FG BEGINS REPAYMENT OF N4TRN GENCOS DEBT WITH N590BN POWER SECTOR BOND
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By Aishat Momoh. O.
The Federal Government has commenced the long-awaited process of settling the over N4 trillion debt owed to power generation companies (GenCos) with the launch of a N590 billion first-tranche bond issuance under the NBET Finance Company Plc Bond Programme.
The debut issuance forms part of a broader N4 trillion bond initiative designed to resolve the deepening liquidity crisis in Nigeria’s electricity sector. The Series 1 bond is fully guaranteed by the Federal Government and is split into two tranches: N300 billion in cash bonds to be offered to the market and N290 billion in non-cash bonds to be directly allotted to GenCos on identical terms.
Details contained in the bond term sheet obtained on Tuesday indicate that the issuance will take place between November and December 2025, with CardinalStone Partners Limited acting as lead issuing house and financial adviser.
The seven-year bond will carry a fixed interest rate, with semi-annual coupon payments and redemption on an amortising basis. It will be listed on both the Nigerian Exchange (NGX) and the FMDQ Securities Exchange, and qualifies under the Trustee Investment Act, making it eligible for investment by pension fund administrators, banks, asset managers, insurance firms and high-net-worth individuals.
Pricing will be determined through a book-build process based on the seven-year Federal Government of Nigeria bond yield plus a margin. The minimum subscription is set at N5 million.
The Federal Government has also retained the option of absorbing oversubscription of up to N1.23 trillion under Phase One of the programme, allowing for increased non-cash bond allocation to GenCos if necessary.
Proceeds from the bond will be used strictly to offset outstanding liabilities owed to GenCos, whose debts have accumulated over the years due to chronic under-remittance by electricity distribution companies (DisCos). Industry estimates put the current debt at about N4 trillion, with projections that it could hit N6 trillion by year-end without intervention.
GenCos have repeatedly warned that the mounting debt has constrained gas supply contracts, weakened operational capacity and forced several power plants to operate far below installed capacity. The liquidity crisis has also been linked to recurrent national grid collapses and unstable electricity supply across the country.
Repayment of the bond will be funded primarily through federal budgetary provisions, while recoveries from DisCos by the Nigerian Bulk Electricity Trading Company (NBET) will serve as a secondary funding source. The bond also enjoys Central Bank liquidity status and meets National Pension Commission (PenCom) requirements, although approval for repo and collateral eligibility by the CBN is still being processed.
In preparation for the issuance, CardinalStone Partners has invited institutional investors to a virtual investor forum scheduled for Wednesday, December 10, 2025. The engagement will be led by the Presidential Power Sector Debt Reduction Committee chaired by the Minister of Finance and Coordinating Minister of the Economy.
According to a notice to investors, the bond will carry a coupon range of between 16.25 per cent and 16.75 per cent and is intended to directly support ongoing electricity market reforms.
An official familiar with the development disclosed that GenCos have also been invited to a separate meeting to discuss the structure and terms of the bond, noting that the programme has generated mixed reactions within the sector.
The bond initiative represents one of the most significant financial interventions by the Tinubu administration in the power sector, aimed at restoring investor confidence, improving generation capacity and stabilising electricity supply nationwide.
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