The World Bank has raised concerns over Nigeria’s N4tn bond programme designed to settle long-standing debts owed to power-generating companies. In its latest Nigeria Development Update, the global lender noted that while the initiative provides immediate liquidity relief for electricity companies, it effectively converts accumulated sector liabilities into formal sovereign debt, placing a recurring burden on government finances.
The bond programme, launched under the Presidential Power Sector Debt Reduction Programme, targets arrears dating from 2015 to April 2025. The first issuance, a N590bn tranche, was allotted directly to generation companies with a seven-year tenor, a fixed coupon, and a 17.5% yield. Although issued through Nigeria Bulk Electricity Trading Plc Finance Company Plc, the bonds are fully guaranteed by the Federal Government, meaning the government assumes the ultimate financial risk.
According to the World Bank, this sovereign guarantee classifies the bonds as Public and Publicly Guaranteed (PPG) debt, which must be transparently reflected in Nigeria’s fiscal accounts. The institution stressed that both principal and interest repayments will be funded from government revenues, creating a sustained claim on public finances that requires careful integration into annual budgets and medium-term fiscal planning.
Nigeria’s power sector has long struggled with liquidity challenges, leaving generation companies and gas suppliers with trillions of naira in unpaid invoices. The new bond programme represents one of the most ambitious attempts to resolve these legacy debts, with President Bola Tinubu approving a plan to settle N3.3tn in outstanding payments. Implementation has already begun, with 15 power plants signing agreements totaling N2.3tn and disbursements already underway.
While the bond programme is expected to stabilize cash flow in the electricity sector, the World Bank warned that it adds pressure to Nigeria’s already stretched fiscal position. With the country’s total public debt at $110.3bn (≈N159.2tn) as of December 2025, balancing sectoral reforms with fiscal prudence remains critical to ensuring long-term debt sustainability and overall economic stability.
source: punch