KEY POINTS
- Nigeria plans to issue up to N4 trillion in government-backed bonds to clear legacy power sector debts
- Supporters say the move could stabilise liquidity, while critics warn it shifts private failures onto public debt
- Analysts stress that without tariff reform and Disco performance improvements, the sector could slip back into crisis
The Federal Government’s plan to issue as much as N4 trillion in sovereign-backed bonds to clear long-standing debts in the power sector is reviving an old debate about whether Nigeria is papering over structural failures with fresh public borrowing.
At the centre of the proposal is a strategy to convert years of unpaid obligations owed to electricity generation companies and gas suppliers into tradable, government-guaranteed securities.
Officials say the move is intended to restore liquidity to a power market that has struggled for more than a decade under the weight of unpaid invoices, weak collections and investor mistrust.
Under the plan, the bonds will replace outstanding IOUs across the electricity value chain, offering Gencos instruments they can trade, pledge or hold to maturity rather than wait indefinitely for cash settlements.
Supporters argue the approach could unlock financing, steady power generation and stabilise gas supply. Critics warn it risks shifting private sector failures onto the public balance sheet.
According to documents reviewed by Nairametrics, the bonds will be issued by NBET Finance Company Plc with a full guarantee from the Federal Government of Nigeria. Nigerian Bulk Electricity Trading Plc is sponsoring the transaction, while CardinalStone Partners is acting as lead issuing house and financial adviser.
The total programme size is N4 trillion, with the first phase already in motion. The government plans to raise N1.23 trillion between November and December 2025 through two tranches. One tranche, valued at N300 billion, will be sold to investors for cash through a book-building process.
Another tranche of N290 billion will be allocated directly to Gencos on identical financial terms but without immediate cash payment. Those bonds can be sold in the secondary market or used as collateral to secure loans.
The bonds will have a seven-year tenor, pay interest semi-annually and carry a fixed coupon priced against comparable federal government bonds, with an added market spread.
Why the power market keeps bleeding cash
Nigeria’s electricity sector has long been trapped in a cycle of payment shortfalls. Distribution companies frequently fail to remit full payments to NBET, citing tariff gaps, poor collections and technical losses. NBET, in turn, is unable to fully settle Gencos, leaving power producers struggling to pay gas suppliers and maintain generation capacity.
Regulatory data shows the depth of the problem. In September 2025, Discos billed customers for just over 86 percent of the electricity they received, with the remainder lost to theft, metering gaps or technical faults. Of what was billed, only about 81 percent was collected, pushing aggregate technical, commercial and collection losses above 30 percent.
These weaknesses choke cash flow upstream and force power plants to operate below capacity or shut down entirely. The bond programme is designed to break that cycle by injecting liquidity into the system and allowing Gencos to meet immediate financial obligations.
Olu Verheijen, the President’s special adviser on energy, said the bond issuance forms part of the Presidential Power Sector Debt Restructuring Programme approved by President Bola Tinubu and ratified by the Federal Executive Council in August.
She said the bonds would be used to clear verified arrears owed to generation and gas companies, helping to stabilise a sector that has discouraged investment and slowed reform for years. Verheijen added that the amortising structure of the bonds would spread repayments over time, easing pressure on public finances.
Officials argue that without intervention, unpaid debts would continue to undermine supply, worsen outages and deter new capital at a time when Nigeria is trying to expand electricity access and industrial output.
