The World Bank has flagged potential fiscal risks in Nigeria’s N4 trillion bond programme aimed at clearing long-standing debts in the power sector, warning that the scheme could place a sustained burden on the federal budget if not properly managed.
In its latest Nigeria Development Update, titled “Nigeria’s Tomorrow Must Start Today – The Case for Early Childhood Development,” the Bank noted that while the initiative provides much-needed liquidity to generation companies and gas suppliers, it effectively converts decades-old sector liabilities into sovereign debt obligations that must be fully accounted for in national fiscal planning.
The programme, implemented under the Presidential Power Sector Debt Reduction Programme, targets verified debts accumulated between 2015 and April 2025. It commenced with a N590 billion bond issuance directly allocated to generation companies, featuring a seven-year tenor, a fixed coupon, and a 17.5 percent yield.
Although issued through Nigeria Bulk Electricity Trading Plc Finance Company, a special-purpose vehicle, the bonds are fully guaranteed by the Federal Government, transferring ultimate financial responsibility to the public sector.
“By securitising arrears, the programme provides short-term relief to the electricity value chain but simultaneously converts existing liabilities into explicit debt instruments,” the Bank report stated. “Interest and principal repayments will be funded directly from government revenues over the life of the bonds.”
The World Bank emphasised that under international standards, the bonds qualify as Public and Publicly Guaranteed (PPG) debt.
As such, the outstanding stock and future debt service obligations must be transparently reflected in Nigeria’s central government debt statistics, medium-term fiscal frameworks, and annual budgets.
While the bond programme is expected to stabilise the power sector by resolving legacy arrears and improving cash flow to generation companies and gas suppliers, the Bank cautioned that it also adds pressure to an already stretched fiscal position. Nigeria’s total public debt stood at $110.3 billion (≈N159.2 trillion) as of December 31, 2025.
Nigeria’s power sector has long struggled with accumulated invoices, tariff shortfalls, and liquidity challenges, limiting investment and constraining electricity supply. The N4 trillion bond programme represents one of the most ambitious attempts to tackle these longstanding debts through market-based solutions.
President Bola Tinubu approved the debt settlement plan under the Presidential Power Sector Financial Reforms Programme, following a final review of the debts.
According to the President’s Special Adviser on Information and Strategy, Bayo Onanuga, N3.3 trillion has been verified for full and final settlement. Implementation has begun, with 15 power plants signing agreements totalling N2.3 trillion. “The Federal Government has already raised N501 billion for payments, of which N223 billion has been disbursed, with further payments ongoing,” Onanuga said.
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