World Bank Flags Risks in Nigeria's N4 Trillion Power Bond

The World Bank has expressed concerns regarding fiscal risks linked to Nigeria's N4 trillion bond program, which is designed to address a N3.3 trillion debt owed to power generation companies. This initiative is part of a broader strategy to clear legacy arrears in the power sector by 2025.

The program will begin with a N590 billion bond issuance, directly allocated to generation companies, featuring a seven-year tenor and a fixed coupon yield of 17.5 percent. Although the bond is structured to provide short-term liquidity relief, the World Bank cautions that it effectively converts long-standing liabilities into sovereign debt obligations, which will be serviced from the federal budget.

The report emphasizes that while the bond offers immediate financial relief, it creates a recurring fiscal burden that must be carefully integrated into Nigeria's fiscal planning framework. The World Bank highlights the importance of transparency and adherence to international standards in managing public debt associated with this bond program.