FG Issues N728.98bn Power Sector Bond To Settle GenCos’ Debts

FG Issues N728.98bn Power Sector Bond To Settle GenCos’ Debts

The Federal Government has issued a N728.98 billion Series 2 bond under its N4 trillion Power Sector Multi-Instrument Issuance Programme to settle verified legacy debts owed to 11 electricity generation companies (GenCos). The latest intervention is aimed at restoring liquidity and confidence in Nigeria’s electricity market, which continues to face a major financial crisis, including an estimated N1.7 trillion annual revenue shortfall. The bond was issued in Abuja as part of the government’s Presidential Power Sector Debt Reduction Programme (PPSDRP). The N728.98 billion Series 2 issuance comprises two major components. The Federal Government raised N402 billion through cash bonds from Nigeria’s domestic capital market, while N326.98 billion was issued as non-cash bonds allocated to participating GenCos. The latest issuance follows the N501 billion Series 1 bond completed in January 2026, which involved eight generation companies. With Series 2, participation has expanded to 11 GenCos, with settlement agreements covering 21 power plants. Officials said the combined proceeds from the two issuances have now exceeded N1.23 trillion under Phase 1 of the wider N4 trillion programme. Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the programme was designed to address accumulated obligations that have weakened liquidity and discouraged investment throughout Nigeria’s electricity value chain. Oyedele said settling the verified debts was important for restoring confidence among market participants, but warned that debt repayment alone would not resolve the sector’s underlying financial problems. He called for stronger market discipline, improved revenue assurance, lower technical and commercial losses, and greater accountability across the electricity market. According to the minister, the real measure of the programme’s success would be whether it produces a financially sustainable electricity market capable of attracting investment, meeting its obligations and delivering more reliable electricity to households and businesses. Despite the debt intervention, the Nigerian electricity market continues to face a significant structural funding problem. The Nigerian Bulk Electricity Trading Plc (NBET) estimates that persistent market revenue shortfalls and non-cost-reflective tariffs are contributing to an annual funding gap of about N1.7 trillion. This means that clearing historical debts without addressing the causes of new liabilities could leave the sector vulnerable to another cycle of unpaid obligations. Government officials have therefore stressed the need for reforms that improve collections and reduce losses across the electricity supply chain. NBET Managing Director and Chief Executive Officer, Akin Odeyemi, described the Series 2 transaction as another milestone in efforts to address long-standing financial challenges affecting Nigeria’s electricity supply industry. He said unpaid obligations had constrained the ability of generation companies to invest in additional generating capacity. Odeyemi said the programme provides a structured mechanism for settling verified legacy debts while improving liquidity, financial confidence and sustainability in the electricity market. He added that the expansion from eight GenCos under Series 1 to 11 under Series 2 reflected growing confidence in the programme. Special Adviser to President Bola Tinubu on Energy, Olu Verheijen, said the government had delivered more than N1.23 trillion through the first two series of the programme. She said the process followed extensive verification of debts owed to GenCos and gas suppliers, with settlement agreements executed with 11 generation companies covering 21 power plants. Verheijen described Series 1 as proof that the debt-settlement model could work, while Series 2 represents an expansion of the approach. She linked the intervention to the Tinubu administration’s broader objective of moving the electricity sector from accumulated debt and dysfunction towards greater financial discipline and improved service delivery. Special Adviser to the President on Power, Lanre Babalola, warned that settling legacy debts would not be enough to permanently fix the electricity market. He said the government must tackle the factors responsible for the accumulation of fresh liabilities, including weak revenue collection, poor payment discipline and technical and commercial losses. According to him, without reforms that prevent new debts from building up, the liabilities being cleared through the bond programme could return. Managing Director and Chief Executive Officer of CardinalStone Capital Advisers, Michael Nzewi, described the N728.98 billion transaction as the largest bond issuance in the history of Nigeria’s capital market. The transaction forms part of the Federal Government’s broader N4 trillion programme designed to provide a structured mechanism for addressing legacy obligations in the power sector. Representing the Minister of Power, Permanent Secretary Mahmuda Mamman said the issuance demonstrated the government’s commitment to creating a more stable foundation for sustainable electricity supply. Generation companies welcomed the latest intervention, describing it as an important confidence-building measure. Speaking on behalf of GenCos, Sahara Group Chief Executive Officer Kola Adesina said the improved liquidity must ultimately translate into stronger operational performance across the electricity market. The intervention is expected to ease some of the financial pressure on generating companies and improve their ability to meet operational commitments and invest in additional capacity. The Federal Government’s latest bond represents a significant attempt to address one of the biggest obstacles facing Nigeria’s electricity industry: accumulated unpaid obligations. However, officials and industry stakeholders acknowledge that debt clearance is only one part of the solution. The sector will still need stronger revenue collection, cost-reflective tariffs, reduced electricity losses, improved payment discipline, increased generation capacity and greater accountability across the value chain. The government is therefore expected to combine the debt-settlement programme with wider reforms aimed at preventing another accumulation of unpaid electricity obligations. The ultimate test will be whether the intervention can translate into increased investment, improved generation and more reliable electricity for Nigerian homes and businesses.