FG turns to bonds to tackle N6trn debt

Using bonds to pay power-sector debt means the government raises money from investors and uses it to settle verified obligations owed to electricity generation companies and related gas companies. It converts immediate unpaid bills into a structured government borrowing obligation. This matters because unpaid debts can weaken the companies that generate electricity and supply fuel for generation.

The clearest example is the N728.979 billion Series 2 bond issued under the N4 trillion Power Sector Debt Reduction Programme. It included N402 billion in cash bonds raised from the domestic capital market and N326.979 billion in non-cash bonds allotted to participating GenCos. NBET said settlement had begun after the bonds were issued and signed.

The arrangement can inject liquidity without relying entirely on the national budget at once. It does not by itself guarantee reliable electricity. The government still needs to sustain generation, transmission, market discipline and governance, while ensuring customers receive the promised improvement.

The government owed electricity generation companies around N6 trillion at the beginning of 2026, with the article describing the debt as reaching that level by the end of 2025. This is the sector’s broader unpaid-obligation problem. Separately, the Federal Government’s gross tariff subsidy obligation for 2025 was N1.928 trillion.

The subsidy represented 57.44 percent of the total NBET invoice. It averaged N160.69 billion each month. The quarterly amounts were N536.40 billion in the first quarter, N514.36 billion in the second, N458.76 billion in the third and N418.79 billion in the fourth. The 2025 total was slightly below the N1.949 trillion recorded in 2024.

These figures show why financing became urgent. Subsidies kept a large gap from reaching customers’ tariffs, while unpaid obligations accumulated elsewhere in the power chain. The bond programme is intended to settle verified legacy debts and improve liquidity, but the article does not say it clears the entire N6 trillion.

The N728.979 billion Series 2 bond was a government financing transaction designed to settle verified legacy debts owed to electricity generation companies and restore liquidity in the power sector. It formed part of the N4 trillion Power Sector Debt Reduction Programme, signed in September 2026.

Its structure had two parts. N402 billion came as cash bonds raised from the domestic capital market. A further N326.979 billion came as non-cash bonds allotted to participating generation companies. NBET said the settlement also covered participating GenCos and their associated gas companies, under an approved settlement framework.

This mixed structure lets the government use both raised cash and non-cash financial instruments to address old obligations. It represents progress in implementing the Presidential Power Sector Debt Reduction Programme. However, the article presents it as one Series 2 transaction, not as a complete solution to the sector’s approximately N6 trillion debt burden.

Generation companies need functioning plants and dependable inputs to produce electricity. Associated gas companies are part of the payment chain described in the settlement. Clearing verified legacy debts can therefore restore liquidity to businesses that have been financially constrained, helping the wider power value chain operate more effectively.

The mechanism is direct: NBET began settling participating GenCos and their associated gas companies after the N728.979 billion Series 2 bonds were issued and signed. The transaction used N402 billion in cash bonds and N326.979 billion in non-cash bonds. The programme was intended to settle old obligations and restore sector liquidity.

Improved payments can support generation, but they cannot alone guarantee customer supply. The minister said generation and transmission recently exceeded 5,000MW, yet national peaks do not describe every community’s experience. Substations, distribution networks, market discipline and governance must also work for better generation to become dependable electricity.

Private companies generating and distributing electricity does not remove the government’s obligation to fund subsidies or settle debts created within the electricity market. The article reports that the Federal Government’s 2025 gross tariff subsidy obligation was N1.928 trillion, covering 57.44 percent of the total NBET invoice. That large gap helps explain why unpaid obligations can accumulate.

The article also says the government could not fully fund electricity subsidies from the national budget. It therefore went to the bond market, while NBET described GenCos as shackled by government indebtedness. The government’s subsidy obligation averaged N160.69 billion monthly in 2025, and outstanding debt was put around N6 trillion.

The source does not explain every historical cause, contract or payment failure behind the debt. It does show the consequence: weak liquidity and weak growth in supply. Bond settlements, stronger market discipline and better governance are presented as necessary responses.

The government’s response goes beyond borrowing. The power minister said its strategy rests on stabilising the value chain, restoring market discipline and strengthening governance. These measures aim to make existing assets work better and improve how electricity moves through the system.

One example is the 375MW Alaoji open-cycle plant, restored to the national grid after three years offline. New transformers at Apapa, Ijora, Alausa and Lekki unlocked 672MW of transmission capacity. A new 300MVA transformer at Katampe in Abuja unlocked another 240MW. These projects address generation and transmission constraints.

The government is also diversifying the energy mix through solar power. The completed REA and partner portfolio includes 62 solar and mini-grid installations across 30 states. Together, they represent about 43.6MW of installed solar capacity and 41,735 new connections, reaching more than 208,000 people. Sustaining these gains remains the next challenge.

Generation is the production of electricity. Transmission moves that electricity over the national network, while distribution carries it through local networks to customers. Tariffs are the amounts customers are charged. When tariffs do not cover the relevant cost, a government subsidy can fill the gap. Market payments, including NBET invoices, connect the money paid into the system with the companies providing power.

The article shows the chain under pressure. In 2025, the government’s gross tariff subsidy was N1.928 trillion, equal to 57.44 percent of the total NBET invoice. It also describes GenCos as constrained by about N6 trillion in government debt. The Series 2 bonds were intended to settle verified debts and restore liquidity.

Physical improvements matter too. Generation and transmission recently exceeded 5,000MW, while substations unlocked additional capacity. Yet the minister acknowledged that a national peak cannot describe every community’s experience. Reliable customer supply requires payment, generation, transmission and distribution to function together.