The Federal Government’s plan to issue up to N4 trillion in government-backed bonds to settle longstanding debts owed to electricity generation companies (Gencos) and gas suppliers has drawn sharp criticism from experts.
In separate interviews with Nairametrics, some experts argued that the bond programme could help ease short-term liquidity pressures in the power sector.
However, others warned that it risks entrenching structural weaknesses and creating long-term financial challenges if not properly managed.
The debate comes in the wake of the Federal Government’s announcement that it will raise N1.23 trillion within the next four months as the first phase of the Presidential Power Sector Debt Reduction Programme.
The Special Adviser to the President on Energy, Mrs. Olu Verheijen, disclosed the plan in Abuja on Friday, noting that the initiative is designed to stabilise Nigeria’s power sector and restore investor confidence.
According to her, the first tranche of the bond issuance—expected to be completed by the first quarter of 2026—will be used to settle verified arrears owed to Gencos and gas suppliers.
Verheijen explained that the bonds will be issued with a seven-year tenor at a fixed interest rate and will be fully guaranteed by the Federal Government of Nigeria.
The programme, approved by President Bola Tinubu and endorsed by the Federal Executive Council (FEC) in August 2025, authorises the issuance of up to N4 trillion in bonds to address what government officials describe as a legacy debt overhang in the electricity market.
Nairametrics reports that President Tinubu had earlier, in June, approved the broader N4 trillion bond initiative to tackle persistent liquidity shortfalls that have crippled power generation, discouraged investment, and worsened supply reliability across the value chain.
Experts urge caution
While government officials argue that the intervention is necessary to reset the sector, some experts are urging caution.
Dr. Sam Amadi, former Chairman of the Nigerian Electricity Regulatory Commission (NERC), questioned the logic of using public debt to settle what he described as “market debts.” According to him, the first step should have been a regulatory and structural review of how the debts accumulated in the first place.
“From a financial perspective, a bond is a way of raising funds,” Amadi said. “But the first thing the president should have done is to go back to NERC. These debts are market debts. The question is: how did these debts arise? What caused them? Can the market deal with it?” he asked.
Drawing from his experience as a regulator, Amadi recalled opposing direct government intervention in operational spending during the early years of power sector reforms.
“When I was Chairman of NERC, there was a meeting where the minister at the time was proposing N5 billion to fix the Afam power plant. I said no. Once you have a regulator, every sphere of the market is regulated and should be removed from the market,” he said.
He warned that repeated government bailouts could create a cycle of dependency. “The market is built on debt. It’s not every debt the government pays. If you don’t understand how these debts were incurred, in the next three years, they will come back with another trillion, and the government will borrow again. Why should there be extra market intervention?” he asked.
It’s “using debt to pay debt” – Expert
Similarly, Dr. Biyi Ogunmodede, a power sector expert with Nexton Consulting Ltd, described the bond plan as “using debt to pay debt,” expressing concern about its long-term sustainability.
“I understand that the Federal Government wants to make the energy market more investor-friendly,” Ogunmodede said. “But the best way to go about it is not through the debt route. That said, we will have to see how this plays out in the next few years.”
On the other hand, some analysts see the bond initiative as an opportunity to reset the sector—if accompanied by strong governance and reforms.
In a policy brief shared with Nairametrics, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, stressed the importance of transparency and accountability in implementing the programme.
“There is an urgent need to ensure that all outstanding claims are properly verified, subjected to rigorous audit, and managed transparently and credibly,” Yusuf said.
He warned that Nigeria’s past experience with fuel subsidy regimes showed how intervention programmes could be abused without strong oversight. “Subsidy systems are vulnerable to malpractice. Strong accountability mechanisms are essential to prevent similar outcomes in the power sector,” he added.
Yusuf also called for deeper reforms alongside the bond issuance, including a phased and predictable transition to cost-reflective electricity tariffs, backed by targeted social protection for vulnerable consumers.
In addition, he urged the government to enforce stricter performance benchmarks for electricity distribution companies (Discos), including recapitalisation requirements, technical upgrades, and aggressive loss reduction measures.
What you should know
The Federal Government announced in October that it had concluded implementation frameworks for the N4 trillion bond programme following a high-level meeting with senior executives of Gencos and other sector stakeholders.
The meeting reviewed the modalities for clearing verified arrears and restoring financial stability to the market.
As Nigeria grapples with chronic power shortages, rising energy demand, and investor apathy, analysts agree that the bond programme could provide short-term relief. However, they also caution that without addressing tariff distortions, poor collections, technical losses, and weak enforcement of market rules, the debt problem may resurface—leaving taxpayers to shoulder the burden once again.