The Federal Authorities’s plan to problem as much as N4 trillion in government-backed bonds to settle legacy money owed owed to electrical energy technology corporations (Gencos) and gasoline suppliers has triggered issues over its dangerous debt-for-debt technique.
On the coronary heart of the initiative is a strategic transfer to transform long-standing IOUs throughout the electrical energy market into tradable, FGN-guaranteed securities.
This shift is designed to stabilise liquidity within the electrical energy worth chain, restore investor confidence, and resolve decade-old money movement disputes which have crippled energy technology and provide.
Nonetheless, whereas some analysts welcome the plan as a realistic fiscal resolution to an intractable drawback, others warn it may entrench structural market failures, deepen public debt, and create long-term liabilities for taxpayers.
How the Bonds Are Structured
Based on a time period sheet reviewed by Nairametrics, the bonds are being issued by NBET Finance Firm PLC, with full sovereign assure from the Federal Authorities of Nigeria.
The sponsor of the transaction is the Nigerian Bulk Electrical energy Buying and selling Plc (NBET), whereas CardinalStone Companions is appearing because the lead issuing home and monetary adviser.
The bond issuance has a programme measurement of N4 trillion, with Part 1 already underway. The federal government plans to lift N1.23 trillion between November and December 2025, cut up into two tranches:
- Sequence 1 Tranche A: N300 billion supplied to buyers for money by way of a book-building course of.
- Sequence 1 Tranche B: N290 billion allotted on to Gencos on the identical phrases however not paid in money. These bonds will be offered within the secondary market or pledged as collateral for loans.
The non-cash bonds present Gencos with liquidity choices with out requiring rapid money payouts from the federal government, and the issuer reserves the appropriate to broaden these allocations to Gencos as much as the permitted N1.23 trillion ceiling for Part 1.
The bonds have a 7-year tenor with semi-annual curiosity funds and a set coupon fee. The pricing will mirror the yield on a comparable 7-year FGN Bond plus a market unfold.
What the Bonds Goal to Clear up
Nigeria’s energy sector has lengthy suffered from a damaged cost construction. Gencos often complain of unpaid invoices from NBET, which in flip blames Distribution Firms (Discos) for failing to remit full funds.
Discos cite tariff shortfalls, poor assortment effectivity, and technical losses as main obstacles to assembly obligations.
Information from the Nigerian Electrical energy Regulatory Fee (NERC) reveals that in September 2025, Discos billed solely 86.4% of vitality acquired, dropping 13.6% to vitality theft or metering gaps.
Worse nonetheless, solely 81.25% of the billed quantity was collected, indicating an Mixture Technical, Business and Assortment (ATC&C) lack of over 30%.
This structural inefficiency creates a liquidity squeeze that flows upstream as Gencos can’t pay gasoline suppliers, gasoline suppliers minimize off gasoline, and technology capability dips.
The bond issuance seeks to interrupt this cycle by injecting liquidity and enabling Gencos to fulfill rapid obligations.
FG’s Place: Stabilising the Energy Sector
Based on Olu Verheijen, the Particular Adviser to the President on Vitality, the bond is a part of the broader Presidential Energy Sector Debt Restructuring Programme, which was permitted by President Bola Tinubu and ratified by the Federal Govt Council (FEC) in August 2025.
Verheijen disclosed that the bonds will assist clear verified arrears to technology and gasoline corporations and are meant to revive monetary stability to a sector that has deterred funding and stalled vitality reform efforts.
She emphasised that the bonds are absolutely government-guaranteed and amortising, that means compensation will happen regularly over time, easing fiscal strain.
Critics Warn of Fiscal Dangers and Poor Precedents
Regardless of the coverage intent, the bond programme has sparked criticism amongst former regulators and monetary analysts.
Dr. Sam Amadi, former Chairman of NERC, questioned the logic of utilizing public debt to resolve market obligations. “These are market money owed. Why is the federal government stepping in with sovereign ensures earlier than a full evaluation of how the money owed have been incurred?” he requested.
Amadi warned that recurring bailouts would encourage market complacency and cut back the strain on Discos and NBET to function effectively.
“After I was Chairman of NERC, I rejected a proposed N5 billion injection into the Afam energy plant. Markets needs to be allowed to perform, and money owed needs to be settled by way of clear regulatory processes,” he mentioned.
“Debt to Pay Debt” – Issues About Lengthy-Time period Sustainability
For Dr. Biyi Ogunmodede, an influence sector analyst at Nexton Consulting Ltd, the bond plan seems to be “utilizing debt to pay debt”. He acknowledged the potential short-term advantages however flagged issues about sustainability.
“The bond market is just not a magic wand. You continue to need to service the debt. If Discos don’t enhance efficiency and tariffs aren’t restructured, you’ll find yourself with one other spherical of unpaid market obligations,” he famous.
Ogunmodede argued that liquidity assist should go hand-in-hand with deeper sector reform, together with tariff rationalisation, Disco recapitalisation, and improved regulatory enforcement.
Specialists Name for Transparency and Reform Benchmarks
In a coverage transient shared with Nairametrics, Dr. Muda Yusuf, CEO of the Centre for the Promotion of Non-public Enterprise (CPPE), urged the federal government to embed accountability, verification, and transparency mechanisms into the bond programme.
Yusuf warned that Nigeria’s expertise with subsidy regimes reveals how well-intentioned interventions will be hijacked or poorly carried out.
“There may be an pressing have to topic all claims to rigorous audit and be certain that settlement relies on verifiable liabilities,” he mentioned.
He additionally advocated for a phased transition to cost-reflective tariffs, supported by focused social safety for low-income households. As well as, Yusuf referred to as for performance-linked reforms for Discos, together with loss discount targets, technical upgrades, and capital injections the place vital.
Implementation Framework Already Underway
The Federal Authorities has confirmed that implementation frameworks for the bond programme have been finalised, following high-level conferences with Gencos and key sector stakeholders in October 2025.
Officers reviewed the modalities for clearing verified arrears and laid out a timetable for phased funds.
Based on Ministry of Energy insiders, the bond will probably be issued in tranches aligned with ongoing verification audits of market claims.
The federal government hopes the profitable issuance of the primary N1.23 trillion will set up a blueprint for market self-discipline, setting the stage for subsequent reforms in tariff regulation, market operations, and investor governance.
What You Ought to Know:
- The bond programme is absolutely assured by the FGN, enhancing investor confidence.
- Gencos are receiving tradable securities, not money, however can monetise them within the open market.
- The bond has a 7-year tenor, semi-annual coupons, and targets institutional buyers.
- Reimbursement is tied to FG budgetary allocations and market revenues, particularly Disco collections.
- Analysts stress that with out cost-reflective tariffs, stronger Disco efficiency, and clear oversight, the intervention could fail to stop one other cycle of debt accumulation.
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