Nigeria has raised ₦501 billion in its inaugural bond issuance dedicated to clearing power sector debts, achieving full subscription as President Bola Tinubu’s administration moves decisively to address payment arrears that have stifled electricity generation for over a decade.
The first tranche under the Presidential Power Sector Debt Reduction Programme closed on Tuesday with strong participation from pension funds, banks, and asset managers, according to Olu Arowolo Verheijen, Special Adviser to the President on Energy. The issuance comprised ₦300 billion raised from capital markets and ₦201 billion in bonds allocated directly to power generation companies.
The programme targets 14 power plants operated by five generation companies owed for electricity supplied between February 2015 and March 2025. Total negotiated settlements stand at ₦827.16 billion, payable in four instalments, with the first bond proceeds funding approximately 50 percent of obligations through a combination of cash and promissory notes.
”Capital formation can only come when there is confidence, when you can truly see a line of sight in recovering investments previously made,” said Kola Adesina, Group Managing Director of Sahara Power Group, which operates five plants including the 1,320-megawatt Egbin facility. “Once this process is complete, construction will commence immediately on the second phase of our Egbin Power Plant.”
The settlement encompasses First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited, and Niger Delta Power Holding Company Limited, representing 4,483.60 megawatts of generation capacity. The companies have executed formal agreements with Nigerian Bulk Electricity Trading Plc (NBET), the state-owned bulk purchaser that accumulated the debts.
Breaking the Vicious Cycle
Nigeria’s chronic power shortages have constrained economic growth in Africa’s most populous nation, where blackouts remain routine despite natural gas reserves ranking among the continent’s largest. Generation companies, starved of payments, have struggled to maintain equipment and secure fuel supplies, creating a vicious cycle of unreliable output and mounting debts.
The Tinubu administration, which assumed office in May 2023, has prioritised electricity reform alongside controversial fuel subsidy removals. The debt programme represents the most concrete effort yet to restore financial viability to a sector where payment discipline collapsed under previous governments.
CardinalStone Partners Limited served as lead financial adviser and issuing house for the transaction, working with NBET as sponsor. The Debt Management Office, Central Bank of Nigeria, National Pensions Commission, and Federal Inland Revenue Service provided support for the issuance.
Pathway to Recovery
Series 1 proceeds will fund the first and second instalment payments to participating companies, estimated at ₦421.42 billion. The programme ultimately aims to settle claims for 290,644.84 gigawatt hours of electricity billed over the past decade, impacting service delivery to 12.03 million registered customers.
”The Federal Government reaffirms its commitment to disciplined implementation of the Programme,” Verheijen stated at Tuesday’s signing ceremony in Lagos. “We look forward to the participation of other power generation companies as part of our broader reforms aimed at building a financially sustainable electricity market.”
The bond structure provides a market-based mechanism for debt resolution while imposing fiscal discipline through validated claims and transparent financing. By clearing historic arrears, authorities anticipate improved liquidity for generation companies, enabling them to meet operating obligations and attract fresh investment.
Market Reforms and Future Prospects
Nigeria’s electricity market has undergone partial privatisation since 2013, when the government sold generation and distribution assets while retaining transmission infrastructure. However, the sector has remained plagued by payment defaults, with distribution companies frequently failing to remit collections to the bulk trader, which consequently cannot compensate generators.
The debt programme forms part of broader structural reforms including tariff adjustments and enhanced collection efficiency measures. Success in restoring financial discipline could prove critical to unlocking the investment required to expand generation capacity and reduce blackouts that cost Nigerian businesses billions of naira annually.
Wale Edun, Minister of Finance, and Adebayo Adelabu, Minister of Power, championed the initiative, which required coordination across multiple government agencies to structure the bonds and secure regulatory approvals.
Additional generation companies may participate in subsequent tranches as the government processes the backlog of verified receivables, with three more instalments planned to complete the ₦827.16 billion in negotiated settlements.
