The Federal Government has cancelled $717.7 million in undisbursed World Bank financing meant to support reforms in Nigeria’s struggling electricity sector, marking a major setback for the country’s power sector recovery programme.
The decision followed a mutual agreement between Nigeria and the World Bank to discontinue the remaining funding under the Power Sector Recovery Performance-Based Operation due to changing sector conditions and failure to meet key reform targets.
The cancelled funds represent the entire remaining balance of a $1.52 billion programme originally designed to improve electricity supply, strengthen sector finances, and enhance regulatory performance.
According to the World Bank, the restructuring effectively ends further disbursements under the initiative, which had already recorded partial success in its earlier phase, including improvements in tariff recovery and increased electricity supply to the national grid.
However, the additional financing package introduced in 2023 struggled to achieve required reform milestones, leading to minimal disbursement before its eventual cancellation.
The bank attributed the setback to structural challenges in Nigeria’s power sector, including weak distribution performance, transmission constraints, and persistent financial shortfalls caused by tariff gaps and rising operational costs.
It further noted that recent macroeconomic changes, particularly exchange rate liberalisation and naira depreciation, significantly increased the cost of gas used for electricity generation, worsening the sector’s financial imbalance.
This mismatch between rising generation costs and stagnant tariffs led to a sharp rise in tariff shortfalls, which reportedly surged to about N1.9 trillion annually in 2024 and 2025.
Despite earlier progress under the original programme, including reduced shortfalls and improved regulatory cost recovery, the World Bank said the new phase of reforms failed to materialise due to financing gaps and implementation delays.
The programme has now been officially brought to a premature close, more than a year ahead of its scheduled completion date, as authorities were unable to establish a sustainable funding framework for the sector.
Meanwhile, Nigeria’s Accountant-General has previously warned that the country may reject future World Bank loans if approval and disbursement delays continue to hinder project execution timelines.
