Power crisis worsens as FG Cancels $717m World Bank Loan
Nigeria’s electricity crisis seems to have worsened after the Federal Government cancelled $717.7 million in undisbursed World Bank financing meant to support reforms and improve power supply across the country. The cancellation, confirmed in World Bank restructuring documents, effectively ends the remaining portion of the $1.52 billion Power Sector Recovery Programme introduced to restore […]
Nigeria’s electricity crisis seems to have worsened after the Federal Government cancelled $717.7 million in undisbursed World Bank financing meant to support reforms and improve power supply across the country.
The cancellation, confirmed in World Bank restructuring documents, effectively ends the remaining portion of the $1.52 billion Power Sector Recovery Programme introduced to restore financial stability in the electricity sector, reduce tariff shortfalls and improve supply reliability.
According to the World Bank, the decision followed a request by the Federal Government and a joint agreement by both parties to discontinue the programme after key reform conditions failed to materialise within the expected timeframe.
“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 development raises fresh concerns over worsening blackouts and mounting pressure on Nigeria’s already fragile electricity sector, which continues to battle poor distribution performance, transmission bottlenecks, inadequate cost recovery and persistent liquidity challenges.
The programme, approved in June 2020 with an initial financing package of about $752.5 million, was designed to improve electricity supply reliability, strengthen financial sustainability in the power sector and enhance accountability among key institutions.
Following early progress, the World Bank approved an additional financing package of about $763.5 million in June 2023 to deepen reforms and address structural weaknesses in the sector.
The facility became effective in June 2024 and was expected to run until June 2027.
However, the bank disclosed that implementation under the additional financing arrangement remained “Moderately Unsatisfactory,” with only about nine per cent of the additional funds disbursed before the cancellation.
Financial records showed that under one component of the facility, only $41.24 million was disbursed out of a committed $449 million, leaving more than $407 million undisbursed.
The World Bank attributed the programme’s difficulties largely to worsening macroeconomic conditions triggered by the liberalisation of Nigeria’s foreign exchange market in 2023, which caused a sharp depreciation of the naira and significantly increased the cost of gas used for power generation.
According to the bank, over 70 per cent of electricity supplied into the national grid is generated using natural gas priced in United States dollars.
At the same time, electricity tariffs for most consumers remained largely frozen despite rising generation costs, except for Band A customers whose tariffs were adjusted in April 2024.
The bank said the mismatch between production costs and revenues sharply widened tariff shortfalls from N140 billion in 2022 to about N1.9 trillion annually in 2024 and 2025.
“Due to the mismatch between the electricity generation costs and the sector tariff revenues, the tariff shortfalls increased sharply in the last three years,” the report stated.
The World Bank further noted that Nigeria failed to establish a credible financing framework capable of addressing the growing deficits and meeting the programme’s reform conditions.
Despite the cancellation, the bank acknowledged that the original phase of the programme recorded significant achievements, including a 71 per cent reduction in tariff shortfalls between 2019 and 2022 and improved cost recovery levels from 56 per cent to 94 per cent.
Annual electricity supplied to the national grid also increased by 13 per cent between 2018 and 2021, according to the report.
The cancellation comes days after the Accountant-General of the Federation, Dr. Shamseldeen Ogunjimi, warned that Nigeria could reject future World Bank loan facilities if delays in approvals and disbursements continue.
Speaking during a meeting with a World Bank delegation in Abuja, Ogunjimi said prolonged delays could disrupt project implementation and undermine Nigeria’s fiscal planning.
“If approvals take more than six months, the Nigerian Government may no longer honour such arrangements,” he said.
The World Bank has now brought forward the programme’s closing date from June 30, 2027, to May 31, 2026, effectively ending the operation more than one year ahead of schedule.