The Federal Government has cancelled $717.7 million in undisbursed financing from the World Bank for Nigeria’s troubled electricity sector, ending the remaining portion of the $1.52 billion Power Sector Recovery Programme amid worsening tariff shortfalls, liquidity pressures, and stalled reforms.
Documents obtained from the World Bank showed that the cancellation followed a formal request by the Federal Government and a joint agreement by both parties to discontinue financing under the Power Sector Recovery Performance-Based Operation.
The World Bank disclosed that the cancelled amount represented the entire undisbursed balance under the programme, adding that no further disbursements would be made after the approval of the restructuring arrangement.
The bank also brought forward the programme’s closing date from June 30, 2027, to May 31, 2026, effectively terminating the operation more than a year earlier than planned.
The intervention was originally approved on June 23, 2020, with financing of about $752.5 million aimed at improving electricity supply reliability, strengthening financial sustainability, and enhancing accountability across the power sector.
An additional financing package of about $763.5 million was later approved in June 2023 to deepen reforms and consolidate earlier gains, bringing the total programme value to about $1.52 billion.
However, while the parent programme reportedly achieved substantial results and fully disbursed its funds, the additional financing struggled to meet critical reform targets, leading to limited disbursement and eventual cancellation of the remaining balance.
The World Bank noted that Nigeria’s electricity sector continues to face deep-rooted structural problems, including weak distribution performance, transmission bottlenecks, underutilisation of generation capacity, and persistent financial imbalances.
According to the report, high technical, commercial, and collection losses within the distribution segment, alongside inadequate cost recovery, have continued to create financing gaps and liquidity pressures across the electricity value chain.
The bank said tariff shortfalls declined by 71 per cent between 2019 and 2022, falling from N581 billion to N166 billion, while regulatory cost recovery improved from 56 per cent to 94 per cent during the same period.
Despite those gains, the bank attributed the programme’s later setbacks largely to macroeconomic developments, particularly the liberalisation of Nigeria’s foreign exchange market in June 2023, which triggered a sharp depreciation of the naira and significantly increased the cost of gas used for power generation.
According to the World Bank, more than 70 per cent of electricity supplied to Nigeria’s national grid is generated from natural gas priced in United States dollars.
The report further noted that electricity tariffs remained largely frozen since early 2023, except for Band A customers whose tariffs were adjusted to cost-reflective levels in April 2024.