The Federal Government has turned to the bond market to raise funds to settle outstanding debts owed to electricity generation companies, as its obligations to power producers reached about ₦6 trillion at the beginning of 2026.
The move comes amid concerns over Nigeria’s electricity supply and the government’s difficulty in fully funding electricity tariff subsidies through the national budget.
According to the Nigerian Electricity Regulatory Commission (NERC), the Federal Government’s gross electricity tariff subsidy obligation stood at ₦1.928 trillion in 2025, representing 57.44 per cent of the total invoices issued by the Nigerian Bulk Electricity Trading Plc (NBET).
The amount was equivalent to an average of ₦160.69 billion monthly.
NERC’s 2025 industry report showed that the government’s subsidy obligations were distributed across the four quarters of the year. A total of ₦536.40 billion was recorded in the first quarter, ₦514.36 billion in the second quarter, ₦458.76 billion in the third quarter and ₦418.79 billion in the fourth quarter.
The 2025 figure represented a slight decline from the ₦1.949 trillion recorded in 2024.
FG Issues ₦728.979 Billion Bond to Settle Power Debts
As part of efforts to address the debt crisis in the electricity sector, the Federal Government signed a ₦728.979 billion Series 2 bond in September 2026 under its ₦4 trillion Power Sector Debt Reduction Programme.
The initiative is aimed at settling verified outstanding debts owed to electricity generation companies and improving liquidity across the power sector.
The bond transaction comprises ₦402 billion in cash bonds raised from the domestic capital market and ₦326.979 billion in non-cash bonds allocated to participating generation companies.
The Managing Director and Chief Executive Officer of NBET, Akin Odeyemi, said the organisation had commenced payments to participating generation companies and their associated gas suppliers following the successful issuance and signing of the bonds.
Odeyemi described the development as an important step towards implementing the Presidential Power Sector Debt Reduction Programme under President Bola Tinubu’s administration.
He said the settlement was being carried out through the approved combination of cash and non-cash bonds.
However, the outstanding debt burden remains a major concern for electricity generation companies, which require adequate funding to maintain their facilities, purchase gas and sustain power production.
Power Minister Insists Electricity Supply Has Improved
Despite persistent complaints about poor electricity supply in several parts of the country, the Minister of Power, Joseph Tegbe, has maintained that the situation has improved over the past three months.
Tegbe acknowledged that some communities were still experiencing inadequate electricity supply but said the government was working to address the challenges.
According to him, operational records showed that electricity generation and transmission had remained above 5,000 megawatts over recent weeks, compared with between 3,700MW and 4,700MW before June 2026.
He added that generation reached a peak of 5,330MW during August and September.
The minister said the next challenge was to sustain the improvement and ensure that increased generation translated into more reliable electricity for consumers.
He explained that the government’s efforts were focused on stabilising the electricity value chain, restoring market discipline and improving governance.
As part of these efforts, the 375MW Alaoji open-cycle power plant was restored to the national grid after remaining out of operation for three years.
The government has also upgraded several substations to improve transmission capacity.
In Lagos, new transformers were commissioned at Apapa, Ijora, Alausa and Lekki, unlocking 672MW of transmission capacity. Another 300MVA transformer was energised at Katampe in Abuja, providing an additional 240MW of transmission capacity.
Tegbe said the interventions were aimed at restoring existing infrastructure and strengthening the electricity network in areas with high demand.
He also highlighted the government’s efforts to expand renewable energy, particularly solar power.
According to him, the completed electrification projects undertaken by the Rural Electrification Agency and its partners included 62 solar and mini-grid installations across 30 states.
The projects provided approximately 43.6MW of installed solar capacity and 41,735 new electricity connections, with an estimated reach of more than 208,000 people.
Power Sector Reforms Remain Incomplete
Special Adviser to the President on Power and Chairman of the Presidential Task Force on Power Sector Reset and Restoration, Dr Lanre Babalola, said Nigeria’s electricity reforms remained incomplete.
Babalola argued that the country’s electricity crisis was not simply caused by insufficient generation capacity but by the inability to consistently convert available power into reliable electricity and sustainable investment.
He explained that Nigeria had unbundled the former vertically integrated electricity utility, privatised generation and distribution companies, and established NBET as a bulk electricity trader.
The reforms were expected to attract private investment and encourage greater commercial discipline across the industry.
However, Babalola said the country had yet to complete the transition to the competitive electricity market originally envisaged by the reforms.
He noted that the single-buyer arrangement was designed as a temporary system to allow market participants to develop the financial strength required to enter into direct electricity supply contracts.
According to him, retaining the transitional arrangement indefinitely could become an obstacle to the sector’s development.
He maintained that the priority should be to complete the transition to a functional and competitive electricity market.
Nigerians Have Been Paying for Darkness, Expert Says
A lawyer and lead consultant on power sector matters at Sage Consulting, Bode Fadipe, criticised the state of electricity supply, arguing that consumers had not received adequate value for the money paid for electricity.
Fadipe said the figures raised serious questions about the performance of the sector, particularly given the amount of public money committed to electricity subsidies.
He identified inadequate investment in infrastructure as one of the major factors limiting improvements in electricity supply.
The consultant also supported the Nigerian Electricity Regulatory Commission’s directive requiring electricity distribution companies (DisCos) to retain part of their revenue for investment in infrastructure.
He said the distribution companies had protested against the directive but noted that NERC had insisted on its implementation.
However, he called for a proper assessment of the extent to which the companies had complied with the order.
Fadipe urged NERC to enforce its investment requirements strictly, establish timelines for measurable improvements and conduct forensic audits of investments made by the distribution companies.
He also called for closer cooperation among regulators and electricity market participants to address outstanding debts and improve the industry’s financial position.
Consumers Demand Better Protection
Consumer rights advocate and Executive Director of the Electricity Consumer Protection Advocacy Centre, Chief Princewill Okorie, also expressed concerns about the quality of electricity services provided to Nigerians.
Okorie said the decentralisation of the electricity sector under the new legal framework had brought regulation closer to consumers at the state level.
However, he argued that enforcement of consumer protection regulations remained weak.
He identified estimated billing, infrastructure charges and alleged violations of regulatory directives as some of the challenges facing electricity consumers.
According to him, residents in some communities had been required to contribute money towards the purchase of transformers and other distribution equipment, despite concerns about the responsibilities of distribution companies.
Okorie said the argument that consumers were not paying their bills should not prevent authorities from examining the quality of service and the fairness of electricity charges.
He questioned whether bills issued to consumers were properly calculated, transparent and justified.
The consumer advocate called for stronger enforcement of electricity regulations, particularly in rural communities, where residents often face serious challenges accessing reliable power.
He also proposed establishing a dedicated mechanism to investigate alleged violations in the electricity sector and improve public awareness of consumer rights.
Okorie questioned why the Federal Ministry of Power did not have a dedicated consumer protection unit and urged relevant agencies to do more to educate Nigerians about their rights.
He further raised concerns about the government’s electricity subsidy claims, arguing that consumers often contribute to the provision of distribution infrastructure, including poles, cables and transformers, without receiving reimbursement from the utilities.
The growing debt burden, persistent electricity supply challenges and concerns over investment and consumer protection continue to put pressure on the Federal Government to implement more effective reforms in the power sector.
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