The Federal Government has cancelled $717.7 million in undisbursed intervention financing from the World Bank aimed at supporting reforms in Nigeria’s struggling electricity sector.
The cancellation followed a formal request by the government and a joint agreement between both parties to discontinue the remaining financing under the Power Sector Recovery Performance-Based Operation.
According to documents obtained from the World Bank, the decision effectively ends the undisbursed portion of a broader $1.52 billion power sector recovery programme introduced to improve electricity supply, strengthen sector finances, and enhance accountability across Nigeria’s power value chain.
“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 programme,” the bank stated.
The original financing package, approved in June 2020, amounted to about $752.5 million, while an additional financing facility worth roughly $763.5 million was approved in June 2023 to deepen ongoing reforms.
The programme sought to restore financial stability in the electricity sector by reducing tariff shortfalls, improving operational performance among power institutions, and strengthening regulatory oversight.
While the initial phase of the programme reportedly achieved substantial progress, the additional financing struggled to meet critical reform targets, leading to poor disbursement performance and eventual cancellation.
The World Bank noted that Nigeria’s electricity sector continues to face deep-rooted structural problems, including weak distribution performance, transmission bottlenecks, underutilised generation capacity, and persistent financial imbalances.
According to the report, tariff shortfalls dropped by 71 per cent between 2019 and 2022, declining from ₦581 billion to ₦166 billion. Regulatory cost recovery also improved significantly during that period.
However, the bank said conditions deteriorated sharply after the liberalisation of Nigeria’s foreign exchange market in June 2023, which led to a steep depreciation of the naira and increased the cost of natural gas used for power generation.
Because over 70 per cent of electricity supplied to Nigeria’s national grid is generated using gas priced in US dollars, generation costs surged while electricity tariffs for most consumers remained largely unchanged.
The report stated that annual tariff shortfalls rose dramatically from about ₦140 billion in 2022 to nearly ₦1.9 trillion in both 2024 and 2025.
“Due to the mismatch between electricity generation costs and sector tariff revenues, the tariff shortfalls increased sharply,” the bank said.
The World Bank explained that the inability to establish a credible financing framework and implement key reform milestones prevented Nigeria from meeting major conditions attached to the additional financing package.
Implementation delays, including issues involving the Transmission Company of Nigeria and verification requirements for sector institutions, also contributed to the programme’s underperformance.
Financial records showed that under the additional financing arrangement, only about nine per cent of the $763.5 million facility was disbursed before the cancellation.
The World Bank added that the programme’s closing date was moved forward from June 30, 2027, to May 31, 2026.
The development comes days after the Accountant-General of the Federation, Shamseldeen Ogunjimi, warned that Nigeria could reject future World Bank loan arrangements if delays in approval and disbursement persist.
Speaking during a meeting with a World Bank delegation in Abuja, Ogunjimi stressed that since the facilities are loans and not grants, timely processing and disbursement are necessary to avoid disrupting project execution and fiscal planning.
