Can Tinubu’s Power Debt Rescue End Nigeria’s Bailout Cycle?

As the Federal Government begins settling verified legacy debts owed to electricity generation companies, mounting liabilities, unpaid invoices and persistent revenue shortfalls raise questions about whether the intervention will restore financial stability or merely provide temporary relief to a sector struggling to keep the lights on. Chidi Ugwu writes;

For Nigeria’s electricity generation companies, the Federal Government’s commencement of a N728.98 billion debt settlement represents a long-awaited financial reprieve. For an electricity industry burdened by years of unpaid invoices, strained relationships with gas suppliers and limited capacity to invest, the intervention offers a measure of relief.

But beneath the headline figure lies a more troubling question: can a sector weighed down by trillions of naira in accumulated liabilities regain financial stability through debt repayment alone when the conditions responsible for creating the debts remain largely unresolved?

The Nigerian Bulk Electricity Trading Plc (NBET) announced on October 9 that it had commenced disbursement under the second series of bonds issued through the Federal Government’s Power Sector Debt Reduction Programme.

The transaction, worth N728.979 billion, comprises N402 billion in cash-backed bonds and N326.979 billion in non-cash instruments designed to settle verified obligations owed to participating electricity generation companies (GenCos) and their associated gas suppliers.

It is one of the most significant interventions in Nigeria’s electricity market in recent years, forming part of a broader N4 trillion financing programme approved by President Bola Tinubu’s administration to address legacy debts and restore confidence in the Nigerian Electricity Supply Industry.

Yet, the scale of the intervention must be measured against the magnitude of the problem.

In February 2026, the Association of Power Generation Companies (APGC) put the amount owed to GenCos at approximately N6.5 trillion. By March, its chief executive, Joy Ogaji, said the figure had risen to about N6.8 trillion, with a substantial portion of the liabilities linked to gas-fired power generation. In July, the association warned that fresh liabilities could exceed N7 trillion if the underlying problems persisted.

These figures, which reflect estimates made at different points in time, underline the central challenge confronting the government’s debt-reduction initiative: while public funds and government-backed financial instruments are being deployed to settle historical obligations, the industry continues to generate new payment shortfalls.

The question is no longer how much government can repay. It is whether Nigeria can establish an electricity market in which power producers are paid sufficiently and consistently to generate electricity, maintain their plants, purchase gas and invest in additional capacity without depending on government-funded rescue programmes.

The N728.979 billion Series 2 bond is the second major issuance under the government’s debt-reduction programme.

The first series, completed in January 2026, raised approximately N501.021 billion.

Combined with the second issuance, the two transactions bring the amount raised under the programme’s first phase to about N1.23 trillion. The second series attracted 11 participating GenCos, compared with eight under the first transaction.

The broader programme authorises the issuance of up to N4 trillion in government-backed instruments to address verified legacy obligations accumulated across the electricity market.

For operators, the importance of the settlement extends beyond the money received. It offers an opportunity to meet outstanding obligations to gas suppliers, lenders and contractors, potentially easing operational pressures that have constrained electricity generation.

NBET Managing Director and Chief Executive Officer, Akin Odeyemi, said the settlement was intended to strengthen the financial position of participating companies, improve liquidity across the electricity value chain and create greater commercial confidence.

The government has also presented the programme as a means of improving the industry’s capacity to attract investment, sustain generation and support a more reliable electricity supply.

However, the arithmetic exposes the limitations of the intervention.

Even if the N728.979 billion is fully deployed as intended, it cannot independently eliminate a debt burden estimated by industry representatives at between N6.5 trillion and N7 trillion.

More importantly, the wider N4 trillion programme is not a blank cheque capable of resolving every liability in the electricity market. Its effectiveness depends on the scope of verified claims, the terms agreed with participating companies and the government’s ability to execute subsequent phases.

The settlement therefore marks progress in addressing accumulated debts, but it should not be confused with a comprehensive resolution of the sector’s financial problems.

To understand why the debt crisis persists, it is necessary to examine how money moves through Nigeria’s electricity market.

Generation companies produce electricity and sell it through the market arrangements involving NBET, while distribution companies (DisCos) supply customers and collect payments. The revenues collected across the chain are expected to support payments to generators, gas suppliers and other service providers.

However, when distribution companies fail to remit sufficient revenue, or when regulated tariffs do not cover the full cost of supplying electricity, the shortfall travels backwards through the market.

Generators receive less than the value of electricity supplied. Gas suppliers wait for payment, maintenance budgets come under pressure, and investments in new generation capacity become more difficult to finance.

The result is a cycle in which financial weakness threatens electricity supply, while poor supply and inefficient revenue collection further undermine the industry’s financial position.

The World Bank has repeatedly identified tariff shortfalls, inadequate investment and operational inefficiencies as important obstacles to the financial sustainability of Nigeria’s electricity sector. Its analysis also highlights how distribution companies’ technical, commercial and collection losses reduce remittances to the wider market, contributing to payment difficulties for generation companies.

The scale of the problem is reflected in the figures provided by industry operators. In March 2026, Ogaji said the government owed GenCos approximately N6.8 trillion, while about N3.3 trillion was owed by thermal generation companies to gas suppliers.

She attributed the growing debt to years of incomplete payments for electricity supplied to the market.

“NBET is set up to buy power from GenCos and sell to distribution companies (DisCos). The aim is that as they buy power, they will pay in full, but since 2013 till today, they’ve never paid in full, so this debt is now N6.8 trillion,” she said in a recent interview.

Her warning exposes the vulnerability of an electricity market in which the ability to generate power depends partly on whether outstanding commercial obligations can be settled.

Gas suppliers, facing mounting unpaid invoices, have reportedly demanded payment before delivering fuel to some thermal power plants. This creates a direct connection between financial arrears and the availability of electricity.

A debt settlement that enables generators to pay their suppliers could therefore have practical benefits beyond improving corporate balance sheets.

But the relief will be temporary if the market continues to accumulate unpaid obligations at a pace that erodes the gains from each repayment.

The government-backed bond programme is intended to restore liquidity and rebuild confidence in the electricity market. Nevertheless, financial instruments cannot independently resolve every operational and commercial problem confronting the sector.

Edu Okeke, managing director of Azura Power West Africa, warned in January 2026 that persistent liquidity constraints were discouraging investment in electricity generation.

He said GenCos were receiving only about 38 per cent of their invoices, arguing that unpaid obligations continued to undermine the industry’s investment prospects.

“At the end of the day, it is still about money. GenCos are receiving about 38 per cent of their invoices. Has anything changed? The answer is no, because as long as suppliers cannot be paid, no new investment will come in,” Okeke said.

His assessment points to the distinction between settling old debts and creating a financially viable electricity market.

The first addresses accumulated liabilities. The second requires the market to generate sufficient revenue to meet its recurring obligations. Without the latter, even a substantial repayment programme risks becoming an expensive exercise in clearing yesterday’s debts while tomorrow’s liabilities continue to grow.

Okeke also warned that another large debt burden could emerge if the structural weaknesses remained unresolved. His concern reflects a broader industry argument that the sustainability of the power sector depends on more than the availability of government-backed financing.

For generation companies, predictable payments are essential to planning maintenance, servicing loans and negotiating reliable gas supply arrangements. Investors must also be confident that future revenues will be sufficient to recover their investments.

Where these conditions are absent, the willingness of private capital to finance additional capacity is likely to weaken.

Another difficult issue is the relationship between electricity tariffs, the cost of supplying power and the government’s responsibility for funding tariff shortfalls.

For years, regulated tariffs have not always reflected the full cost of electricity supply. Where the government undertakes to cover the difference, delays or inadequate funding can leave operators with unpaid balances.

The World Bank’s National Energy Compact for Nigeria describes how the depreciation of the naira in 2023 increased the sector’s revenue requirements, partly because important inputs, including gas, are affected by dollar-linked costs.

The document estimated that tariff shortfalls rose to N650 billion in 2023 and projected that they could reach N2.2 trillion in 2024. These were estimates and projections contained in the document, rather than verified figures for the sector’s present liabilities.

The implication is that the debt crisis cannot be separated from the wider debate about electricity pricing, subsidies and affordability.

Increasing tariffs without addressing service quality and household purchasing power could intensify public dissatisfaction. Keeping tariffs below cost-recovery levels without reliably funding the difference could, however, leave the sector financially exposed.

Chdi Ugwu is a correspondent with Independent Newspapers.

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