FG to Issue N729bn Power Debt Bond

The Federal Government will issue a second power sector bond worth N729 billion to clear verified legacy debts owed to electricity generation companies. The looming capital market intervention aims to inject desperate liquidity into the gasping domestic electricity supply industry. State administrators will host an essential Investors’ Forum on Tuesday to pitch the debt instrument to prospective institutional buyers. The transaction completes the opening phase of a wider N4 trillion state intervention program approved by President Bola Tinubu. State interventions remain the only barrier holding back total industry insolvency.

The incoming bond follows a N501 billion debt issuance floated by the state in January. Together, both tranches push the total value of the initial debt reduction package to N1.23 trillion. The state cleared the first coupon and principal repayments on that initial January issuance on 14 July. Finance officials timed the full, prompt payout to assure skeptical bondholders of state creditworthiness before asking for more money. The Nigerian Bulk Electricity Trading Plc acts as the principal state sponsor for the fundraising.

While state officials praise the program as a masterstroke, the intended beneficiaries remain deeply hostile to the current terms. The Association of Power Generation Companies has accused the government of forcing aggressive payment terms onto private firms. Under the state framework, generation companies must accept a steep 50 per cent reduction on their verified invoices. Producers must also accept a mix of cash and long-dated bonds, which commercial banks will discount further. Private power producers view the state rescue package as an extortionate ultimatum.

The mounting liquidity crisis stems from a structurally broken domestic electricity market that cannot recover its own costs. Disorganized billing systems, systemic collection shortfalls, and rigid tariff caps ensure the sector loses money every single day. The total debt pile owed to generation companies now exceeds N6.8 trillion and continues to rise. Because power firms cannot collect their revenues, they cannot pay their primary gas suppliers. This debt loop regularly forces gas suppliers to shut off fuel supplies to major generation stations.

Independent market analysts warn that borrowing billions from the capital market offers only a temporary respite to a terminal problem. Issuing large state-backed bonds runs the serious risk of crowding out private corporate borrowers from domestic credit markets. The financial injections will fail to stabilise the grid unless the state implements holistic market reforms. Administrators must permanently fix retail electricity tariffs and enforce total collection compliance among regional distribution companies. Short-term cash injections cannot permanently cure structural commercial failures.