The Federal Government has commenced the settlement of Nigeria’s long-standing power sector debts, estimated at about ₦4 trillion, after five electricity generation companies signed agreements under the Presidential Power Sector Debt Reduction Programme.
The initiative follows the issuance of a ₦501 billion bond, which officials say was fully subscribed by institutional investors, including pension funds and asset managers, signalling renewed confidence in the government’s approach to fixing structural weaknesses in the electricity market.
Who Is Involved and What Was Signed
The settlement agreements were executed between the Nigerian Bulk Electricity Trading Plc (NBET) and five generation companies operating 14 power plants nationwide. They include First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited and the Niger Delta Power Holding Company Limited.
Under the framework, verified receivables for electricity supplied between 2015 and 2025 will be settled through negotiated payments, with the first phase funded by proceeds from the bond issuance.
How the System Works
At the heart of the programme is a structured debt-resolution mechanism that combines capital market financing with phased settlements. By issuing bonds through a special-purpose vehicle linked to NBET, the government is converting unpaid obligations into tradable instruments, allowing generation companies to recover part of their historical debts while spreading fiscal impact over time.
Officials say this approach is designed to stabilise the market without injecting inflationary pressure or distorting public finances.
Why This Matters
For more than a decade, unpaid electricity invoices have constrained liquidity in Nigeria’s power sector, weakening balance sheets and discouraging new investment. Generation companies have struggled to meet maintenance and debt obligations, limiting their ability to expand capacity even as demand continues to rise.
By clearing a significant portion of legacy arrears, authorities argue that power producers will regain the financial headroom needed to reinvest, improve plant reliability and support incremental capacity growth.
The Bigger Picture
The debt settlement comes amid broader efforts by the administration of Bola Tinubu to reset the electricity market through pricing reforms, improved governance and private-sector participation. Energy officials insist that debt resolution is a prerequisite for restoring confidence across the value chain, from generation to distribution.
Industry operators have welcomed the move, describing it as a turning point that could unlock stalled projects and attract new capital into the sector.
What Happens Next
Payments to participating generation companies will be made in phases, with additional GenCos expected to join the programme as verification processes are completed. Analysts say the success of the initiative will ultimately be judged by whether improved liquidity translates into more reliable power supply for households and businesses.
If sustained, the programme could mark a decisive shift from crisis management to long-term stabilisation of Nigeria’s electricity market.
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