There remains a cultural resistance in parts of the sector that undermines transparency, board independence, and ethical leadership.
v. Varying levels of understanding and interpretation of the code's provisions: This disparity can lead to inconsistent implementation across different companies, potentially undermining the code's effectiveness in achieving its intended objectives.
vi. Cost of compliance: Particularly for smaller companies operating in the sector, can be substantial, creating a barrier to full implementation and potentially leading to a two-tiered system of governance within the industry.
The implementation and enforcement of the NERC Code of Corporate Governance are guided by several fundamental goals and principles. These consist of the following:
i. Encouraging openness and disclosure, guaranteeing the independence and efficacy of the board. ii. Improving internal controls and risk management and cultivating stakeholder involvement.
Impact of the NERC Code on the Nigerian Electricity Supply Industry
The introduction of the NERC Code of Corporate Governance has a profound impact on corporate governance practices within the Nigerian electricity supply industry. Some of the most notable effects includes:
1. Changes in board composition and Increased diversity: The increased emphasis on board independence and diversity, with companies striving to ensure that their boards are composed of individuals with a wide range of skills, experiences, and perspectives. This shift leads to more robust decision-making processes and improved oversight of company operations.
2. Increased transparency: The code's requirements for enhanced transparency and disclosure may result in more comprehensive and timely reporting of financial and non-financial information, enabling stakeholders to make more informed decisions and hold companies accountable for their performance.
3. Enhanced risk management practices: The code fosters a greater focus on risk management and internal control systems, prompting companies to develop more comprehensive approaches to identifying, assessing, and mitigating potential risks to their operations. This heightened awareness of risk contributes to improved financial stability and operational resilience within the sector.
4. Enhanced stakeholder trust and consumer satisfaction.
The implementation of the NERC Code of Corporate Governance has a significant impact on various stakeholders within the Nigerian electricity sector. For investors and shareholders, the code provides greater assurance of transparency and accountability in company operations, thereby increasing confidence in investment opportunities. By promoting ethical conduct and responsible management practices, the NERC Code has also contributed to improved consumer trust and satisfaction.
Consumers benefit from enhanced service delivery and fair treatment by electricity companies that adhere to governance standards. Moreover, employees within electricity companies have experienced positive effects from the implementation of the NERC Code. The emphasis on fairness and responsibility lead to improved working conditions, ethical behavior, and career development opportunities within these organizations.
Regulators also benefit from the code's implementation, as it has facilitated better oversight and monitoring of corporate governance practices within the sector. Overall, the NERC Code plays a pivotal role in fostering a more transparent, accountable, and sustainable electricity supply industry in Nigeria.
Where adopted effectively, the Code has the potential to deliver measurable improvements in:
i. Board Oversight: There is growing awareness among NESI boards about their governance responsibilities and obligations to the regulator and stakeholders.
ii. Risk Awareness: Licensees are gradually adopting formalized risk management frameworks, enhancing operational resilience.
iii. Transparency: Annual reporting obligations have encouraged more regular financial and performance disclosures, albeit inconsistently across the sector. iv. Investor Confidence: The introduction of the Code has improved the perception of regulatory seriousness, which could bolster investment confidence in the long term.
However, these gains remain limited in scope and heavily dependent on voluntary adherence.
Challenges and Criticism of the NERC Code
The Code has drawn valid criticisms in the following areas:
i. Vagueness in Enforcement: The "comply or explain" standard lacks sufficient regulatory power to compel action in a sector accustomed to noncompliance. ii. Inadequate ESG Provisions: In the era of global energy transition, the omission of climate governance, sustainability indicators and environmental risk assessments is a significant gap. iii. Neglect of Public Utilities' Governance Realities: The Code does not provide detailed prescriptions for dealing with legacy inefficiencies and political pressures affecting government-owned transmission and distribution companies. It neglects governance realities of public utilities. iv. Minimal Consumer Focus: The governance structure omits mechanisms for consumer feedback or representation in governance frameworks, missing a critical stakeholder group. v. Enforcement and Sanctions: A major weakness of the code is the absence of codified sanctions. To address this NERC should introduce; a tiered penalty system, Non-compliance should affect license renewals and positive incentives should reward high-governance performers.
Recommendations for Improvement
To strengthen the Code and its impact on the NESI landscape, the following recommendations are proposed:
i. Codify Sanctions and Incentives: NERC should move beyond moral suasion by establishing clear penalties and rewards for governance performance.
ii. Mandate ESG and Sustainability Reporting: Require utilities to disclose climate risk strategies and sustainability plans aligned with global standards.
iii. Establish Monitoring and Enforcement Mechanism: The establishment of a more robust monitoring and enforcement mechanism to ensure consistent compliance with the code across the industry. This could involve regular audits and the implementation of a system of incentives and penalties to encourage adherence to the code's provisions.
iv. Strengthen Public Utility Oversight: Introduce specific governance guidelines and training for boards of public sector electricity companies. v. Promote Stakeholder Inclusivity: there is a call for greater collaboration between regulatory bodies, industry associations, and other stakeholders to address emerging challenges and continuously improve the code's effectiveness in promoting good corporate governance practices. Additionally embed consumer feedback and community engagement mechanisms into the governance structure.
vi. Capacity Development Programs: NERC should invest in board training and compliance support for licensees, especially small and emerging operators. The development of more targeted training and capacity-building programs to help companies better understand and implement the code's requirements. These initiatives could focus on areas such as board effectiveness, risk management, and stakeholder engagement, providing practical guidance and best practices tailored to the specific needs of the electricity sector.
Conclusion
The NERC Code of Corporate Governance for NESI is a significant regulatory milestone with the potential to bring about cultural and operational shift in Nigeria's power sector. While it lays a strong foundation, its success will depend on how effectively it is implemented, enforced, and periodically updated to reflect changing realities. To ensure the Code does not become a symbolic document, NERC must embrace a proactive, transparent, and participatory approach embedding accountability at all levels, encouraging good behavior, and ensuring governance becomes a lived principle rather than a checkbox exercise. While challenges exist in its implementation, the code has a positive impact on stakeholders and has laid a solid foundation for future improvements in corporate governance. By aligning with international standards while addressing sectorspecific challenges, the NERC Code has positioned the Nigerian electricity sector for continued growth and sustainability through enhanced governance practices.
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