World Bank Cancels $717.7m Power Sector Financing
The Federal Government has lost access to $717.7m in undisbursed World Bank financing originally earmarked to rescue Nigeria’s troubled electricity sector, following a joint decision by both parties to terminate the Power Sector Recovery Performance Based Operation.
According to restructuring documents obtained from the World Bank, the cancellation was triggered by a formal request from the Federal Government after key reform milestones could not be met. The decision effectively ends the remaining portion of a $1.52bn power sector intervention programme.
“The restructuring will result in the cancellation of the entire undisbursed balance in the amount of $717.7m equivalent, and no further disbursements will be made under the Program following approval of this restructuring,” the Bank stated.
The original loan of $752.5m was approved on June 23, 2020, with the goal of restoring sector financial viability, improving electricity supply reliability, and strengthening accountability across the power value chain. Encouraged by early progress, the Bank approved Additional Financing of $763.5m on June 9, 2023, which became effective on June 19, 2024, extending the closing date to June 30, 2027.
The parent programme delivered measurable gains. Tariff shortfalls dropped 71 percent between 2019 and 2022, falling from N581bn to N166bn. Regulatory cost recovery climbed from 56 percent to 94 percent, while electricity supplied to distribution companies rose 13 percent between 2018 and 2021. The Bank confirmed that all disbursement linked indicators under the original programme were fully achieved.
The Additional Financing, however, faltered. The Bank attributed the collapse largely to the June 2023 liberalisation of Nigeria’s foreign exchange market, which sharply depreciated the naira and inflated the cost of natural gas, the fuel powering over 70 percent of grid electricity. With tariffs frozen since early 2023, except for Band A customers whose rates were adjusted to cost reflective levels in April 2024, the gap between generation costs and consumer revenues widened dramatically.
Annual tariff shortfalls surged from N140bn in 2022 to N1.9tn in both 2024 and 2025, severely straining federal finances.
Disbursement figures reflect the scale of underperformance. Under the International Bank for Reconstruction and Development component, only $41.24m of the $449m commitment was released, a disbursement rate of just 9.18 percent. The International Development Association component released $754.82m of $1.063bn committed. Overall, while 95 percent of the parent operation was disbursed, only 9 percent of the Additional Financing reached release stage.
The Bank concluded that the programme’s design had grown “misaligned” with sector realities, and the closing date has been brought forward to May 31, 2026.
The cancellation comes shortly after Accountant General of the Federation, Dr Shamseldeen Ogunjimi, warned that Nigeria could reject World Bank facilities if approval delays persist. Speaking in Abuja during a visit by a Bank delegation led by Mrs Treed Lane, Ogunjimi said, “If approvals take more than six months, the Nigerian Government may no longer honour such arrangements.”