- The cancellation covers the full undisbursed amount of $717.7 million
- The World Bank noted that Nigeria’s power sector continues to face deep structural problems
- The development comes amid broader concerns over Nigeria’s access to external financing
Nigeria has lost $717.7 million in undisbursed World Bank electricity sector financing after the Federal Government and the World Bank jointly agreed to discontinue a major reform programme aimed at stabilising the country’s struggling power industry.
According to official restructuring documents published on the World Bank’s website, Eko Hot Blog gathered that the decision effectively terminates the remaining balance of the $1.52 billion Power Sector Recovery Performance-Based Operation, following Nigeria’s request to exit the facility amid ongoing implementation difficulties and unmet reform conditions.
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The cancellation covers the full undisbursed amount of $717.7 million, with no further releases expected under the programme.
The project’s lifespan has also been shortened, with its closing date advanced from June 30, 2027, to May 31, 2026, bringing the intervention to an early end.
The initiative was originally approved in 2020 with about $752.5 million in financing to support reforms in electricity supply reliability, financial sustainability, and governance within the power sector.
In 2023, an additional $763.5 million was approved to deepen reforms and address remaining structural challenges, bringing total commitments to about $1.52 billion.
While the initial phase reportedly achieved notable progress and full disbursement, the additional financing component struggled to meet key performance benchmarks, resulting in limited fund release and eventual cancellation.
The World Bank noted that Nigeria’s power sector continues to face deep structural problems, including weak distribution efficiency, transmission constraints, and underutilised generation capacity, all of which contribute to persistent financial instability.
A major concern highlighted in the report is the widening gap between electricity generation costs and consumer tariffs.
Despite rising costs, tariffs have largely remained unchanged since 2023 for most users, except for Band A customers, whose rates were adjusted in 2024.
The situation has significantly worsened tariff shortfalls, which jumped from about N140 billion in 2022 to an estimated N1.9 trillion annually in 2024 and 2025, placing additional pressure on government finances and sector liquidity.
The report also linked the worsening crisis to broader macroeconomic changes, particularly the liberalisation of the foreign exchange market in 2023, which led to a sharp depreciation of the naira and increased the cost of gas used for electricity generation. Over 70 per cent of Nigeria’s power supply depends on gas-fired plants priced in US dollars.
Implementation setbacks, including delays in meeting performance improvement targets and verification requirements across key sector agencies such as the Transmission Company of Nigeria, further slowed progress under the programme.
The World Bank rated overall performance of the additional financing component as “moderately unsatisfactory,” noting that Nigeria was unable to meet key global indicators due to insufficient funding plans and persistent tariff deficits.
While the original programme recorded stronger results, including reduced tariff shortfalls and improved cost recovery, the additional financing phase failed to sustain the same momentum.
The Federal Government had designed the recovery programme to restore financial viability to the electricity sector, reduce fiscal burdens, and improve accountability across the power value chain.
However, the latest outcome reflects ongoing challenges in implementing long-standing reforms.
The development comes amid broader concerns over Nigeria’s access to external financing, with officials previously warning that delays in loan approvals and disbursement processes could affect future borrowing decisions.
Nigeria remains one of the largest beneficiaries of World Bank concessional funding in Africa, even as its electricity sector continues to face unresolved structural and financial challenges.
