NBET begins N729bn debt settlement to ease power sector liquidity

The Federal Government has begun settling N728.98 billion in outstanding obligations to electricity generation companies (GenCos) and their gas suppliers, in a fresh attempt to restore liquidity to Nigeria’s troubled power sector and ease the financial constraints undermining electricity supply.

The Nigerian Bulk Electricity Trading Plc (NBET) disclosed this on Friday following the issuance and signing of the second series of bonds under the Federal Government’s N4 trillion Power Sector Multi-Instrument Issuance Programme.

The N728.98 billion settlement comprises N402 billion in cash bonds and N326.98 billion in non-cash bonds, structured to address verified legacy obligations owed to participating power generators and associated gas suppliers.

The payment marks a significant step towards clearing debts that have accumulated across the electricity value chain for more than a decade, weakening the capacity of power generators to maintain plants, secure gas supplies and invest in additional generation.

NBET Managing Director and Chief Executive Officer, Akin Odeyemi, said the settlement would improve liquidity among market participants, strengthen their financial positions and create greater certainty for future investment.

For the wider economy, the intervention addresses a critical weakness in Nigeria’s electricity market: when generators are not paid adequately or on time, their ability to finance operations and meet obligations to gas suppliers deteriorates, threatening the reliability of power supply to businesses and households.

The Federal Government has now raised approximately N1.23 trillion through two bond issuances under the programme, comprising the N501 billion raised in January and the latest N728.98 billion issuance in September.

The government’s verification exercise reduced reported legacy claims of more than N4 trillion to about N3.3 trillion in agreed liabilities. The two bond issuances therefore represent roughly 37 per cent of that verified amount, underscoring the scale of the outstanding obligations still requiring resolution.

The first issuance resulted in settlement agreements with participating generation companies, while subsequent payments have been intended to extend relief across more of the electricity value chain.

The programme became necessary after years of payment shortfalls left electricity companies struggling with unpaid bills, gas supply constraints and mounting operating costs. In March, industry reports indicated that 16 of Nigeria’s 33 power plants were not supplying electricity to the national grid, with the remaining facilities generating a combined 3,705 megawatts at the time.

The debt settlement could help generators meet outstanding obligations to gas suppliers, lenders and maintenance contractors, improving their ability to sustain operations. However, the extent of any improvement in electricity supply will depend on how effectively the payments translate into increased generation and whether transmission and distribution networks can deliver the additional power to consumers.

The initiative also raises an important fiscal consideration. Using government-backed bonds to settle legacy obligations provides immediate relief to operators, but ultimately transfers the financial burden into structured public-sector liabilities that must be serviced.

That makes broader electricity-market reforms essential. Unless revenue collection improves, technical and commercial losses decline, and market participants meet their payment obligations, new arrears could accumulate even after the existing debts are settled.

For manufacturers, small businesses and households spending heavily on diesel and petrol generators, a financially healthier electricity market could reduce operating expenses, improve productivity and ease pressure on consumer prices.

The success of the N729 billion settlement will therefore be measured not simply by the amount paid, but by whether it restores financial discipline across the electricity value chain and delivers more reliable power without creating another cycle of government-backed debt.