KEY POINTS
- Federal Government bond issuances have raised about N1.23 trillion to address legacy debts owed to electricity generating companies.
- Series 2 raised N728.9 billion, following N501 billion from Series 1 in January.
- Eleven GenCos participated in Series 2, compared with eight in the first issuance.
- Government says debt settlement must be matched with reforms to prevent new arrears.
MAIN STORY
The Federal Government has raised about N1.23 trillion through two bond issuances under its power sector debt reduction programme, as it moves to tackle about N4 trillion in outstanding obligations to electricity generating companies.
The Chief Executive Officer of Nigerian Bulk Electricity Trading Plc, Akin Odeyemi, disclosed this on Monday in Abuja, saying the second issuance generated N728.9 billion after N501 billion was secured through the first series in January.
The Series 2 issuance, launched in August, attracted 11 GenCos, compared with eight participants under Series 1. Odeyemi said the wider participation indicated increased confidence in the mechanism being used to resolve verified debts in the electricity market.
The N728.9 billion raised under Series 2 will be implemented through two tranches, identified as Tranches A and B.
Odeyemi said the accumulated obligations had weakened the ability of participants in the electricity market to meet their financial commitments and had limited the capacity of GenCos to make further investments in generation.
He said the debt reduction programme should therefore be viewed beyond the settlement of old obligations, arguing that it was also intended to restore liquidity and financial confidence across the electricity supply industry.
Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, said the Series 2 issuance comprised N402 billion in cash bonds and N326.9 billion in non cash bonds allocated to participating GenCos under the Presidential Power Sector Debt Reduction Programme.
Oyedele said the transaction was designed to address accumulated obligations that had weakened liquidity and confidence across the electricity value chain.
He, however, stressed that settling the existing debt would not be sufficient without changes to the way the electricity market operates.
According to him, the bond programme must be supported by stronger market discipline, better revenue assurance, lower technical and commercial losses, and improved efficiency and accountability across the sector.
Power Minister Joseph Tegbe, represented by Permanent Secretary Mahmuda Mamman, said the issuance reflected the Federal Government’s effort to address structural weaknesses in the electricity industry and strengthen the sector’s financial position.
He said the initiative was also expected to support efforts towards a more stable electricity supply and provide a foundation for sustainable growth.
The Special Adviser to President Bola Tinubu on Oil and Gas, Olu Verheijen, said Series 1 resulted in settlement agreements with 11 GenCos covering 21 power plants.
She said Series 2 would expand the implementation of the programme, with the first issuance having established the viability of the model.
THE ISSUES
- The scale of the outstanding GenCo debt highlights the financial pressure within Nigeria’s electricity market and the extent to which unpaid obligations have affected participants across the value chain.
- Debt settlement alone does not address the underlying causes of recurring liabilities. Revenue collection, market discipline and the reduction of technical and commercial losses remain central to preventing another accumulation of arrears.
- GenCos’ ability to invest in additional generation is closely linked to the financial health of the electricity market. Persistent payment problems can limit the sector’s capacity to expand supply.
- The use of domestic capital markets gives government a structured mechanism for addressing verified obligations, but the long term success of the approach will depend on whether wider sector reforms keep new debts from building up.
WHAT’S BEING SAID
“The increased participation is a positive development and reflects the growing confidence of stakeholders in the programme.” – Akin Odeyemi, CEO, NBET
“This means that the bond programme cannot stand alone.” – Taiwo Oyedele, Minister of Finance and Coordinating Minister of the Economy
“As I said at the investor forum in July, Series 1 proved the model and Series 2 is scaling it.” – Olu Verheijen, Special Adviser to the President on Oil and Gas
WHAT’S NEXT
The Federal Government is expected to continue implementing the debt reduction programme while pursuing reforms aimed at improving revenue assurance, market discipline and the financial sustainability of the electricity sector.
BOTTOM LINE
The N1.23 trillion raised through the two bond issuances provides a major step towards clearing GenCos’ legacy obligations. Its wider impact will depend on whether the reforms accompanying the debt settlement can prevent similar arrears from returning.
