The Federal Government has cancelled $717.7 million in undisbursed World Bank financing for the power sector after failing to meet key reform conditions.
The cancellation affects the remaining balance of the $1.52 billion Power Sector Recovery Performance-Based Operation approved between 2020 and 2023. The World Bank confirmed, on Tuesday May 26, that no further disbursements will be made following a joint agreement to terminate the programme.
The initial $752.5 million tranche, approved in June 2020, was fully disbursed and met its performance targets. It reduced tariff shortfalls by 71% from ₦581 billion in 2019 to N166 billion in 2022, improved regulatory cost recovery from 56% to 94%, and increased grid electricity supply by 13% between 2018 and 2021.
The additional $763.5 million approved in June 2023 stalled due to unmet reform milestones. The World Bank said the programme became misaligned with Nigeria’s realities after two major shocks: the liberalization of foreign exchange in June 2023, which raised gas costs for generation, and a freeze on electricity tariffs for most consumers. With over 70% of grid electricity gas-fired and priced in dollars, the changes severely strained sector finances.
Persistent issues remain, including high technical and commercial losses in distribution, weak transmission capacity, underused generation assets, and inadequate cost recovery. These continue to create liquidity gaps across the power value chain.
Recall that the Accountant-General of the Federation Dr. Shamseldeen Ogunjimi had warned that prolonged delays in loan approval and disbursement could lead Nigeria to reject future World Bank loans. He said delays beyond six months undermine project execution and fiscal planning.
The World Bank has moved the programme’s closing date forward from June 30, 2027, to May 31, 2026, ending the initiative more than a year early.
