President Bola Ahmed Tinubu has approved a ₦4 trillion ($2.61bn) repayment plan to settle long-standing debts in Nigeria’s electricity sector—an intervention the government says will revive the power industry and improve supply for homes and businesses.

The liabilities, owed mainly to 27 power generation companies since 2015, have stalled investments and exacerbated electricity shortages, leaving operators unable to repair ageing infrastructure or expand capacity.

How the Repayment Will Work

Finance Minister Olayemi Cardoso announced the decision after a Federal Executive Council meeting in Abuja, noting that the plan will be finalised within a month. The Debt Management Office (DMO) will oversee repayments through bonds and other financial instruments, limiting immediate cash pressure on the treasury.

Linked Power Reforms: Subsidy Cuts & Tariff Adjustments

The debt-clearance plan forms part of broader power-sector reforms, including a 35% reduction in electricity subsidies and tariff adjustments for urban consumers. Government estimates indicate potential savings of ₦1.1 trillion ($718m) annually—resources that could be redirected toward stabilising the grid and scaling generation.

Concerns: Restructuring vs. Resolution

Critics warn that using bonds restructures the debt rather than eliminating it—pushing obligations into the future. If reforms fail to deliver better service, Nigeria could be left with higher borrowing costs alongside persistent power shortages.

Debt Context: Mounting Obligations, Weak Naira

Nigeria’s public debt rose by ₦27.72 trillion in the past year to ₦149.39 trillion, driven by fresh borrowing and a weaker naira that inflated the local-currency value of external loans. While external debt in dollar terms increased modestly, its naira value jumped about 26%. Domestic debt has also expanded, and some analysts project total debt could reach ₦187.79 trillion by end-2025 if the trend persists.

Can the Bet Pay Off?

Despite a debt-to-GDP ratio that remains below the IMF’s 60% benchmark for emerging markets, low revenue collection and currency volatility complicate repayments. Ultimately, the success of Tinubu’s power-sector gamble hinges on visible, near-term improvements in reliability and service delivery to justify