The Federal Government of Nigeria has officially commenced the process of repaying the long standing debt owed to Power Generation Companies with the launch of a N590 billion first tranche bond issuance. The move marks a major step in addressing the liquidity crisis that has affected Nigeria’s electricity sector for years.

The repayment process follows years of negotiations between the Federal Government, GenCos, financial institutions and regulatory bodies. Industry experts have consistently warned that the unresolved debt was crippling the power sector and discouraging new investments in electricity generation infrastructure.

The initial bond issuance, valued at N590 billion, is designed as part of a broader plan to settle approximately N4 trillion in verified debts owed to power generation companies across the country. These debts reportedly accumulated due to revenue shortfalls in the power market and inconsistencies in tariff collections over several years.

According to official information from government sources, the bond is structured to provide immediate liquidity to GenCos, allowing them to stabilise operations, service their own obligations to lenders and invest in plant maintenance and upgrades.

The move is expected to improve the overall performance and reliability of power supply nationwide.

What the Bond Issuance Means for Nigeria’s Power Sector

Analysts believe that the Federal Government’s decision to issue the bond reflects a renewed commitment to stabilising the electricity market. By gradually settling outstanding obligations, the government hopes to restore confidence among private investors that have been hesitant to inject new capital into the sector.

The debt has long affected the value chain, from generation to transmission and distribution. Power Generation Companies have repeatedly complained that delayed payments made it difficult to purchase gas, maintain turbines and expand capacity. This situation often resulted in frequent plant shutdowns and reduced electricity supply to homes and businesses.

With the N590 billion bond now in place, GenCos are expected to receive partial payments that could ease operational pressures. Industry stakeholders believe this financial relief may lead to better grid stability and fewer power disruptions.

Financial experts also note that the structured bond approach helps the government manage repayment without putting immediate pressure on public finances. The phased structure makes room for gradual settlement of the full N4 trillion debt over time while keeping fiscal stability in check.

While the announcement has been largely welcomed, power sector advocates have urged transparency in the disbursement process to ensure that funds reach the intended beneficiaries and are used for critical infrastructure improvements.

As Nigeria continues efforts to reform its power industry, this development is seen as a potential turning point in resolving long standing structural issues that have slowed down growth in the sector.

The Federal Government has stated that additional tranches of the bond will follow as part of the broader Power Sector Recovery Programme.