On 30 May 2025, the Nigerian Electricity Regulatory Commission (NERC) issued formal guidelines for the registration and engagement of Third-Party Collection Service Providers (CSPs) by electricity distribution companies (DisCos). The Guidelines are issued pursuant to Section 226 of the Electricity Act, 2023 and represent a major shift in how DisCos may partner with fintechs and other entities for electricity bill collection.
Use Cases for a CSP Engagement Nigeria’s Power Sector
A CSP is any third-party fintech entity engaged by a DisCo to collect electricity payments through physical or digital means. DisCos in Nigeria typically engage CSPs to address a range of operational, financial, and regulatory challenges. One of the most common reasons is the need to offer digital payment channels to customers. CSPs enable electricity bills to be paid through mobile apps, USSD codes, internet banking, and wallets services that most DisCos are not equipped to provide in-house.
In addition, CSPs help DisCos expand their geographic reach, especially into rural or underserved areas where physical service centers are limited or non-existent. Through partnerships with fintechs and agent networks, CSPs provide cash collection services via POS terminals, giving customers more accessible ways to pay.
DisCos also use CSPs to outsource payment collection operations, particularly to reduce the risk of cash handling errors and fraud. Many CSPs offer digital reconciliation, settlement automation, and real-time transaction traceability.
Key Highlights of the Guidelines
1. Mandatory Registration with NERC: All CSPs must now obtain registration and approval from NERC prior to onboarding or transacting with any DisCo. DisCos are also prohibited from engaging unlicensed CSPs.
2. CBN Licensing & NIBSS Compliance: CSPs must hold a valid license or permit from the Central Bank of Nigeria (CBN) and there systems must be integrated with the Nigeria Inter-Bank Settlement System (NIBSS) to ensure secure and traceable digital collections.
3. Contractual Terms & Notification: All DisCos must submit executed CSP agreements to NERC within 90 days of the Guidelines commencement. Contracts must specify performance benchmarks and are be subject to NERC review and audit.
4. Commission Caps: The Guidelines introduce service fee caps for different payment channels (e.g., ₦20 maximum for USSD transactions below ₦5,000). No commissions may be charged on collections from maximum demand customers.
5. Scope of Coverage
The guidelines cover collections via:
- USSD
- Mobile apps and wallets
- POS terminals
- Internet banking
- Payment gateways
Balogun Harold insights are shared for general informational purposes only and does not constitute legal advice. For tailored guidance, please contact our Fintech & Power Sector Lawyers at bhlegalsupport@balogunharold.com
