Nigeria’s long-standing financial troubles in the power sector entered a decisive new phase as the Federal Government initiated repayments of the N4tn owed to power generation companies (GenCos).
FG begins N4tn GenCos debt repayment marks the first major attempt in years to restore liquidity across the electricity value chain.
The repayment process kicked off with the launch of a N590bn first-tranche bond issuance under the newly established NBET Finance Company Plc Bond Programme.
The programme, valued at N4tn, is structured to resolve the crippling debt backlog that has plagued GenCos and weakened power supply nationwide.
According to documents reviewed by our correspondent, the Series 1 bond issuance comprises N300bn in cash bonds floated on the capital market and N290bn in non-cash bonds, which will be allotted directly to GenCos under the same terms.
CardinalStone Partners Limited is serving as the lead issuing house and financial adviser.
A term sheet for the bond shows that the Series 1 issuance will run between November and December 2025 with a seven-year tenor, fixed coupon rates, and semi-annual interest payments.
The bonds will be amortised over their lifespan.
FG Bond Programme: A Turning Point in the Power Sector
The Federal Government’s first tranche bond issuance—central to ongoing market reforms—signals a renewed commitment to ending the liquidity challenges that have destabilised power generation for years.
Stakeholders have long argued that clearing GenCos’ debts is the only sustainable path toward stabilising the national grid and ensuring reliable electricity supply.
With Nigeria’s power sector historically hindered by NBET’s inability to fulfil payment obligations due to chronic under-remittance from distribution companies (DisCos), the GenCos’ receivables have ballooned to about N4tn, with projections estimating a rise to N6tn by year-end.
As a result, many gas suppliers suspended or reduced gas deliveries, while several power plants were forced to operate below 30% of their installed capacity.
The effect has been widespread grid instability and persistent blackouts.
The Federal Government-backed bond programme therefore aims to break this cycle.
Details of the Bond Issuance
The Series 1 bond issuance offers investors a sovereign-backed instrument listed on the Nigerian Exchange and the FMDQ Securities Exchange.
It qualifies under the Trustee Investment Act, enabling investment from pension funds, banks, insurers, and institutional asset managers.
The issuer also retains the option to absorb oversubscription of up to N1.23tn—expanding the ability to allocate additional non-cash bonds to GenCos where necessary.
According to the term sheet:
Minimum subscription is N5m for 5,000 units at N1,000 per unit.
Additional subscriptions will be accepted in multiples of N1,000.
Pricing will be benchmarked against the seven-year FGN bond yield plus a spread.
The issuance will follow a book-build process to allow for efficient price discovery.
Proceeds will be used exclusively to settle GenCos’ outstanding invoices.
Why the Debt Matters: Sector-Wide Impact
The longstanding liquidity imbalance has been one of the largest impediments to power reform in the country.
GenCos insist that NBET’s failure to settle debts has weakened their operational capacity, undermined expansion plans, and affected Nigeria’s overall generation output.
Industry analysts argue that until GenCos are financially stabilised, investments in new capacity, metering, grid expansion and gas supply cannot flourish.
By guaranteeing the bond, the Tinubu administration is signalling a willingness to address structural failures rather than relying on short-term interventions.
Investor Engagement and Market Response
Ahead of the issuance, CardinalStone Partners issued a notice inviting institutional investors—including PFAs, banks, insurers and asset managers—to an investor forum scheduled for December 10, 2025.
The notice explained that the seven-year bond will offer a coupon between 16.25% and 16.75%, with proceeds directed toward electricity market stabilisation.
It added that the instrument carries a full sovereign guarantee and qualifies for the National Pension Commission waiver.
Approval from the Central Bank of Nigeria for repo and collateral usage is still being processed.
The upcoming investor forum will be led by the Presidential Power Sector Debt Reduction Committee, chaired by the Minister of Finance.
The engagement aims to clarify reform strategies, address investor concerns, and promote participation in the multi-instrument bond programme.
Stakeholder Reactions: Confidence and Uncertainty
Although the bond issuance has been widely welcomed, industry insiders caution that stakeholders still have unanswered questions regarding implementation timelines and repayment safeguards.
A senior official privy to the discussions told our correspondent that GenCos have been invited to a meeting for further clarification.
According to him:
“The bond issuance raises more questions than answers. The meeting is expected to clarify key issues, especially around how funds will flow to GenCos and how subsequent tranches will be managed.”
Despite the reservations, the bond programme is viewed as a bold and necessary step toward restoring the financial integrity of the power sector.
A New Era for Power Sector Reform
With the Federal Government initiating the repayment of N4tn in outstanding debts through a structured bond programme, Nigeria’s power sector may be on the verge of its most significant recovery in years.
The administration’s ability to sustain the programme, enforce DisCo remittances, and improve sector governance will determine whether the initiative delivers long-term stability.
For now, the first tranche of the FG electricity bond represents progress—one that could reshape power generation, boost investor confidence, and pave the way for a more reliable electricity supply nationwide.
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