FG to capture N4tn power sector bond in MTEF

FILE COPY: The Minister of Power, Adebayo Adelabu. Credit: Ministry of Power

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The Federal Government on Thursday announced that the newly launched power sector liquidity bond, designed to settle decade-long N4tn debts owed to electricity generation companies will be fully captured in the country’s Medium-Term Expenditure Framework, a move officials say strengthens its credibility and guarantees repayment.

This will also increase the nation’s public debt by N4tn.

Speaking at a virtual investor forum convened by the Federal Ministries of Finance and Power, top government officials and financial advisors said the debt instrument, backed by a sovereign guarantee, is central to the Presidential Power Sector Debt Reduction Programme and marks the administration’s boldest attempt yet to restore confidence in Nigeria’s troubled electricity supply industry.

CardinalStone Partners’ Group Managing Director, Michael Nzewi, told prospective investors that the bond should not be confused with previous power sector interventions that failed to close liquidity gaps, stressing that the inclusion of the debt in the MTEF elevates it to a statutory government obligation.

“These bonds are backed by the Federal Government. The debt will be included in the medium-term federal framework. This is essentially an insurance by the government.

“We should not be overly worried about shortfalls from GenCos or DisCos. The government has stepped in with a guarantee to cover such gaps,” Nzewi said.

Recall that on Tuesday, PUNCH Online reported that the government had begun the process of repaying the N4tn debt owed to Power Generation Companies with the launch of a N590bn first-tranche bond issuance.

The initial tranche, part of a wider N4tn NBET Finance Company Plc Bond Programme, is guaranteed by the Federal Government. It comprises N300bn in cash bonds to be issued to the market and N290bn in non-cash bonds to be directly allotted to GenCos on identical terms.

PUNCH Online learnt that details contained in the bond term sheet obtained by our correspondent on Tuesday revealed that the Series 1 bond will be issued between November and December 2025. CardinalStone Partners Limited is serving as the lead issuing house and financial adviser.

According to the term sheet, “Series 1 Tranche A involves N300bn issued to the market for cash, while N290bn under Tranche B is allotted to the GenCos on identical terms. The bond will be issued between November and December, with a seven-year tenor on a fixed-rate coupon, redeemed on an amortising basis and paid semi-annually in arrears.”

Giving further details, the MD explained that unlike regular sovereign issuances that disappear into general financing, this bond has a defined purpose: injecting liquidity into the power sector to make it financially viable. “It will form the foundation for the sector’s next phase of development,” he added.

Providing a breakdown of the instrument, Head of Investment Banking at CardinalStone Onyebuchim Obiyemi, said the issuer is NBET Finance Company Plc, a special-purpose vehicle sponsored by the Nigerian Bulk Electricity Trading Plc.

She noted that the SPV structure was created to ring-fence both historic liabilities and receivables.

Between February 2015 and March 2025, all debts owed to GenCos are being migrated to the SPV, while receivables due from distribution companies over the same period are also being assigned to it.

“This creates a stand-alone entity responsible for the entire transaction,” he said, explaining that the structure removes the burden from NBET and improves transparency for investors.

Minister of Power, Adebayo Adelabu, said the reform will be complemented by improved service delivery by distribution companies, particularly as more customers migrate to Band A.

He maintained that not all subsidies would be removed, insisting that vulnerable households will continue to receive government support.

“Those who can afford to pay for reliable electricity must do so. But low-income Nigerians will still enjoy targeted subsidies,” he said.

“The key is to redesign the subsidy regime so it reaches only those who truly need it.”

Adelabu added that the Federal Government would monitor DisCos more stringently to ensure they deliver value for money.

In his closing remarks, NBET’s Acting Managing Director, Johnson Akinnawo, described the programme as a “strategic reset” rather than another bailout for the power sector.

He said the sovereign guarantee provides the “sunlight and water” needed for investor confidence, noting that several months of claim validation have culminated in a debt instrument designed to stabilise the electricity ecosystem.

“This bond issuance is our collective tree-planting. It is an investment in Nigeria’s energy security,”* he said, thanking President Bola Tinubu, the finance and power ministers, and investors for supporting the initiative.

PUNCH Online reports that more than 600 institutional investors, including pension funds, asset managers, banks, insurers and trustees, joined Thursday’s call.

The forum officially heralded the launch of the Presidential Power Sector Debt Reduction Programme, which aims to clear long-standing GenCo debts, stabilise market cash flow, and attract fresh investment into generation, transmission and distribution infrastructure.

Attaching the debt to the MTEF places it within Nigeria’s medium-term fiscal planning, improving transparency, repayment certainty, and credit quality, three factors investors have long demanded from the sector.

A business, investment, infrastructure and property correspondent currently with The PUNCH, Aina is a media professional with over three years experience

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