Reported by: Ijeoma G | Edited by: Oravbiere Osayomore Promise.
LAGOS, Nigeria — Nigeria’s power generation companies (GenCos) are intensifying their concerns and public criticism over the failure to receive funds from a N501 billion debt‑settlement bond issued by the federal government, even as the broader electricity market grapples with unresolved legacy liabilities, structural inefficiencies and escalating financial pressure. Three months after the inaugural bond was issued under the Presidential Power Sector Debt Reduction Programme (PPSDRP), GenCos report that no cash has flowed to their accounts, raising fresh alarm about liquidity, investment shortfalls and the viability of ongoing reforms in the sector.
The issuance of the N501 billion bond in late 2025 was intended as a decisive first step toward settling an estimated N4 trillion in accumulated debts owed to major power producers for electricity supplied to the national grid over the past decade, a longstanding problem that has eroded confidence, deterred investment and suppressed operational capacity in Nigeria’s electricity supply industry.
Officials at the time hailed the bond’s 100 per cent subscription by institutional investors — which included pension funds, banks and asset managers — as a strong signal of renewed confidence in government reforms and its commitment to address endemic liquidity constraints. The instrument was designed not only to begin servicing outstanding liabilities but also to signal a structural reboot of financial flows across the generation, transmission and distribution segments of the power value chain.
Under the settlement framework, five GenCos — First Independent Power Limited, Geregu Power Plc, Ibom Power Company Limited, Mabon Limited and the Niger Delta Power Holding Company — signed negotiated agreements in January 2026 to receive payments for verified receivables totalling N827.16 billion in phased instalments. However, as of March 2026, executives within the Association of Power Generation Companies have confirmed that no payment has been received from the bond proceeds, leaving operators in a precarious position despite their participation in the scheme.
Industry leaders say the non‑payment is intensifying an already severe cash crunch. GenCos have historically been paid a fraction of their billed revenues, with regulatory reports indicating that less than 40 per cent of invoiced amounts were received in previous years, constricting operations, undermining maintenance efforts and limiting investments in plant upgrades and capacity expansion.
The failure to disburse bond proceeds has sparked frustration among power producers, who argue that continued delays not only compound existing liquidity challenges but also risk derailing broader reform objectives. Without timely funds, they warn, operators will struggle to procure fuel, service debts and sustain the infrastructure necessary to deliver more reliable electricity — outcomes that could further weaken the sector’s performance and discourage much‑needed private capital inflows.
A broader dispute over the quantum of legacy liabilities has further complicated the landscape. GenCos have previously estimated unpaid invoices at about N6 trillion, a figure significantly higher than the government’s audited liability of approximately N2.8 trillion, according to multiple industry sources. This divergence has been at the center of protracted negotiations and reflects deeper disagreements over the scale of debts accumulated from tariff shortfalls, weak remittances, and market inefficiencies.
Government authorities have maintained that rigorous auditing was necessary to verify the actual amount owed and to prevent inflated claims reminiscent of earlier controversies surrounding fuel subsidies. After extensive review by a tripartite audit committee, the verified liability was reduced to N2.8 trillion, and the administration pledged to settle this figure progressively, with initial payments tied to performance conditions and commitments by GenCos to invest a portion of proceeds into enhancing their infrastructure.
Despite these assurances, the delay in actual cash transfers is raising skepticism about the pace and effectiveness of reform implementation. Industry analysts argue that without swift action to operationalize the bond programme and clear timelines for payment disbursement, confidence among investors and sector participants could erode further, jeopardizing the viability of the government’s broader strategy to stabilise the electricity market and attract long‑term capital.
The liquidity crisis in Nigeria’s power sector is rooted in systemic challenges that predate the current reform push. Since the 2013 privatisation of generation and distribution assets, the market has struggled with tariff structures that fail to cover the full cost of generation and delivery, revenue collection gaps, under‑remittance by distribution companies, and persistent inefficiencies in the payment waterfall mechanisms that determine how cash flows through the electricity value chain. These structural deficiencies have starved GenCos of critical funds needed to sustain operations and invest in network resilience.
The consequences of chronic non‑payment extend beyond the generation segment. Distribution companies and gas suppliers, who rely on stable cash flows from GenCos and bulk traders, also face financial strain when funds fail to circulate effectively. This weakens the overall ecosystem, limits capacity expansion nationwide, and contributes to recurrent grid instability that has frustrated businesses and households alike.
The government has signaled that additional payments amounting to hundreds of billions of naira may be released later in the year as part of a phased settlement plan under the verified liability, but the specifics of the schedule and mechanisms remain unclear, leaving operators and market watchers seeking more concrete commitments. Recent policy discussions have suggested a second tranche of funds could be disbursed mid‑year, with remaining balances spread over subsequent months, but such projections are contingent on fiscal capacity and administrative coordination across agencies.
Experts say that beyond the bond programme, complementary reforms — including cost‑reflective tariffs, improved revenue collection systems, clearer contractual frameworks, and stronger regulatory oversight — are essential to ensuring long‑term financial sustainability in the power sector. Without addressing the root causes of liquidity shortfalls, incremental interventions risk providing temporary relief rather than lasting transformation.
As pressure mounts on policymakers to fulfill payment obligations under the N501 billion bond, GenCos and industry stakeholders are urging the government to expedite disbursements, enhance transparency around the settlement process, and implement structural reforms that will foster a healthier investment climate and improve electricity delivery to consumers nationwide.
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