When the Nigerian Bulk Electricity Trading Plc (NBET) announced the successful issuance of N501.02 billion bonds to settle legacy debts outstanding on power generation companies (Gencos), it was more than any other government financing title.
The N501.02 billion Series 1 bonds represent the first issuance under the Federal Government’s N1.23 trillion initial approval under the comprehensive N4 trillion Presidential Power Sector Debt Reduction Program (PPSDRP), designed to address legacy liabilities in the Nigerian Electricity Supply Industry (NESI). Therefore, this issuance marks the first phase of a multi-tier capital markets intervention, which aims to gradually restore liquidity and financial stability in the electricity market.
For a power market burdened with over N6 trillion in outstanding dues (by December 2025), lack of liquidity and investor concerns, the transaction signaled what policymakers described as a long overdue reset.
The bond, issued through NBET Finance Company PLC, a dedicated, bankruptcy-relieving special purpose vehicle set up to issue PPSDRP bonds, is fully guaranteed by the federal government under the Presidential Power Sector Debt Reduction Program.
Structured into two tranches, a N300 billion 7-year 17.50 per cent Series 1 (Tranche A) and a N201.02 billion 7-year 17.50 per cent Series 1 (Tranche B), the instrument is designed to bring immediate liquidity to the generation segment of the Nigerian Electricity Supply Industry (NESI).
But beyond the numbers, the transaction represents an effort to restore credibility, stabilize operations and rebuild investor confidence in a sector that has been struggling for more than a decade.
Roots of liquidity crisis
Since the privatization of Nigeria's power sector in 2013, the market has suffered from a structural revenue gap. Electricity rates are not fully cost-reflective, and the federal government has made up the shortfall in the form of subsidies. However, those subsidies have not been largely financed in cash.
Although subsidy provisions have been included in the federal budget, releases against those appropriations have historically fallen below expected levels.
As a result, Gencos have consistently received only a fraction of their monthly invoices. Industry data shows that between May and October 2025, 25 generation companies issued invoices totaling N1.531 trillion but received only N547.37 billion, about 35.7 per cent of the amount due. The balance of N984.3 billion is expected to be covered by the government as tariff subsidy.
Over time, unpaid liabilities exceed N6 trillion by the end of 2025. For Gencos, this translated into rising receivables, difficulty in repaying loans, low maintenance budgets and stalled expansion projects. Gas suppliers, which depend on timely payments from power producers, were also affected, worsening the cycle of supply disruptions and grid instability.
Against this backdrop, the N501.02 billion bond is being seen as the first decisive step towards breaking the cycle.
A structured exit from inheritance dues
Speaking at the signing ceremony in Lagos, Special Adviser on Energy to President Bola Ahmed Tinubu, Olu Verheijen, described the program as a “decisive reset” of the electricity market.
Under the arrangement, verified receipts for power supplied between February 2015 and March 2025 are being settled through the agreement. Fourteen Gencos have signed full and final settlement agreements with a total negotiated value of about N827 billion.
The proceeds from the Series 1 issuance will finance the first phase of the settlement payment, which is approximately 50 percent of the negotiated amount agreed with the participating generation companies.
For government officials, the importance lies not only in clearing past dues but also in restoring liquidity in the value chain. By settling the loans in a structured manner, the government aims to strengthen payment certainty for gas suppliers, enable Gencos to stabilize assets and create space for new investments.
To date, there are five GenCOs, representing 14 power plants across the country, including First Independent Power Limited (FIPL); Geregu Power Plc; Ibom Power Company Limited; Mabon Limited; And Niger Delta Power Holding Company Limited (NDPHC), owner of 10 plants, has executed settlement agreements with NBET.
The Coordinating Minister of Finance and Economy, Mr. Wale Edun, who was represented by the Director General of the Debt Management Office, Ms. Patience Oniha, acknowledged that resolution of legacy debts was “not optional” but critical to unlocking growth in the sector.
Central to the reform narrative is NBET's claim that the bond is not a bailout but a structured capital markets intervention designed to resolve legacy obligations and restore liquidity to the Nigerian electricity supply industry.
Acting Managing Director of NBET, Mr Johnson Akinnewo, described the successful completion of the release of N501.02 billion as a milestone in implementing the comprehensive debt reduction programme.
According to him, the intervention will significantly improve liquidity, enable operators to stabilize their operations and support renewed investment.
The bond qualifies for liquidity status of the Central Bank of Nigeria and has obtained exemption from the National Pension Commission, making it eligible for investment by pension fund administrators.
Officials say the structure is in line with global best practices and reflects the administration's preference for market-based financing rather than monetary expansion.
In short, the government is attempting to solve a structural fiscal problem through capital market discipline by borrowing transparently, backed by sovereign guarantees, rather than relying on opaque financing arrangements.
Investor confidence and new projects
Perhaps the clearest indication of the bond's potential impact came from the production companies themselves.
Kola Adesina, group managing director of Sahara Power Group, which owns five power plants including Egbin Power Plant and First Independent Power Limited (one of the gencos benefiting from the bond proceeds), said chronic indebtedness has discouraged further capital formation. With receivables piling up, companies were reluctant to commit fresh funds for expansion.
However, he indicated that once the settlement process is completed, construction of the second phase of the Egbin Power Plant will begin, a project that could add significant megawatts to the national grid.
“But last year we acted swiftly based on the commitment of President Bola Ahmed Tinubu to resolve the legacy issues, and I can say that once this process is completed, construction on the second phase of our Egbin Power Plant will commence immediately. On behalf of the generation companies, I want to thank the President for this resolution,” he said.
This underlines the central promise of the bond: by restoring confidence and improving cash flows, it can unlock stalled capacity expansion and improve the availability of existing plants.
Energy analysts say production capacity in Nigeria often exceeds output actually dispatched, largely due to gas shortages, transmission bottlenecks and financial distress. If gencos can pay gas suppliers promptly and invest in maintenance, plant availability could be improved even without building entirely new stations.
Resolution of outstanding receivables is widely seen in the industry as a means to renew capital investment in production capacity.
Government officials stress that debt relief is only one pillar of a broader reform strategy. Verheijen stressed that financial restructuring must be accompanied by structural changes to prevent new liabilities.
These include improving market transparency, enforcing remittance discipline, increasing transmission capacity, and ensuring that subsidies are clearly budgeted and cash-backed where necessary.
For the administration, the bond represents a fundamental step forward, clearing up the past to make room for forward-looking reforms.
The language used by NBET describes the sovereign guarantee for growth as “inexhaustible sunlight and water”, reflecting its ambition to transform the electricity market from a subsidy-dependent ecosystem to a commercially viable one.
What does this mean for consumers
For electricity consumers, the immediate impact may be limited, as the improvement in supply will depend on how quickly the increased liquidity translates into operational stability in the generation, transmission and distribution sectors of the market.
However, over time, improved payment certainty could reduce system failure, increase plant availability and encourage new generation projects. If combined with transmission upgrades and delivery improvements, the reset could gradually improve reliability.
However, stakeholders warn that subsidies remain unsustainable without fiscal support. Energy experts argue that adding trillions of dollars annually in unfunded subsidies weakens national growth and reduces investment in other sectors.
The central question is whether the N501.02 billion bond marks a genuine reset or merely a temporary relief.
On the one hand, it demonstrates political will, structured negotiations and capital market confidence. Fourteen Gencos have signed agreements. Pension funds and institutional investors have shown interest. A sovereign guarantee underwrites the instrument.
On the other hand, the structural revenue gap of the electricity market persists. Unless tariffs move toward cost-reflectivity or subsidies are fully funded, new arrears may emerge.
Yet even critics agree that doing nothing is not an option. Without intervention, the financial crisis in the value chain could have worsened, leading to reduced production, increased risk of grid collapse and further erosion of investor confidence.
While the bond alone will not solve all the structural challenges in Nigeria's electricity market, it represents a decisive step towards restoring financial discipline, resolving legacy obligations and rebuilding investor confidence in the sector.
