By Simpson Global Media News Desk
Nigeria’s efforts to address longstanding financial challenges in the electricity supply industry have entered a new phase following the successful completion of a ₦728.9 billion Series 2 power-sector bond transaction supported by the Africa Finance Corporation (AFC).
The bond, issued through NBET Finance Company Plc under the Federal Government’s Presidential Power Sector Financial Reforms Programme, is designed to help settle verified outstanding obligations owed to electricity generation companies and improve liquidity across the power value chain.
The transaction is the second issuance under the government’s broader ₦4 trillion Power Sector Multi-Instrument Issuance Programme. It follows the ₦501 billion Series 1 bond completed in January 2026 and brings cumulative issuance under the programme to approximately ₦1.23 trillion, according to AFC. (AFC)
The initiative is intended to address a problem that has affected Nigeria’s electricity industry for years: unpaid obligations between power-market participants.
Generation companies require timely payments to maintain power plants, purchase gas, meet operational expenses and invest in additional generating capacity. When receivables remain unpaid for long periods, the financial pressure can spread through the entire electricity supply chain.
The new bond programme seeks to convert verified legacy obligations into structured financial instruments, allowing participating generation companies to receive value against eligible outstanding claims while providing the government with a mechanism for managing the liabilities.
The Structure of the Series 2 Transaction
The Series 2 issuance was structured in two components.
The cash component amounted to approximately ₦402 billion and was raised through the capital market. The non-cash component was valued at approximately ₦326.979 billion and was allocated to participating electricity generation companies.
Together, the two components produced an aggregate issuance of approximately ₦728.9 billion. The transaction involved 11 generation companies, compared with eight companies that participated in the first series, according to reporting on the government’s debt-reduction programme. (Premium Times)
The structure is intended to support the settlement of verified claims while reducing the immediate pressure on public finances.
The Federal Government’s programme is being implemented through NBET Finance Company Plc, the special-purpose vehicle associated with the Nigerian Bulk Electricity Trading framework.
The Presidential Power Sector Debt Reduction Committee oversees the programme, while the Office of the Special Adviser to the President on Power provides technical leadership.
AFC served as co-financial adviser alongside CardinalStone Partners. Its responsibilities included supporting negotiations with participating generation companies, assisting with the structure of the cash and non-cash components, and engaging investors ahead of the issuance. (AFC)
Legacy Debts at the Centre of the Programme
The proceeds of the Series 2 transaction are intended to support the settlement of verified overdue receivables owed to generation companies for electricity supplied between February 2015 and March 2025.
The period covered by the settlement illustrates the long-term nature of the financial pressures affecting Nigeria’s electricity market.
Generation companies produce electricity that is supplied into the national electricity market. Payments move through a system involving market operators, bulk electricity trading arrangements, distribution companies and consumers.
Where expected payments are delayed or incomplete, companies may struggle to meet their own obligations.
Gas suppliers may not receive payment on time. Power plants may operate with limited funds for maintenance. New investment can be delayed because companies cannot demonstrate sufficient cash flow to lenders or investors.
Akin Odeyemi, Managing Director and Chief Executive Officer of NBET, said verified receivables had remained on generation companies’ balance sheets for too long, limiting their ability to pay gas suppliers, maintain plants and invest in new capacity.
He said the Series 2 transaction would convert more of those arrears into liquidity across the electricity value chain. (AFC)
The government’s argument is that resolving legacy claims can help create a more stable financial foundation for the sector.
However, settling historical debts does not automatically resolve every problem affecting electricity supply. The market will still require improvements in tariff collection, metering, transmission capacity, distribution performance, gas availability and regulatory implementation.
From Series 1 to Series 2
The latest bond builds on the inaugural Series 1 transaction, which was completed in January 2026 with a value of ₦501 billion.
AFC also served as co-financial adviser for the first issuance.
The two transactions together represent a substantial mobilisation of capital under the government’s larger ₦4 trillion programme.
AFC said the Series 2 transaction was completed within eight months of the inaugural issuance and that the programme had attracted support from domestic investors.
The corporation said the bond was oversubscribed, with participation from pension fund administrators, banks, sovereign wealth funds and asset managers. (AFC)
Investor participation is important because the government is using the domestic capital market to address a major infrastructure-sector liability.
The approach depends on investors’ willingness to purchase the instruments and on confidence that the repayment arrangements will be honoured.
The first series’ payment record has become part of that confidence-building effort.
AFC said the government made the first coupon and principal instalment on the Series 1 bonds in July 2026 in full and on time.
Such payments can strengthen investor confidence in subsequent issuances, although they do not eliminate the need for continued transparency and sound financial management.
What the Bond Could Mean for Generation Companies
Generation companies are among the principal institutions affected by the sector’s liquidity problems.
A power plant requires regular spending even when payment for electricity supplied is delayed.
Operating expenses include fuel or gas purchases, maintenance, staff costs, equipment replacement and compliance with technical requirements.
When payment arrears accumulate, generation companies may have to rely on additional borrowing or postpone maintenance and expansion projects.
The bond programme is intended to provide value against eligible verified receivables.
By settling those claims, the government hopes to improve the financial position of participating companies and reduce the pressure that unpaid bills place on their operations.
AFC said the programme is expected to affect approximately 5,398 megawatts of generation capacity.
It also said the settlement process covers electricity billed over a period beginning in February 2015 and involving approximately 290,644.84 gigawatt-hours of electricity.
The companies participating in the programme serve a market involving approximately 12 million active registered electricity customers, according to AFC. (AFC)
The figures indicate the scale of the financial relationship between generation capacity, electricity production and customer supply.
They also demonstrate why financial problems in the power market can have consequences for households, businesses and industrial users.
Liquidity Is Not the Same as More Electricity
One important distinction is that financial settlement and physical electricity supply are related but separate issues.
A generation company may receive payment for past electricity supplied, but additional electricity production still depends on several conditions.
These include access to gas or other fuel sources, the operating condition of generating equipment, transmission availability, distribution infrastructure and the ability of customers to pay for electricity.
The bond may therefore improve the financial position of participating companies without immediately producing a proportional increase in electricity available to consumers.
The programme’s longer-term objective is to create conditions that support new investment in generation capacity.
That outcome would depend on whether companies use improved liquidity to maintain existing plants, resolve outstanding obligations and finance expansion.
The government’s wider power-sector reforms also include investment in metering and transmission infrastructure and a move toward bilateral electricity trading based on market-reflective pricing. (AFC)
The Importance of Gas Supply
Nigeria’s electricity generation system depends heavily on gas-fired power plants.
Gas availability and payment arrangements are therefore closely connected to the performance of the electricity market.
When generation companies face liquidity shortages, they may struggle to settle bills owed to gas suppliers.
That can create a chain reaction: gas suppliers face unpaid invoices, gas deliveries may be constrained, generation companies produce less electricity, and distribution companies receive less power to deliver to consumers.
The NBET leadership has identified the ability to pay gas suppliers as one of the reasons why the settlement of legacy receivables is important.
The bond programme is designed to inject liquidity into the system and help address that problem.
Nevertheless, a sustainable gas-to-power arrangement requires more than clearing historical debts.
It also requires reliable gas production, processing and transportation infrastructure, commercially viable pricing, contract enforcement and payment discipline throughout the electricity market.
Capital-Market Participation
The involvement of domestic investors is a central element of the programme.
Pension funds, banks, asset managers and other institutional investors manage capital that can be invested in infrastructure-related instruments.
The government’s use of a bond structure gives those investors an opportunity to participate in the financing of a sector considered important to national economic activity.
The attraction for investors depends on several factors.
These include the structure of the bond, the repayment terms, the perceived creditworthiness of the issuer or supporting government arrangements, prevailing interest rates and the broader condition of the Nigerian economy.
The government’s timely payment of the first Series 1 coupon and principal instalment was highlighted by AFC as evidence of its commitment to meeting programme obligations.
The Series 2 transaction was also reported to have been oversubscribed.
Oversubscription indicates that demand exceeded the amount available under the offer, but it does not by itself guarantee that all long-term financial risks have been removed.
The programme will need to maintain regular reporting, clear documentation and timely payments to sustain investor confidence.
The Wider Electricity-Market Challenge
Nigeria’s electricity market has faced persistent challenges involving inadequate infrastructure, technical losses, commercial losses, low collection rates and financial shortfalls.
Distribution companies collect payments from customers, while generation companies and other participants depend on the wider market for revenue.
When electricity delivered is not fully paid for, the resulting shortfall affects the financial stability of the market.
The government has introduced several reforms intended to improve the market’s financial sustainability.
These include tariff reforms, metering initiatives, debt-settlement programmes and changes in the structure of electricity trading.
Each reform addresses a different part of the problem.
Debt settlement focuses on accumulated liabilities.
Metering seeks to improve the accuracy of electricity measurement and reduce disputes over estimated billing.
Tariff reforms are intended to align prices more closely with the cost of service, while also raising questions about affordability and consumer protection.
Transmission investment seeks to reduce bottlenecks between generation and distribution.
The effectiveness of the broader reform programme will depend on how these measures work together.
Consumers and the Cost of Electricity
Although the Series 2 bond is primarily a financial transaction involving government institutions, investors and generation companies, its longer-term implications extend to electricity consumers.
Households and businesses depend on electricity for lighting, refrigeration, communication, manufacturing, retail activity and other economic functions.
Unreliable supply often forces businesses to rely on diesel or petrol generators, increasing operating costs.
Manufacturers may face additional expenses for alternative power sources, while small businesses can experience reduced working hours or lower profit margins.
Improving the financial stability of the electricity sector could support more reliable service over time.
However, consumers may not experience immediate benefits from a debt-settlement transaction.
Better electricity supply requires operational improvements across the entire chain, from fuel supply and generation to transmission, distribution and customer payments.
Consumer affordability is also an important consideration.
Financial reforms that improve market viability must be implemented alongside measures that address the ability of households and businesses to pay for electricity.
Transparency and Verification
The programme is based on the settlement of verified receivables.
Verification is important because a debt-reduction programme must distinguish legitimate outstanding obligations from disputed, duplicated or unsupported claims.
A transparent verification process can help establish confidence among investors, generation companies, regulators and the public.
The government’s programme has attracted public discussion about the scale of the electricity-sector debt and the methodology used to calculate outstanding liabilities.
Some industry stakeholders have called for greater disclosure concerning the debt baseline, the claims included in the programme and the structure of the settlement arrangements.
Such questions underline the importance of publishing sufficient information for stakeholders to understand the programme’s progress.
The government’s financial reforms would benefit from regular disclosures covering the amounts raised, the obligations settled, the participating companies and the remaining liabilities.
Transparency would also help the public distinguish between debts already settled and financial obligations that continue to accumulate.
The Risk of New Arrears
Clearing historical debt is only sustainable if new arrears do not accumulate at the same pace.
The electricity market must therefore address the causes of unpaid bills while settling existing liabilities.
If distribution companies continue to collect less revenue than required to meet their obligations, new debts could emerge.
Similarly, if tariffs do not reflect the cost of service or if subsidies are not funded promptly, the market may continue to face financial pressure.
Gas suppliers and generation companies also require predictable payment arrangements.
The success of the bond programme will consequently depend on reforms that improve payment discipline after the historical liabilities have been addressed.
A debt settlement can provide temporary relief, but long-term sector stability requires a commercially sustainable electricity market.
The Role of the Federal Government
The Federal Government’s power-sector financial reforms place it at the centre of the debt-settlement process.
The government is responsible for coordinating the programme, supporting the issuance structure and ensuring that the obligations associated with the instruments are managed.
The Presidential Power Sector Debt Reduction Committee provides oversight, while NBET’s financing vehicle carries out the issuance process.
The involvement of the government is significant because the electricity market has historically been affected by public-sector interventions, regulated pricing arrangements and financial obligations linked to market operations.
The government’s stated objective is to use structured financial instruments to resolve legacy debts and support a more viable electricity market.
Achieving that objective will require coordination among government agencies, generation companies, distribution companies, regulators, financial institutions and investors.
Broader Economic Implications
Electricity supply is closely connected to Nigeria’s wider economic performance.
Manufacturing companies require dependable power to operate machinery and maintain production schedules.
Small businesses depend on electricity for refrigeration, telecommunications, digital services and commercial activity.
Hospitals, schools and public institutions also require reliable power.
When businesses spend less on alternative electricity sources, they may have more resources available for employment, expansion and investment.
Improved electricity supply can also strengthen productivity and reduce operational uncertainty.
However, the economic benefits of power-sector reforms depend on the extent to which financial improvements translate into physical service improvements.
A bond issuance is one step in that process.
It must be supported by investment in equipment, maintenance, fuel supply, transmission and distribution.
What Happens Next
The next stage of the programme will involve implementing the settlement arrangements associated with the Series 2 issuance and continuing the wider debt-reduction process.
The government’s ₦4 trillion Power Sector Multi-Instrument Issuance Programme has not been completed by the Series 2 transaction.
The programme will require additional work to address eligible outstanding obligations and maintain the financial arrangements supporting the electricity industry.
Generation companies will need to use improved liquidity to address operational requirements, including payments to gas suppliers and maintenance of generating facilities.
Government institutions and market participants will also need to continue work on metering, transmission infrastructure and electricity-market reforms.
AFC has said the programme is intended to create a foundation for new investment in Nigeria’s generation capacity.
Whether that objective is achieved will depend on the implementation of the financial settlement and the success of the wider market reforms.
A Financial Intervention With Long-Term Tests
The ₦728.9 billion Series 2 bond represents a significant financial intervention in Nigeria’s electricity sector.
It follows the ₦501 billion Series 1 issuance and raises cumulative programme issuance to approximately ₦1.23 trillion.
The transaction is intended to settle verified overdue receivables owed to generation companies for electricity supplied between February 2015 and March 2025.
It also seeks to improve liquidity, support the operations of generation companies and create conditions for additional investment.
The initiative addresses an important problem in the electricity market, but its long-term results will depend on more than the amount raised.
The government and market participants will need to prevent the accumulation of new arrears, improve payment systems, strengthen infrastructure and ensure that electricity-market reforms are implemented consistently.
Investors will continue to monitor repayment performance and transparency.
Generation companies will need to demonstrate that improved liquidity supports maintenance and expansion.
Consumers and businesses will look for improvements in the reliability and affordability of electricity.
The Series 2 transaction therefore marks another stage in Nigeria’s attempt to reform the financial foundations of its electricity industry.
Its success will ultimately be measured not only by the completion of the bond issuance, but also by whether the programme contributes to a more stable electricity market, stronger investment conditions and improved power supply for households and businesses across the country.
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