Nigeria’s Federal Government has completed the implementation frameworks for an NGN4 trillion ($2.6bn) bond, designed to settle verified debts owed to power generation companies (GenCos) and gas suppliers, according to officials involved in the process.

The debt-resolution plan, backed by the Ministry of Finance and the Central Bank of Nigeria, aims to restore liquidity in the power sector and improve gas supply reliability to the national grid. The framework follows months of verification by the Nigerian Electricity Regulatory Commission (NERC) and the Nigerian Bulk Electricity Trading Plc (NBET) under the Power Sector Recovery Plan (PSRP 2.0).

Industry officials said the bonds will be issued through the Debt Management Office (DMO) and structured to clear legacy payment obligations that have constrained GenCos’ operations and hindered investment in gas-to-power infrastructure. The verified arrears reportedly include unpaid energy invoices and gas-supply debts accumulated since the privatisation of the power sector in 2013.

The bond—equivalent to about 1% of Nigeria’s GDP—is part of the 2025 Medium-Term Expenditure Framework and signals a renewed effort to balance fiscal consolidation with critical sectoral reforms. According to officials, the DMO plans to structure the instrument as a multi-tranche issuance with maturities of between seven and ten years, pending National Assembly approval.

Officials said the bond issuance is expected before the end of 2025, once all final approvals and debt-reconciliation audits are completed, and will be accompanied by a transparent payment-tracking mechanism to prevent a fresh buildup of liabilities under the new PSRP framework.

The IMF, in its latest Article IV review and World Economic Outlook, identified contingent liabilities from the power sector as a key fiscal risk. It noted that clearing verified arrears through transparent bond instruments would improve investor confidence and reduce pressure on banks exposed to GenCos and gas suppliers.

Nigeria’s grid currently has about 14 GW of installed capacity but typically generates 3–5 GW due to liquidity, gas supply and transmission constraints. Power Minister Adebayo Adelabu said earlier in October that the bond is essential to “revitalising the power sector and sustaining electricity generation”.

While the measure could ease liquidity constraints in the electricity market, it will test fiscal discipline, as Nigeria’s public debt stock already exceeds NGN97 trillion ($62bn).