FG issues N590bn bond to settle GenCos’ N4tn debts

File photo of an electricity station

Kindly share this story:

The Federal Government has 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.”

The bond issuance marks a major step by President Bola Tinubu’s administration to resolve what experts describe as one of the most crippling financial crises in Nigeria’s power sector.

The Series 1 bond carries a seven-year tenor, a fixed coupon rate, and semi-annual interest payments, and will be amortised over its lifespan.

It will be listed on the Nigerian Exchange and the FMDQ Securities Exchange, and will qualify under the Trustee Investment Act, making it eligible for investment by pension fund administrators, banks, asset managers, insurers and high-net-worth investors.

The issuer also retains the discretion to absorb oversubscription of up to N1.23tn, creating room for additional non-cash bond allocations to GenCos if required.

The term sheet added, “Pricing will be based on the yield of the seven-year FGN bond plus a spread, and the issuance will be conducted through a book-build process. The minimum subscription is N5m, representing 5,000 units at N1,000 each, with additional subscriptions in multiples of N1,000. Proceeds from the issuance will be used to settle outstanding liabilities owed to GenCos. The instrument is guaranteed by the full faith and credit of the Federal Government, enjoys CBN liquidity status, meets PenCom compliance requirements, qualifies under the Trustee Investment Act, and will be listed on both the Nigerian Exchange Limited and the FMDQ OTC Securities Exchange.”

It further noted that “oversubscription may be absorbed at the discretion of the issuer up to a maximum of N1,230,000,000,000 approved for Phase 1 of this transaction. The issuer reserves the right to increase the size of the non-cash bonds to be issued to the GenCos under any Series or accommodate additional allotments as may be required.”

Nigeria’s power sector has been weighed down for years by NBET’s inability to settle GenCos’ invoices due to chronic under-remittance by electricity distribution companies (DisCos).

GenCos have repeatedly complained that mounting debts, currently estimated at N4tn and projected to reach N6tn by year-end, have crippled their operations, weakened gas supply contracts and forced several power plants to run far below capacity.

This liquidity shortfall has contributed significantly to recurrent grid collapses, poor generation output and unstable electricity supply nationwide.

The bond is fully guaranteed by the Federal Government, enjoys Central Bank liquidity status, and meets PenCom requirements for pension fund investments.

Repayment will be funded primarily through the national budget, with NBET’s recoveries from DisCos serving as a secondary source.

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

Kindly share this story:

All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH.

Contact: [email protected]

UPDATE NEWS: Nigerians can now invest ₦2.5million on premium domains and profit about ₦17-₦25Million. All earnings paid in US Dollars. Rather than wonder, 👉 click here to find out how it work (Be sure to ask for evidence of clients that have benefitted from this)

Stay informed and ahead of the curve! Follow The Punch Newspaper on WhatsApp for real-time updates, breaking news, and exclusive content. Don't miss a headline – join now!

Stay in the know—fast. Get instant alerts, breaking headlines, and exclusive stories with the Punch News App. Download now and never miss a beat.