A ₦501 Billion Reset: Resolving the Decade-Old Power Debt

On February 3, 2026, Nigeria reached a landmark milestone in its journey toward energy stability with the launch of a ₦501 billion bond. This is the first tranche of the Federal Government’s massive ₦4 trillion Power Sector Bond Programme, designed to clear a decade of “legacy debts” that have historically paralyzed the electricity market.

This move is a “decisive reset” for the Nigerian Electricity Supply Industry (NESI), aiming to move from a state of perpetual liquidity crisis to a sustainable, investor-led market.

1. Breaking the Debt Cycle

The primary mission of this bond is to settle verified, overdue payments owed to Power Generation Companies (GenCos) for electricity supplied between February 2015 and March 2025.

• The Beneficiaries: Five major GenCos representing 14 power plants have already signed settlement agreements, including Geregu Power Plc, Ibom Power, and NDPHC.

• Financial Strategy: The ₦501 billion was raised through a mix of capital market funds (₦300bn) and direct bond allotments to GenCos (₦201bn).

• The “Haircut”: While GenCos are receiving much-needed liquidity, many are reportedly taking a 40% haircut on their claims to expedite the settlement and clear their own debts with gas suppliers.

2. Impact on Capacity and Supply

The resolution of these debts is expected to have a direct ripple effect on the national grid’s performance in 2026.

• Targeted Capacity: The programme aims to impact 5,398MW of generation capacity.

• Reviving “Stranded” Power: Currently, nearly 33% of Nigeria’s available generation (roughly 2,275MW) remains “stranded”—meaning it is produced but cannot reach consumers due to transmission bottlenecks or the inability of GenCos to pay for gas.

• New Investment: Sahara Power Group (owners of the Egbin plant) announced that this settlement would allow them to immediately commence the second phase of the Egbin Power Plant, adding critical new capacity to the grid.

3. The 2026 Subsidy Shift

Coinciding with this bond launch, the Federal Government has introduced a major fiscal policy shift in the 2026 Budget:

• Shared Responsibility: The FG will no longer be the sole bearer of electricity subsidies.

• State Participation: States that mandate lower tariffs for their residents must now fund the difference from their own budgets.

• Power Assistance Consumers Fund (PACF): Subsidies will now be targeted specifically toward vulnerable households through the PACF, rather than the previous universal subsidy model.

The Power Sector at a Glance (February 2026)

Operational Resilience

Despite the financial infusion, the transmission sector remains the “weak link.” In late January 2026, the national grid suffered two collapses within five days, highlighting the urgent need for the Nigerian Independent System Operator (NISO) to modernize the aging transmission infrastructure to absorb the new capacity being unlocked.