How power sector debt threatens FG’s N1.23trn bond plan

The Federal Government’s plan to settle electricity sector debts through a N1.23 trillion Power Sector Bond is under pressure as liabilities owed to generation companies (GenCos) rose by 62.5 per cent to N6.5 trillion by the end of 2025, up from N4 trillion at the beginning of the year.

The government launched the programme in December 2025 with a N590 billion Series 1 bond, aimed at improving liquidity in the power sector.

However, industry data show that GenCos received only about 35 per cent of payments for electricity supplied to the national grid, worsening the sector’s liquidity crisis.

Between May and October 2025, 25 GenCos issued invoices totalling N1.53 trillion but were paid just N547.37 billion, leaving an outstanding subsidy balance of about N984 billion.

The Nigerian Electricity Regulatory Commission (NERC) attributed the low payments to the DisCos Remittance Obligation, which limits how much distribution companies remit in the absence of cost-reflective tariffs.

NERC’s Q3 2025 report showed DisCos collected N570.25 billion out of N706.61 billion billed, a collection efficiency of 80.7 per cent.

Meanwhile, GenCos have raised concerns over the structure and transparency of the bond, warning that it lacks a bankable framework and reliable funding sources.

Stakeholders blamed the rising debt on subsidies not backed by cash, warning that unless fundamental issues are resolved, the bond will not prevent further debt accumulation or attract new investment into the sector.