Nigeria has begun settling an estimated ₦4 trillion (US$2.8 billion) backlog of power sector debts after five electricity generation companies signed repayment agreements under a federal debt reduction programme backed by a newly issued bond, officials said on Tuesday.
The initiative follows the issuance of a ₦501 billion (US$355 million) Series 1 Power Sector Bond, which authorities said was fully subscribed by institutional investors including pension funds, banks and asset managers, signalling renewed confidence in the government’s electricity market reforms.
The programme, driven by President Bola Tinubu and known as the Presidential Power Sector Debt Reduction Programme, aims to resolve long-standing payment arrears owed to power generation companies for electricity supplied over the past decade. The debts have weighed heavily on the liquidity and balance sheets of generation firms, curbing investment across Nigeria’s electricity value chain.
At a signing ceremony in Lagos, Johnson Akinnawo, managing director of the Nigerian Bulk Electricity Trading Plc (NBET), described the programme as a turning point for the sector.
“This programme has received the full backing of President Bola Tinubu and the Federal Executive Council,” Akinnawo said. “That endorsement signals a firm commitment to revitalising Nigeria’s power sector and restoring market discipline.”
He said the settlement would strengthen confidence across the industry and enable growth throughout the generation, transmission and distribution segments.
Olu Verheijen, special adviser to the president on energy, said the bond issuance marked a decisive reset for the electricity market by combining debt resolution with broader financial and structural reforms.
She said the Series 1 issuance, executed by NBET Finance Company Plc, raised ₦300 billion (US$213 million) from the capital market, while ₦201 billion (US$142 million) was allocated in bonds directly to participating power generation companies.
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According to Verheijen, the programme covers verified receivables for electricity supplied between February 2015 and March 2025 and involves negotiated settlement agreements with individual generation companies.
Five companies operating a total of 14 power plants have signed agreements so far: First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited, and the Niger Delta Power Holding Company Limited.
She said the total negotiated settlement value for the five firms stands at ₦827.16 billion (US$587 million), to be paid in four phased instalments.
Proceeds from the Series 1 bond will fund the first and second instalments, estimated at ₦421.42 billion (US$299 million), representing about half of the total settlement amount. Payments in the initial phase will be made through a mix of cash and promissory notes.
Industry executives said clearing the legacy arrears would significantly improve liquidity for generation companies, enabling them to meet operating and debt obligations and unlock new investment.
Kola Adesina, group managing director of Sahara Power Group, said resolving the debt overhang would restore confidence among investors.
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“Capital formation depends on confidence and the ability to recover investments already made,” Adesina said. “Once this process is completed, construction will begin immediately on the second phase of our Egbin Power Plant.”
Verheijen said that when fully implemented, the programme would affect 4,483.6 megawatt-hours per hour of generation capacity and finalise payment settlements for about 290,645 gigawatt-hours of electricity billed since February 2015.
She added that the initiative would provide a foundation for new investment in capacity expansion by power generation companies serving more than 12 million registered electricity customers nationwide, while reinforcing fiscal discipline through verified claims, negotiated settlements and transparent capital market financing.
The federal government acknowledged support from the Ministry of Finance, the Ministry of Power, the Debt Management Office, the Central Bank of Nigeria, the National Pensions Commission and the Federal Inland Revenue Service in facilitating the bond issuance.
CardinalStone Partners Limited acted as lead financial adviser and issuing house, while NBET served as transaction sponsor.
Finance Minister Wale Edun, represented by Debt Management Office Director-General Patience Oniha, said the bond issuance marked a critical turning point for Nigeria’s power sector.
“This goes beyond a financing transaction,” Edun said. “It reflects the government’s commitment to honouring its obligations, restoring liquidity and confidence, and laying the groundwork for a more sustainable electricity market.”
