FG raises N1.23trn to clear GenCo debts, revive power sector liqui

The Federal Government has raised N1.23 trillion through two bond issuances under its Presidential Power Sector Debt Reduction Programme, stepping up efforts to clear legacy obligations owed to electricity Generation Companies (GenCos) and restore liquidity to a power market weighed down by years of unpaid bills.

The latest Series 2 issuance raised N728.9 billion, bringing total funds mobilised under the programme to N1.23 trillion after N501 billion was secured through the inaugural transaction in January.

Chief Executive Officer of Nigerian Bulk Electricity Trading Plc (NBET), Akin Odeyemi, disclosed this in Abuja, saying the second transaction attracted 11 GenCos, compared with eight participants in Series 1.

The wider participation, he said, reflected growing confidence in the debt-settlement framework and its potential to address one of the electricity industry’s biggest structural problems: the accumulation of unpaid obligations across the value chain.

The government’s verification exercise had originally identified more than N4 trillion in outstanding claims, but a line-by-line review subsequently reduced the validated liability to about N3.3 trillion.

Under Series 2, Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, said N402 billion was raised through cash bonds while N326.9 billion was issued as non-cash bonds to participating GenCos.

He said the transaction was designed to repair liquidity across the electricity chain, where unpaid debts have constrained GenCos’ ability to settle obligations to gas suppliers, lenders and operations and maintenance contractors.

The implications extend beyond the balance sheets of power companies. Persistent payment shortfalls have weakened incentives for generators and gas suppliers to invest in additional capacity, contributing to a cycle of inadequate supply, low industry liquidity and weak investment.

The government said N333 billion from the first series has so far been paid to eight GenCos covering 17 power plants. The seven-year bond also made its first coupon payment of about N63.5 billion in July, which officials said enabled participating companies to meet outstanding obligations to suppliers and contractors.

Odeyemi said the second issuance would be implemented through two tranches, with the broader objective of restoring financial confidence across the Nigerian Electricity Supply Industry.

But Oyedele warned that settling the historical debt would not, on its own, fix the sector.

He called for stronger market discipline, better revenue assurance, lower technical and commercial losses and greater accountability among operators, stressing that the bond programme must be supported by reforms that prevent new arrears from accumulating.

Power Minister Joseph Tegbe said the initiative was part of the Federal Government’s broader effort to strengthen the financial position of the electricity market and create conditions for more reliable supply.

The programme therefore carries a significant economic test. Clearing old debts can improve the ability of GenCos and their suppliers to operate, but unless the sector begins collecting sufficient revenue and reducing losses, new payment arrears could emerge and require further government intervention.

That risk is important because electricity costs are a major component of business operating expenses. More reliable grid supply could reduce manufacturers’ and small businesses’ dependence on diesel and petrol generators, lowering production and logistics costs and improving competitiveness.

The government is ultimately targeting up to N4 trillion in bond-backed settlements under the debt-reduction initiative. The success of the programme will therefore depend not simply on how much debt is cleared, but on whether the injection of liquidity translates into stronger generation, more reliable electricity and a financially sustainable power market without creating another cycle of government-backed debt.