The Geregu Power Plc default on a N6 billion bond repayment has raised fresh questions about the utilisation of proceeds from the N40 billion debt instrument raised under the company’s previous management.

It also raised questions about the level of transparency in the utilisation of proceeds from fast-growing commercial papers issued by Nigerian corporates, the quality of issuance regulation, the efficiency of due diligence carried out before business acquisition deals are signed, and general trust concerns.

As in the case of the used automobile market, corporate defaults and events leading to their revelation may expand the frontier of information symmetry and full disclosure in mergers and acquisitions in the coming years. But more importantly, it could stretch the responsibilities of operators and regulators involved in M&A to a dangerous limit and potentially increase rigidity.

The seven-year series one senior unsecured bond, issued in 2022 under the company’s N100 billion multi-instrument issuance programme, was scheduled to mature on July 28, 2029.

FMDQ listing details show that the company defaulted on its eighth coupon payment and fourth bullet principal repayment.

At the time of the issuance, Geregu said the bond proceeds would be applied to general corporate purposes, including expansion of its power generation capacity and strategic acquisition of power assets in Nigeria and other African countries.

However, its 2022 financial statements gave specific indication of the intended use of the funds, stating that the net proceeds would be used to finance the acquisition of a power-generating company that was then in the final stage of the Bureau of Public Enterprises (BPE) bidding process.

The records identified the planned acquisition as one of the power assets being pursued through the BPE process, while the company’s 2023 financial statements showed that the company had made a contractual commitment of $4 million as a bid bond in favour of the BPE, with validity extending to May 23, 2024.

The acquisition objective has now become a key point of scrutiny following the bond default, with questions being asked about how funds raised for the proposed transaction were subsequently deployed after the acquisition did not materialise.

Reports said there was no publicly confirmed evidence showing that the final award of Geregu II was completed in favour of Geregu.

“If the acquisition did not close, what happened to the earmarked proceeds is a legitimate, documentable question,” a source asked.

The source added that if the stated purpose of the bond was not fulfilled, the funds should either have been saved or deployed to strengthen the business in a manner that could add value to the company.

The questions have gained traction following comments by an auditor and Managing Partner at Segun Salaimon & Co, Farouk Yusuf, who disclosed that Geregu’s bond payable stood at about N34 billion as of December 2025, while the company’s books showed restricted cash of about N31 billion.

Speaking on Arise Television’s Morning Show, Yusuf said the restricted cash had been kept in an interest-yielding account and was expected to provide a source for settling the bond liability when payments fell due.

According to him, the N6 billion repayment that fell due in July 2026 was expected to be met from the restricted account, but the new management was allegedly informed that the funds had already been utilised.

“The bond payable is N34 billion and the restricted cash there is N31 billion,” Yusuf said.

He said the new management subsequently went to access the restricted account when the repayment became due but was told that the money had been utilised by the former management.

The bond was issued under Femi Otedola as chairman. At the time, Otedola also had an indirect controlling interest through the investment vehicle.

Otedola subsequently sold his majority stake in Geregu Power for N1.088 trillion in December 2025, resulting in a change in ownership and leadership, with Abdulaziz Yari emerging as chairman.

The bond default occurred about eight months after the ownership transition, leaving the new management with the outstanding obligation contracted.

Although the bond had an original value of about N40 billion, the outstanding liability was lower because coupon and principal payments had been made since its issuance.

The July default represented the eighth coupon payment and fourth bullet principal repayment.

The development has also revived broader concerns about the financial pressures facing power-generating companies, who are still battling to recover a reported N6.5 trillion debt owed by the federal government.

Geregu Power, in a statement, said it was engaging relevant stakeholders, advisers and regulators to resolve the issues surrounding the bond obligation.