AFC advises FG on landmark N501bn power sector bond

The Federal Government has raised N501 billion from the domestic capital market under its Presidential Power Sector Financial Reforms Programme, with Africa Finance Corporation advising on the transaction. The bond issuance represents the first tranche of a planned N4 trillion programme aimed at resolving long-standing debts that have weighed on Nigeria’s electricity industry for more than a decade.

The issuance is designed to settle verified and overdue receivables owed to power generation companies for electricity supplied between February 2015 and March 2025. These unpaid obligations have created persistent liquidity stress across the power sector. They have limited the ability of generation companies to service loans, maintain assets, and invest in new capacity.

Africa Finance Corporation acted as co-financial adviser alongside CardinalStone Partners. The programme is being implemented through NBET Finance Company Plc, a special purpose vehicle of the Nigerian Bulk Electricity Trading Plc. Oversight is provided by the Presidential Power Sector Debt Reduction Committee, with technical leadership from the Office of the Special Adviser to the President on Energy.

Proceeds from the bond issuance will be used to extinguish legacy claims owed to generation companies. This is expected to strengthen GenCos’ balance sheets and improve cash flows. The government believes this will reduce systemic risk in the electricity market and ease pressure on banks with exposure to the sector.

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For years, payment shortfalls and delayed remittances have undermined the financial health of the power industry. Many generation companies have relied on short-term borrowing to stay operational. Others have deferred critical maintenance, contributing to frequent outages and capacity constraints.

The transaction received strong backing from domestic institutional investors. Pension fund administrators accounted for about 50 percent of total subscriptions. Market participants say this reflects growing confidence in policy-backed infrastructure instruments and the search for long-dated naira assets by pension funds.

According to officials involved in the programme, the bond issuance is not a standalone intervention. It forms part of a broader reset of Nigeria’s electricity market. The reforms combine debt resolution with financial discipline and structural changes across the value chain.

When fully completed, the bond programme is expected to cover about 5,398 megawatts of installed generation capacity. It will finalise settlement for more than 290,000 gigawatt-hours of electricity billed since 2015. The impact will be felt across companies supplying power to roughly 12 million registered customers nationwide.

The initiative also complements ongoing investments in transmission infrastructure and accelerated consumer metering. The government is pushing a gradual transition towards bilateral electricity trading between wholesale counterparties. Pricing under this framework is expected to better reflect market realities.

Together, these measures are aimed at correcting deep-seated financial distortions in the power sector. Policymakers believe a more liquid and commercially viable electricity market is critical to supporting industrial expansion, job creation, and long-term economic growth

David Olujinmi is a financial journalist, with a knack for reporting and analysing the capital markets. He has experience in reporting the Nigerian and African financial scene.

With a Bsc in Chemical Engineering from the Obafemi Awolowo University, he has a significant grasp of numbers that has aided his understanding of the financial context.

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