The Nigerian Electricity Regulatory Commission (NERC), has introduced a comprehensive set of regulations aimed at reducing electricity transmission losses and improving transparency across Nigeria’s national grid.
The directive, issued as Order No. NERC/2026/026, was released on April 8, 2026, and became effective on April 13, 2026. It establishes a strengthened framework for monitoring, measuring, and reporting transmission losses, marking a critical step toward improving efficiency and accountability in Nigeria’s power sector.
Background and Sector Context
Electricity transmission losses remain a persistent challenge in Nigeria, largely due to aging infrastructure, weak monitoring systems, and operational inefficiencies. These losses occur when electrical energy dissipates during transmission from generation plants to distribution networks.
According to data from the Nigerian Independent System Operator (NISO):
- Transmission loss factor declined from 8.71% in 2024
- To 7.24% in 2025
Despite this improvement, losses still exceed the 7% benchmark set under the Multi-Year Tariff Order (MYTO), highlighting the need for stronger regulatory intervention.
The new rules are backed by the Electricity Act 2023, which empowers NERC to enforce efficiency, transparency, and accountability across the electricity market.
Key Stakeholders and Their Roles
The new regulatory framework clearly defines responsibilities for major players in the power sector:
a. NERC (Regulator)
- Sets performance benchmarks
- Monitors compliance
- Enforces accountability across the transmission network
b. NISO (System Operator)
- Responsible for grid operations and energy flow management
- Mandated to implement advanced monitoring systems
c. Transmission Company of Nigeria (TCN)
- Manages transmission infrastructure
- Responsible for executing technical improvements to reduce losses
Key Provisions of the New Regulations
a. Mandatory Smart Metering
NISO must install smart meters at all regional interconnection boundary points by December 2026.
- Ensures accurate measurement of electricity flows
- Reduces estimation errors and data inconsistencies
b. Measurement at Transmission Substations
- Energy flows must be measured and documented at transformers within transmission substations
- Enables identification of technical loss points across the grid
c. Quarterly Regional Reporting
- NISO must submit quarterly reports on transmission losses
- Reports must be region-specific, improving transparency and targeted interventions
d. Regional Transmission Loss Framework
- Introduction of a regional Transmission Loss Factor (TLF), system
- Helps pinpoint high-loss zones and guide corrective actions
e. TCN Action Plan Requirement
The Transmission Company of Nigeria must:
- Submit a comprehensive loss-reduction plan by July 2026
- Outline operational and technical strategies to improve efficiency
Targets and Performance Benchmarks
NERC has introduced stricter performance targets to ensure measurable progress:
- Maintain losses within the 7% MYTO benchmark
- Achieve a maximum transmission loss of 6.5% by December 2026
These targets signal a shift toward results-driven regulation with clear accountability mechanisms.
Objectives of the New Framework
The initiative is designed to achieve several strategic goals:
a. Improved Transparency
Accurate, real-time data collection and reporting will enhance visibility into grid performance.
b. Strengthened Monitoring Systems
Advanced metering and reporting structures will allow NERC to better track inefficiencies and enforce compliance.
c. Enhanced Operational Efficiency
Data-driven insights will enable faster detection and resolution of faults within the transmission network.
d. Better Infrastructure Planning
Reliable data will support:
- Investment decisions
- Maintenance planning
- Grid modernization efforts
e. Fair Pricing and Market Efficiency
Accurate loss accounting will:
- Support cost-reflective tariffs
- Improve fairness in electricity pricing for consumers
Expected Impact on the Power Sector
If effectively implemented, the new rules are expected to deliver significant benefits:
- Reduction in transmission losses through improved monitoring and enforcement
- Enhanced grid reliability and stability
- Increased investor confidence due to improved transparency
- Economic gains, including lower operational inefficiencies and better service delivery
Implementation Challenges
Despite the strong framework, several risks may affect outcomes:
- Aging transmission infrastructure requiring substantial upgrades
- Funding constraints for smart metering and grid modernisation
- Technical capacity limitations in deploying advanced monitoring systems
- System-wide inefficiencies, including generation and gas supply constraints
Addressing these challenges will require coordinated efforts among NERC, NISO, TCN, and other stakeholders.
Conclusion
The introduction of Order No. NERC/2026/026 by NERC represents a significant milestone in national electricity sector reform. By mandating smart metering, enforcing regional monitoring, and setting stricter performance targets, the regulator is laying the groundwork for a more efficient and transparent transmission system.
While implementation challenges remain, the policy provides a robust framework for reducing transmission losses, improving grid performance, and strengthening the overall electricity market in Nigeria.
