FG Unveils N729bn Bond to Settle Electricity Debts
The Federal Government has increased the coupon on its second power sector bond to a range of 17.85 per cent to 17.95 per cent, higher than the 17.50 per cent fixed rate on the inaugural issuance, as it seeks strong investor demand for a N728.98 billion instrument designed to clear legacy debts owed to electricity generation companies.
Subscriptions for the seven year bond issued by NBET Finance Company Plc opened on 3 August 2026 and close on 14 August, with settlement expected on 24 August. The instrument is fully guaranteed by the Federal Government and forms the second series under the N4 trillion Multi Instrument Issuance Programme established to resolve long standing liabilities in the Nigerian Electricity Supply Industry.
The bond is structured in two tranches: a N400 billion cash bond and a N328.98 billion non cash bond. Investors will earn a fixed coupon determined through book building within the stated range, with interest payable semi annually. The higher pricing, an increase of between 35 and 45 basis points over Series 1, reflects prevailing market conditions and the government’s effort to attract institutional capital for the next phase of debt resolution.
CardinalStone Partners Limited is Lead Issuing House and Lead Financial Adviser, with the Africa Finance Corporation serving as Joint Financial Adviser. The offer document states that net proceeds will primarily settle verified outstanding invoices owed by the Nigerian Bulk Electricity Trading Plc to generation companies for the period between February 2015 and March 2025.
President Bola Tinubu established the Presidential Power Sector Debt Reduction Committee to develop a fiscally responsible strategy for settling these liabilities and improving the efficiency of the power sector. The Federal Executive Council later approved the N4 trillion programme based on the committee’s recommendations. The initiative rests on three pillars: settlement of verified unpaid invoices, execution of negotiated settlement agreements with participating generation companies, and a coordinated framework to prevent recurrence of debt accumulation.
The bond carries several investor incentives. It is backed by the full faith and credit of the Federal Government, classified as a liquid asset by the Central Bank of Nigeria, qualifies as an eligible investment for Pension Fund Administrators, enjoys tax exempt status approved by the Minister of Finance, and is expected to be listed on both the Nigerian Exchange Limited and the FMDQ Securities Exchange Limited. Minimum subscription is fixed at N5 million, with additional investments in multiples of N1 million.
Generation companies have for years reported mounting unpaid invoices that constrained liquidity, limited investment in new capacity and threatened operational sustainability. Industry estimates of the total debt have varied. Government verification placed the eligible settlement amount at approximately N3.3 trillion after detailed line by line review of claims. Generation company associations have cited higher figures, with some analyses placing outstanding obligations to generators at around N7.66 trillion as of mid 2026 when fresh shortfalls are included.
Under Series 1, issued earlier in 2026, the government raised approximately N501 billion, comprising N300 billion in cash and about N201 billion in non cash instruments. Officials reported that N333.12 billion had been settled to eight participating generation companies covering 17 power plants. The first coupon payment of about N63.5 billion on the Series 1 bond was made in full on 14 July 2026. Pension fund administrators accounted for roughly half of the cash subscriptions in the first series, with commercial banks contributing about 41.5 per cent.
The Association of Power Generation Companies has warned that without addressing ongoing payment shortfalls, total sector debt could rise substantially in coming years. Data covering January to April 2026 showed generation companies invoicing an average of N213.5 billion monthly while receiving about N90.8 billion, an average settlement rate of 42.52 per cent. Monthly shortfalls averaged around N122.7 billion during that period. The association projected that without structural fixes the debt stock could climb significantly by 2033.
Minister of Finance and Coordinating Minister of the Economy Taiwo Oyedele has described the return to the capital market as evidence of the government’s commitment to meeting obligations after years of underinvestment driven by tariff shortfalls, settlement gaps and weak market confidence. Minister of Power Joseph Tegbe has framed the programme as an economic reform initiative rather than a pure financing exercise, stressing that reliable electricity requires a financially sustainable market and that unresolved legacy debts remain a major obstacle under the Electricity Act 2023 reforms.
The current issuance completes the first phase of the broader N4 trillion programme. Combined with Series 1, the two series total approximately N1.23 trillion. Proceeds are expected to improve liquidity across the value chain, enable generation companies to meet obligations to gas suppliers and service providers, and support plant availability. Whether the higher yield successfully draws the required institutional demand, and whether subsequent phases and parallel reforms on tariffs and collections can prevent fresh accumulation of liabilities, will shape the medium term outlook for power sector investment and supply reliability.
Power Sector Bond, NBET Finance Company, Federal Government, GenCos Debt, N4 Trillion Programme, Electricity Sector, Taiwo Oyedele, Joseph Tegbe, Nigerian Bulk Electricity Trading, Presidential Debt Reduction