By Olusola Bello
Nigeria’s electricity market continues to post weak financial returns despite years of reforms, subsidies, and regulatory intervention. At the centre of renewed debate is the Nigerian Bulk Electricity Trading Company (NBET), an institution originally designed as a temporary stabiliser but now increasingly viewed by industry stakeholders as a structural constraint to market efficiency.
NBET was established in the aftermath of power sector privatisation to serve as an intermediary buyer of electricity from generation companies (Gencos) and seller to distribution companies (Discos). Its mandate was to absorb early market risks, guarantee payments, and help build confidence during the transition to a fully competitive electricity market. More than a decade later, however, critics argue that the model has failed to evolve and is now contributing to the very inefficiencies it was meant to resolve.
A central issue is market liquidity. Gencos have consistently raised concerns over delayed and incomplete payments, limiting their capacity to maintain infrastructure, expand generation, or meet debt obligations. These payment gaps cascade through the value chain, affecting gas suppliers who increasingly demand cash-and-carry arrangements, further constraining generation output.
Analysts point out that NBET’s presence has weakened payment discipline by insulating Discos from direct commercial consequences. Because Discos are not contracting power directly from generators, incentives to improve collections, reduce losses, or match power purchases to actual demand remain limited.
Compounding the problem is the current allocation mechanism managed by the Nigerian Electricity Regulatory Commission (NERC) through the Nigerian Independent System Operator (NISO). Power is allocated to Discos based on fixed percentages rather than real-time demand, technical capacity, or financial readiness. The result is a mismatch between supply and absorption.
Under this framework, some Discos receive more power than they can evacuate, distribute, or pay for, leading to load rejection and stranded generation capacity. While generation capacity remains underutilised, revenue losses persist across the market, reinforcing a cycle of inefficiency.
Against this backdrop, calls for a transition to bilateral contracting are growing louder. Under a bilateral market structure, Gencos would negotiate directly with Discos or eligible customers, backed by bankable agreements, payment guarantees, and enforceable penalties for default. Proponents argue that this approach would reintroduce commercial logic into the market.
Supporters of bilateral trading believe it would naturally reward efficiency and penalise weak performance. Discos with sound balance sheets, effective metering systems, and strong revenue collection would gain access to power, while inefficient operators would face pressure to reform or risk losing supply. For generators, predictable revenue streams would improve bankability and attract much-needed private investment.
“Once power supply is governed by contracts rather than allocations, the electricity market begins to behave like a real market,” an industry stakeholder noted. “Performance becomes measurable, and accountability becomes unavoidable.”
However, the push to remove NBET is not without cautionary voices. Policy analysts warn that an abrupt exit could expose weaker Discos and vulnerable consumers to supply disruptions, particularly in regions where technical and commercial losses remain high. They argue that bilateral contracting must be introduced gradually, alongside cost-reflective tariffs, improved transmission capacity, and strong regulatory enforcement.
Still, there is broad agreement that the status quo is unsustainable. Government continues to spend billions of naira annually on market shortfall interventions, a burden that underscores the failure of existing structures to achieve financial self-sufficiency.
As Nigeria seeks to unlock private capital, stabilise its power sector, and improve electricity supply for homes and businesses, the debate over NBET’s future has become emblematic of a deeper question: whether the country is ready to move from managed reform to true market discipline. For many stakeholders, resolving that question may be the key to breaking the cycle of underperformance that has long defined Nigeria’s electricity sector.