THE Federal Government has begun using a N728.98 billion bond issuance to settle outstanding debts owed to electricity generation companies and their gas suppliers, in a move aimed at easing financial pressures across Nigeria’s power sector.
The Nigerian Bulk Electricity Trading Plc (NBET) said the settlement commenced after the successful issuance and signing of the second series of bonds under the government’s N4 trillion Power Sector Multi-Instrument Issuance Programme.
The latest transaction comprises N402 billion in cash bonds and N326.979 billion in non-cash bonds, bringing the total to N728.979 billion.
The initiative forms part of President Bola Tinubu’s Power Sector Debt Reduction Programme, which seeks to address accumulated liabilities that have constrained the operations of businesses supplying electricity and gas.
Managing Director and Chief Executive Officer of NBET, Akin Odeyemi, said the commencement of the settlement was an important step towards clearing historical obligations and improving the financial position of companies across the electricity value chain.
The company did not disclose the amount payable to each generation company or gas supplier, nor the total number of beneficiaries covered by the latest phase.
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GenCos, gas suppliers await relief
The settlement targets longstanding financial obligations within Nigeria’s electricity market, where revenue shortfalls and unpaid invoices have affected the ability of market participants to meet their commitments.
Generation companies require adequate funds to maintain power plants, procure equipment and finance operational costs. For gas-fired plants, the ability to settle gas suppliers is equally important because interruptions in fuel supply can limit electricity generation.
The settlement is therefore intended to ease some of the financial constraints affecting both power producers and their fuel suppliers.
NBET said the bond issuance would help improve liquidity and create a more predictable payment environment for companies operating in the sector.
However, the N728.979 billion settlement should not be interpreted as an equivalent cash payout. Only N402 billion is classified as cash bonds, while N326.979 billion consists of non-cash bonds.
The terms governing the redemption of the bonds, including their repayment schedules and interest conditions, were not provided in the announcement.
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N4trn programme targets legacy liabilities
The Series 2 issuance is part of a broader N4 trillion financing programme designed to settle qualifying historical debts in the power sector.
Through the programme, the government is seeking to address accumulated obligations using a combination of financial instruments rather than relying exclusively on immediate cash payments.
Odeyemi said the settlement would support efforts to establish a more commercially sustainable electricity market, with stronger liquidity, improved payment discipline and greater certainty for businesses.
He added that NBET was preparing for the next phase of the programme as implementation continues.
The latest issuance represents a substantial step towards the programme’s overall value, although the announcement did not specify how much of the N4 trillion has already been issued, settled or remains outstanding.
Debt settlement expected to support power supply
The financial condition of generation companies has implications for electricity supply because power producers need adequate working capital to maintain generating equipment and procure fuel.
A more stable payment system could help companies plan maintenance, meet operating expenses and invest in existing generation assets.
NBET said the settlement was expected to strengthen the capacity of generation companies to sustain and improve their plants, potentially supporting higher electricity output and more reliable supply.
The actual impact, however, will depend on how quickly eligible claims are settled, the terms of the bonds and whether improvements in cash flow are sustained across the electricity market.
Nigeria’s power sector depends on a network of gas suppliers, generation companies, transmission infrastructure, distribution companies and market operators. Financial difficulties at one point in the chain can affect the ability of other participants to deliver services and meet their obligations.
The Federal Government is seeking to use the debt reduction programme to resolve part of these longstanding financing problems while laying the groundwork for a more commercially viable electricity market.
NBET said its immediate priority was to prepare for the next phase of the N4 trillion programme and advance the settlement of eligible historical obligations.
