This publication provides a comprehensive analysis of the landmark Presidential Power Sector Financial Reforms Programme introduced under the administration of Bola Ahmed Tinubu. It examines the strategic framework underpinning the ₦4 trillion bond issuance designed to resolve entrenched liquidity constraints in Nigeria’s power sector, as well as the successful completion of the first tranche valued at ₦501 billion.
Sectoral Challenges, and Establishment of the Landmark Reform Programme
The Nigerian Electricity Supply Industry (NESI) has persistently suffered from a “circular debt” plague, characterized by systemic payment defaults across different parts of the electricity supply value chain. Power Distribution Companies (DisCos), responsible for downstream retail supply to consumers, have consistently failed to meet their remittance obligations to Power Generation Companies (GenCos). This shortfall is transmitted upstream through the Nigerian Bulk Electricity Trading Company (NBET), which functions as an intermediary under power purchase arrangements and Vesting Contracts. Consequently, GenCos have been unable to satisfy their own financial obligations to gas suppliers (GasCos), thereby exacerbating liquidity stress across the sector.
In response to this structural inefficiency, the Federal Government of Nigeria under the leadership of President Bola Ahmed Tinubu established the Presidential Power Sector Financial Reforms Committee (PPSFRC), mandated to design and implement a sustainable framework for the resolution of legacy debts within the sector as well as.
Pursuant to this mandate, the Committee developed the ₦4 trillion Presidential Power Sector Financial Reforms Programme, pursuant to the approval of the Federal Executive Council. The Programme is specifically designed to settle verified unpaid invoices owed by DisCos to GenCos for the period spanning February 2015 to March 2025. It further incorporates negotiated settlement agreements, including discounted repayment terms on legacy obligations.
Key Transaction Parties
The Nigerian Bulk Electricity Trading Finance Company Plc serves as the issuer of the debt instruments. It is a jointly owned special purpose vehicle established by the Ministry of Finance and NBET to facilitate the execution of the Programme in accordance with regulatory and market requirements.
The Nigerian Bulk Electricity Trading Company acts as the sponsor of the issuance. As a government-owned entity, NBET is responsible for aggregating receivables from DisCos and applying such funds toward the settlement of GenCos’ outstanding claims under vesting contracts and PPAs.
The Federal Government of Nigeria functions as guarantor to the issue, Guarantor of the Issue. All subsequent instruments subscribed to under the issue shall have the full faith and credit of the Nigerian Federal Government.
CardinalStone Partners Limited serves as the lead issuing house - placing it in the forefront of this transaction, responsible for structuring the bond issuance and providing financial advisory services, including determination of tenor, pricing, and applicable instruments suitable for issue. Additional issuing houses and bookrunners include Comercio Partners Capital Limited, Cordros Advisory Services Limited, Coronation Merchant Bank Limited, FSDH Capital Limited, Meristem Capital Limited, Renaissance Securities (Nigeria) Limited, and United Capital Plc, among others.
Finally, Sankore Securities Limited acts as the independent share trustee, holding the issued share capital of the SPV in trust.
Key Features and Investor Considerations
The Programme being the first of its kind represents a pioneering intervention within NESI and is underpinned by sovereign backing (The Federal Government of Nigeria). The issued instruments constitute direct, unconditional, and unsecured obligations of the issuer, ranking pari passu with all other unsubordinated debt obligations.
The instruments qualify as permissible investments under the Trustee Investments Act 2004 and have been approved by the National Pension Commission for pension fund investment, with specific regulatory waivers granted. Additionally, pursuant to Section 340 of the Investment and Securities Act 2007, the Minister of Finance has exercised discretionary authority to exempt the offering from certain statutory requirements.
Further enhancing their attractiveness, the instruments have been recognized liquid asset status by the Central Bank of Nigeria. They are therefore eligible for use as collateral in financing and repurchase transactions, and benefit from a zero-risk weighting computing Capital Adequacy Ratios by Deposit Money Banks, Specialised Banks and Other Financial Institutions. The instruments are also transferable, redeemable, and discountable by Banks and Other Financial Institutions, and are exempt from taxation under applicable Nigerian tax legislation.
Importance of liability Novation in the Program Structure
A unique feature of the programme is the novation of liabilities under existing Power Purchase Agreements (PPAs), through which obligations are transferred from the Nigerian Bulk Electricity Trading Company to the incorporated Special Purpose Vehicle (SPV), Nigerian Bulk Electricity Trading (NBET) Finance PLC.
Unlike a simple assignment, novation substitutes the SPV as the primary obligor, transferring both receivables from DisCos and payment obligations to GenCos. This creates a single, clearly defined counterparty for investors (instrument holders), enhancing legal certainty and enforceability.
The structure also ensures risk isolation. By separating obligations within the SPV, the Programme shields investors from NBET’s legacy debt exposure while enabling the effective securitisation of cash flows backing the bonds.
Why the Sinking Fund Matters
Another defining feature of the Programme is the establishment of a sinking fund, maintained with the Central Bank of Nigeria and administered by the Debt Management Office and backed by the full faith of the Nigerian Federal Government. The sinking fund serves as a credit rating enhancement mechanism that underpins the overall credibility and attractiveness of the issuance.
In practical terms, the fund is capitalized/maintained through periodic inflows from the Federal Government; acting through the Ministry of Finance, as well as receivables from Electricity Distribution Companies (DisCos) and other sectoral revenues. These contributions are accumulated over the life of the instruments and primarily applied towards the timely servicing of coupon payments and eventual redemption of the debt instruments.
The overall importance is its ability to mitigate repayment risk. By prefunding obligations on a frequent basis and with the existence of a full sovereign backing, the Programme reduces reliance on uncertain future cash flows, thereby addressing a core weakness that has famous plagued the Nigerian Electricity Supply Industry. For investors, this translates into enhanced payment certainty and improved risk perception, which in turn supports stronger sectoral participation
Programme Structure and Financial Architecture
The Programme addresses longstanding debt obligations attributable to under-remittance by DisCos as a result of metering failures, and inadequacies in government subsidy funding. Factors, which have collectively undermined liquidity and eroded investor confidence in the sector.
To commence the Programme, a Special Purpose Vehicle (SPV), the Nigerian Bulk Electricity Trading (NBET) Finance PLC, was incorporated pursuant to the approval of the Federal Executive Council. The SPV is mandated to issue debt instruments—including bonds and Sukuk—through a range of mechanisms such as public offers, and private placements to the members of public.
The 25 billion naira share capital of the SPV is held by an independent share trustee, ensuring structural neutrality. Through a novation of liabilities under existing Power Purchase Agreements (PPAs), the SPV assumes entitlement to receivables previously owed to NBET by DisCos. Simultaneously, NBET’s payment obligations to GenCos are also transferred to the SPV.
Following compliance with provisions of the Investment and Securities Act, the SPV issues debt instruments to the investing public. These instruments are backed by the full faith and credit of the Federal Government of Nigeria, supported by a deed of guarantee from the Accountant General of the Federation and the establishment of a sinking fund to the effect.
Settlement of legacy debts is effected through a combination of partial settlements of Negotiated Outstanding liabilities via cash payments and notes/instrument issue. Coupon payments to instrument holders are paid through a Central Bank of Nigeria - Sinking Fund managed by the Debt Management office and funded by Monthly Payments by the Ministry of Finance (MoFi) on behalf of the Federal Government and outstanding receivables from the Discos and other Power sector initiatives
Series 1 Completion
The first Series of the Programme, valued at ₦501 billion, represents a significant milestone in the phased implementation of the debt resolution framework, demonstrating both market receptivity and institutional commitment to sectoral reform.
Under the first Series of the Programme, the issuance was divided into two distinct tranches, each designed to address liquidity constraints within the sector through different approaches.
Series 1 Tranche A, valued at ₦300 billion, was offered to institutional and qualified investors such as asset managers, banks, pension funds, and retail investors through a competitive book-building process. This tranche creates an avenue for a conventional cash-raising instrument, enabling the issuer to secure immediate liquidity from the issue.
Series 1 Tranche B, amounting to ₦201 billion, was allocated directly to Power Generation Companies (GenCos) that have executed the Settlement Agreement under the Presidential Power Sector Debt Reduction Programme (PPSDRP) on substantially similar terms but structured as a non-cash settlement. As opposed to immediate cash disbursement, GenCos receive bonds which may be traded in the secondary market or used as collateral in secured financing arrangements in the nearest future.
The bonds issued under both tranches carry a tenor of seven years, with Semi-annual interest payments. The instruments bear a fixed coupon rate of 17.50%, determined with reference to the prevailing yield on comparable Federal Government of Nigeria (FGN) bonds of similar maturity.
In conclusion, the ₦4 trillion Presidential Power Sector Financial Reforms Programme marks a pivotal shift within the Nigerian Electricity Supply Industry, saddled with the potential to resolve longstanding structural inefficiencies, restore liquidity to a debt-ridden sector, and improve already diminished investor confidence, Provided that new liabilities are not allowed to accumulate behind it.
Regardless its numerous strengths, the Programme’s effectiveness will ultimately depend on continued regulatory oversight and strict enforcement of remittance and performance obligations across the entire value chain. Without this, the risk of re-accumulation of debt remains a serious concern, potentially undermining the long-term objectives of the reform programme.
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