The Federal Authorities’s plan to difficulty as much as N4 trillion in government-backed bonds to settle longstanding money owed owed to electrical energy era corporations (Gencos) and fuel suppliers has drawn sharp criticism from specialists.
In separate interviews with Nairametrics, some specialists argued that the bond programme might assist ease short-term liquidity pressures within the energy sector.
Nonetheless, others warned that it dangers entrenching structural weaknesses and creating long-term monetary challenges if not correctly managed.
The controversy comes within the wake of the Federal Authorities’s announcement that it’s going to elevate N1.23 trillion throughout the subsequent 4 months as the primary part of the Presidential Energy Sector Debt Discount Programme.
The Particular Adviser to the President on Vitality, Mrs. Olu Verheijen, disclosed the plan in Abuja on Friday, noting that the initiative is designed to stabilise Nigeria’s energy sector and restore investor confidence.
In line with her, the primary tranche of the bond issuance—anticipated to be accomplished by the primary quarter of 2026—might be used to settle verified arrears owed to Gencos and fuel suppliers.
Verheijen defined that the bonds might be issued with a seven-year tenor at a hard and fast rate of interest and might be totally assured by the Federal Authorities of Nigeria.
The programme, accepted by President Bola Tinubu and endorsed by the Federal Govt Council (FEC) in August 2025, authorises the issuance of as much as N4 trillion in bonds to deal with what authorities officers describe as a legacy debt overhang within the electrical energy market.
Nairametrics experiences that President Tinubu had earlier, in June, accepted the broader N4 trillion bond initiative to deal with persistent liquidity shortfalls which have crippled energy era, discouraged funding, and worsened provide reliability throughout the worth chain.
Specialists urge warning
Whereas authorities officers argue that the intervention is critical to reset the sector, some specialists are urging warning.
Dr. Sam Amadi, former Chairman of the Nigerian Electrical energy Regulatory Fee (NERC), questioned the logic of utilizing public debt to settle what he described as “market money owed.” In line with him, step one ought to have been a regulatory and structural evaluate of how the money owed collected within the first place.
“From a monetary perspective, a bond is a method of elevating funds,” Amadi mentioned. “However the very first thing the president ought to have carried out is to return to NERC. These money owed are market money owed. The query is: how did these money owed come up? What precipitated them? Can the market cope with it?” he requested.
Drawing from his expertise as a regulator, Amadi recalled opposing direct authorities intervention in operational spending through the early years of energy sector reforms.
“Once I was Chairman of NERC, there was a gathering the place the minister on the time was proposing N5 billion to repair the Afam energy plant. I mentioned no. After you have a regulator, each sphere of the market is regulated and needs to be faraway from the market,” he mentioned.
He warned that repeated authorities bailouts might create a cycle of dependency. “The market is constructed on debt. It’s not each debt the federal government pays. In case you don’t perceive how these money owed have been incurred, within the subsequent three years, they are going to come again with one other trillion, and the federal government will borrow once more. Why ought to there be further market intervention?” he requested.
It’s “utilizing debt to pay debt” – Professional
Equally, Dr. Biyi Ogunmodede, an influence sector professional with Nexton Consulting Ltd, described the bond plan as “utilizing debt to pay debt,” expressing concern about its long-term sustainability.
“I perceive that the Federal Authorities desires to make the vitality market extra investor-friendly,” Ogunmodede mentioned. “However the easiest way to go about it’s not by way of the debt route. That mentioned, we should see how this performs out within the subsequent few years.”
However, some analysts see the bond initiative as a possibility to reset the sector—if accompanied by robust governance and reforms.
In a coverage transient shared with Nairametrics, the Chief Govt Officer of the Centre for the Promotion of Non-public Enterprise (CPPE), Dr. Muda Yusuf, confused the significance of transparency and accountability in implementing the programme.
“There may be an pressing want to make sure that all excellent claims are correctly verified, subjected to rigorous audit, and managed transparently and credibly,” Yusuf mentioned.
He warned that Nigeria’s previous expertise with gas subsidy regimes confirmed how intervention programmes could possibly be abused with out robust oversight. “Subsidy programs are weak to malpractice. Sturdy accountability mechanisms are important to stop related outcomes within the energy sector,” he added.
Yusuf additionally referred to as for deeper reforms alongside the bond issuance, together with a phased and predictable transition to cost-reflective electrical energy tariffs, backed by focused social safety for weak customers.
As well as, he urged the federal government to implement stricter efficiency benchmarks for electrical energy distribution corporations (Discos), together with recapitalisation necessities, technical upgrades, and aggressive loss discount measures.
What you must know
The Federal Authorities introduced in October that it had concluded implementation frameworks for the N4 trillion bond programme following a high-level assembly with senior executives of Gencos and different sector stakeholders.
The assembly reviewed the modalities for clearing verified arrears and restoring monetary stability to the market.
As Nigeria grapples with persistent energy shortages, rising vitality demand, and investor apathy, analysts agree that the bond programme might present short-term reduction. Nonetheless, in addition they warning that with out addressing tariff distortions, poor collections, technical losses, and weak enforcement of market guidelines, the debt drawback might resurface—leaving taxpayers to shoulder the burden as soon as once more.
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