The Federal Government has finalized the implementation frameworks for a N4 trillion government-backed bond aimed at settling verified arrears owed to power Generation Companies (GenCos) and gas suppliers, a move analysts say could reshape Nigeria’s energy sector.
The announcement was made on Tuesday by Mrs. Olu Verheijen, Special Adviser to the President on Energy, following a high-level meeting in Abuja between federal government officials and senior executives from the GenCos. The meeting focused on reviewing modalities for clearing the long-standing debts, which have hampered investment and reliable electricity delivery for over a decade.
“The discussions were productive, and we have agreed on the next steps, which include bilateral negotiations to finalize comprehensive settlement agreements,” Mrs. Verheijen said. “The government is committed to balancing fiscal realities with the need to restore financial stability to the power sector.”
The bond plan, which received approval from the Federal Executive Council (FEC) in August 2025, authorizes the issuance of up to N4 trillion in government-backed bonds. This initiative is considered the largest intervention in Nigeria’s power sector debt market in more than ten years.
According to the Ministry of Energy, as of April 2025, the verified exposure of the Federal Government to GenCos, dating back to 2015, stood at N4 trillion. The arrears, which accumulated over successive administrations, have been cited as a major constraint on investment and expansion in the electricity sector.
Experts note that the bond issuance is expected to stabilize GenCo balance sheets, enabling them to meet operational costs, invest in infrastructure, and improve electricity generation. It will also provide an avenue for gas suppliers to receive timely payments, addressing a critical bottleneck in the power supply chain.
Market Implications and Challenges
Financial analysts say that while the bond represents a significant step toward resolving power sector debt, the success of the intervention depends on careful execution and transparency. “Issuing a bond of this scale is a complex task. It must be managed to ensure that funds are properly allocated, debts are verified, and repayments are made efficiently,” said a power sector consultant.
The government has indicated that the bond issuance will be closely monitored and is part of a broader strategy to attract private investment, reduce bottlenecks, and ensure a more reliable electricity supply for households and businesses across the country.
Historical Context
Nigeria’s electricity sector has long struggled with financial instability. Delayed payments to GenCos and gas suppliers, combined with infrastructure deficits and technical losses, have limited power generation and contributed to high tariffs. The N4 trillion bond is designed not just to settle arrears but also to restore investor confidence and incentivize long-term development in the sector.
The intervention comes amid renewed pressure on the government to address electricity shortages, industrial power needs, and the financial health of utilities. With a clear framework now in place, stakeholders are optimistic that the bond will mark a turning point in Nigeria’s long-troubled power sector.
Looking Ahead
The Federal Government has pledged to ensure that the bond issuance translates into tangible improvements in electricity generation and supply. Bilateral discussions with GenCos are expected to finalize comprehensive settlement agreements within the coming months, after which the bond will be deployed to clear verified arrears and stabilize the sector.
If successfully implemented, the N4 trillion government-backed bond could become a model for strategic debt management in Africa’s energy markets, demonstrating how coordinated fiscal policy and regulatory oversight can support critical infrastructure and promote economic growth.
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Reporting by Joshua Chinonye in Lagos, Nigeria.
