President Bola Tinubu has approved a NGN4 trillion ($2.6bn) bond programme to settle verified debts owed to power generation companies (GenCos) and gas suppliers, Power Minister Adebayo Adelabu said, in a move aimed at restoring liquidity and investor confidence in Nigeria’s electricity market.

Speaking at a sector briefing in Abuja, the minister said the bond will be issued by the federal government to clear legacy arrears accumulated across the power value chain. The payment plan covers verified obligations owed to GenCos and gas suppliers by government agencies and market operators, according to TheCable and BusinessDay Nigeria.

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. Adelabu described the measure as essential to “revitalising the power sector and sustaining electricity generation,” adding that it followed a detailed audit and verification process to ensure only eligible claims are honoured.

Adelabu said the liquidity squeeze had constrained GenCos’ ability to maintain plants and meet gas-payment obligations, worsening generation shortfalls and contributing to load-shedding. The settlement, he said, should free up capital and improve generation capacity.

The minister also confirmed that the government is preparing a targeted subsidy scheme to protect vulnerable consumers while pushing the market towards cost-reflective tariffs. The reforms form part of the administration’s Power Sector Recovery Programme, launched to stabilise the industry.

However, local media report that some GenCos said they had not yet received formal notice of the debt-clearance plan or bond structure, raising questions about implementation timing and communication.

Industry sources told BusinessDay Nigeria that the government’s decision follows repeated warnings from GenCos about rising receivables. Liquidity challenges have persisted since the 2013 privatisation round, leaving the market with NGN3 trillion to NGN5 trillion in unpaid obligations.

While details of the bond’s structure and issuance schedule have yet to be disclosed by the Ministry of Finance, the Energy Transition Office is expected to oversee execution jointly with the ministry and the Debt Management Office.

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).