AFC Advises on Inaugural Bond Issuance Under Nigeria’s Power Sector Reform Programme

The reform initiative is overseen by the Presidential Power Sector Debt Reduction Committee (PPSDRC), with technical leadership provided by the Office of the Special Adviser to the President on Energy.

 

Africa Finance Corporation (AFC), the continent’s leading infrastructure solutions provider, has played a key advisory role in the successful issuance of the inaugural tranche of bonds under the Federal Government of Nigeria’s Presidential Power Sector Financial Reforms Programme (PPSFRP).

The first tranche, valued at ₦501 billion, represents a major milestone in the implementation of the ₦4 trillion Power Sector Bond Programme, a landmark initiative designed to resolve more than a decade of legacy debt obligations in Nigeria’s electricity supply industry.

The Programme is being implemented to address long-standing liquidity challenges that have undermined the financial health of power generation companies (GenCos) and constrained investment across the electricity value chain.

Clearing Legacy Power Sector Debt

The reform initiative is overseen by the Presidential Power Sector Debt Reduction Committee (PPSDRC), with technical leadership provided by the Office of the Special Adviser to the President on Energy. Implementation is being carried out through a special purpose vehicle, NBET Finance Company Plc, established by Nigerian Bulk Electricity Trading Plc (NBET).

Proceeds from the bond issuance will be used to settle verified and overdue receivables owed to GenCos for electricity supplied between February 2015 and March 2025. The settlement effectively extinguishes legacy claims that have accumulated over the years, restoring liquidity to the sector and strengthening the balance sheets of power producers.

By resolving these obligations, the Federal Government aims to restore financial stability in the electricity market, improve cash flows for operators, and create a more attractive environment for domestic and international investment.

Strong Domestic Investor Participation

The transaction received strong backing from Nigeria’s pension fund investment community, with Pension Fund Administrators (PFAs) contributing approximately 50 percent of the total financing. This level of participation underscores growing confidence in power sector reforms and highlights the successful mobilisation of long-term domestic capital for critical infrastructure development.

Market analysts note that the involvement of pension funds is a positive signal for the sustainability of the Programme, particularly as Nigeria seeks to deepen its local capital markets while reducing reliance on short-term financing.

AFC’s Advisory Role

AFC acted as Co-Financial Adviser to the Federal Government of Nigeria on the transaction, working alongside CardinalStone Partners. The Corporation provided comprehensive financial advisory services, including the design of the Programme’s negotiation strategy framework, support in negotiating and executing Settlement Agreements with GenCos, and the structuring of the bond issuance.

The successful execution of the inaugural tranche reflects AFC’s deep sector expertise and strong understanding of Nigeria’s power market dynamics, particularly the commercial and financial complexities that have historically constrained reform efforts.

Olu Verheijen, Special Adviser to the President on Energy, described the Programme as a turning point for Nigeria’s electricity market.

“The Programme represents a decisive reset of Nigeria’s electricity market, combining debt resolution with broader financial and structural reforms,” she said. “AFC brought strong sector expertise, deep local market knowledge, and a clear understanding of the market’s commercial complexities, playing a critical role in delivering a credible outcome that supports liquidity restoration, investor confidence and long-term sustainability.”

Banji Fehintola, Executive Board Member and Head of Financial Services at AFC, said the transaction reinforces the Corporation’s commitment to transformative reforms in Nigeria’s power sector.

“The successful issuance of the inaugural tranche under the Power Sector Bond Programme underscores AFC’s commitment to supporting transformative reforms in Nigeria’s power sector,” he said. “By resolving long-standing liquidity challenges and restoring confidence among investors and operators, this transaction lays the foundation for sustainable growth and improved electricity supply across the country.”

Impact on Electricity Supply and Investment

When fully completed, the Power Sector Bond Programme is expected to impact approximately 5,398 megawatts (MW) of electricity generation capacity operated by Nigerian GenCos. It will also finalise payments for an estimated 290,644.84 gigawatt-hours (GWh) of electricity billed since February 2015.

The settlement provides a stronger financial foundation for GenCos to invest in capacity enhancement and expansion, supporting improved service delivery to Nigeria’s estimated 12 million active registered electricity customers.

Industry stakeholders believe the clearance of legacy debts will reduce operational risks, improve creditworthiness across the value chain, and unlock new financing opportunities for power generation, transmission and distribution.

Part of Broader Energy Sector Reforms

The Power Sector Bond Programme forms a core pillar of the Federal Government’s broader electricity market reforms. These include significant ongoing investments in consumer metering, upgrades to transmission infrastructure, and a gradual transition to bilateral electricity trading between wholesale counterparties based on market-reflective pricing.

Together, these reforms are aimed at creating a commercially viable and financially sustainable electricity market capable of supporting Nigeria’s long-term industrial growth, economic development and energy security objectives.