In a significant move to stabilize Nigeria's struggling power sector, the Federal Government has successfully raised N501 billion from the domestic capital market. This issuance represents the initial step in a larger N4 trillion initiative designed to resolve the persistent debt crisis plaguing the electricity industry.

The Africa Finance Corporation (AFC) played a crucial role as co-financial advisor, working alongside CardinalStone Partners to facilitate this complex transaction. This bond issuance is specifically targeted at settling verified debts owed to power generation companies (GenCos) for electricity supplied over a ten-year period, from February 2015 to March 2025.

For over a decade, the Nigerian power sector has been crippled by payment shortfalls and delayed remittances. These challenges have created a severe liquidity crunch, hindering the ability of GenCos to service existing loans, adequately maintain their assets, and invest in expanding power generation capacity. The current bond is aimed at breaking this cycle of debt and underinvestment.

The N501 billion raised will be channeled through NBET Finance Company Plc, a special purpose vehicle established under the Nigerian Bulk Electricity Trading Plc (NBET). Oversight of the program is provided by the Presidential Power Sector Debt Reduction Committee, with technical expertise from the Office of the Special Adviser to the President on Energy. This multi-layered approach ensures accountability and efficient allocation of funds.

The government anticipates that extinguishing these legacy claims will significantly improve the financial health of the GenCos. By strengthening their balance sheets and boosting cash flows, these companies will be better positioned to meet their financial obligations and invest in critical infrastructure upgrades. This injection of capital is expected to have a cascading effect, reducing systemic risk across the entire electricity market.

Furthermore, the government hopes this action will alleviate the pressure on banks with substantial exposure to the power sector. Many Nigerian banks have significant loan portfolios tied to GenCos, and the resolution of these outstanding debts will reduce the risk of non-performing loans and improve overall financial stability. This intervention will enhance confidence within the banking sector, encouraging further investment in the power sector.

This initial N501 billion bond issuance marks a pivotal moment in the government's efforts to reform the power sector. The planned N4 trillion program demonstrates a significant commitment to addressing the root causes of the industry's challenges. While this is a promising start, sustained effort and effective implementation will be crucial to ensuring the long-term viability and sustainability of Nigeria's power sector.
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