FG Issues N728.98bn Bond To Clear Power Sector Debts Amid N1.7tn Revenue Gap

FG Issues N728.98bn Bond To Clear Power Sector Debts Amid N1.7tn Revenue Gap 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 issuance is part of the Presidential Power Sector Debt Reduction Programme (PPSDRP), coming as Nigeria’s electricity market continues to face an estimated N1.7 trillion annual funding gap caused by persistent revenue shortfalls and non-cost-reflective tariffs. The Series 2 bond consists of two major components. The Federal Government raised N402 billion through cash bonds from the domestic capital market, while another N326.98 billion was issued as non-cash bonds allocated to participating generation companies. The transaction follows the N501 billion Series 1 bond, which was completed in January 2026 and involved eight GenCos. With the latest issuance, the government says more than N1.23 trillion has now been delivered under the N4 trillion programme through the first two series. According to Special Adviser to the President on Energy, Olu Verheijen, the latest phase followed extensive verification of debts owed to generation companies and gas suppliers. Settlement agreements have been executed with 11 GenCos covering 21 power plants, providing a structured mechanism for addressing accumulated obligations in the electricity market. Verheijen said Series 1 had demonstrated that the debt-settlement model could work, while Series 2 expands the programme and strengthens confidence among stakeholders. Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, said the bond programme was designed to address accumulated obligations that have weakened liquidity, constrained investment and reduced confidence across Nigeria’s electricity value chain. However, he stressed that clearing existing debts alone would not solve the sector’s financial problems. Oyedele said the government must also strengthen market discipline, revenue assurance, reduction of technical and commercial losses and accountability across the electricity market. He said the success of the programme would ultimately be measured by whether it produces a financially sustainable electricity market capable of attracting investment, meeting its obligations and delivering more reliable electricity to Nigerians. The latest debt intervention comes against the backdrop of a persistent financial imbalance in Nigeria’s electricity industry. The Nigerian Bulk Electricity Trading Plc (NBET) estimates that revenue shortfalls and non-cost-reflective tariffs are creating an annual funding gap of approximately N1.7 trillion. The figure highlights the challenge facing the government: while the bond programme can address historical debts, deeper reforms are required to prevent fresh liabilities from accumulating. Managing Director and Chief Executive Officer of NBET, Akin Odeyemi, described the Series 2 transaction as another milestone in efforts to resolve long-standing financial challenges in the Nigerian Electricity Supply Industry. Odeyemi said unpaid obligations had constrained power producers’ ability to invest in additional generation capacity. He said the programme provides a market-aligned mechanism for settling verified legacy debts while restoring liquidity, financial confidence and sustainability to the sector. Managing Director 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 is part of the Federal Government’s broader N4 trillion framework for addressing verified legacy obligations in the power sector. Representing the Minister of Power, Permanent Secretary Mahmuda Mamman said the issuance demonstrated the government’s commitment to establishing a more stable foundation for sustainable electricity supply. Special Adviser to the President on Power, Lanre Babalola, cautioned that clearing existing debts would be insufficient unless the underlying causes of recurring liabilities were addressed. The government is therefore expected to focus on improving revenue collection, reducing losses and strengthening payment discipline across the electricity value chain. The Bureau of Public Enterprises Director-General, Ayodeji Gbeleyi, also linked sustainable electricity supply to Nigeria’s ambition of building a $1 trillion economy, arguing that reliable power is fundamental to industrial expansion and economic growth. Generation companies welcomed the latest bond issuance, describing it as an important confidence-building measure for the electricity market. Speaking on behalf of the GenCos, Sahara Group Chief Executive Officer Kola Adesina said the improved liquidity should ultimately translate into stronger operational performance across the sector. The intervention is expected to ease financial pressure on generation companies and improve their ability to meet obligations and invest in additional electricity-generating capacity. The Series 2 bond represents a major government attempt to address one of the electricity sector’s most persistent problems: accumulated unpaid obligations. However, the N1.7 trillion annual funding gap means that debt settlement will need to be accompanied by deeper reforms. For the intervention to deliver lasting results, stakeholders will need to improve revenue collection, reduce technical and commercial losses, strengthen payment discipline, ensure more sustainable tariffs and create conditions that encourage investment in generation and distribution. The Federal Government’s challenge now is to ensure that the debt being cleared through the N4 trillion programme does not simply re-emerge in another form, but instead becomes part of a broader transition towards a financially sustainable and more reliable Nigerian electricity market.