The Federal Government has discontinued $717.7 million in undisbursed intervention financing from the World Bank meant to support reforms in Nigeria’s troubled electricity sector.
The cancellation came after the Federal Government formally requested a restructuring of the Power Sector Recovery Performance-Based Operation, with both parties agreeing to halt the remaining financing due to changing realities in the sector and the failure to meet critical reform targets.
Documents obtained from the World Bank showed that the decision effectively brings an end to the outstanding portion of the $1.52 billion electricity recovery programme, with the entire undisbursed balance now cancelled.
“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 Power Sector Recovery Programme was introduced by the Federal Government as part of efforts to restore financial stability in the electricity sector and reduce pressure on public finances.
Under the programme, authorities planned to gradually eliminate tariff shortfalls, improve operational efficiency among electricity agencies, and strengthen accountability and regulatory oversight across the sector.
The original financing package, valued at approximately $752.5 million, received approval on June 23, 2020. It was designed to improve electricity supply reliability, strengthen the financial sustainability of the power sector, and improve governance across the electricity value chain.
Following early progress recorded under the initiative, the World Bank approved an additional financing package of about $763.5 million on June 9, 2023, to deepen reforms and consolidate earlier achievements. The facility later became effective on June 19, 2024, while the project deadline was extended to June 30, 2027.
Combined together, both facilities amounted to roughly $1.52 billion.
However, while the original programme recorded significant achievements and largely exhausted its funds, the additional financing arrangement struggled to meet major reform conditions, resulting in minimal disbursements and the eventual cancellation of the remaining balance.
According to the World Bank, Nigeria’s electricity sector continues to battle major structural problems despite years of reforms and substantial financial interventions.
The bank explained that persistent technical, commercial, and collection losses within the distribution segment, alongside poor cost recovery, have continued to create major gaps between revenue generated by the sector and its actual operating costs.
“These constraints have created recurrent financing gaps, most notably in the form of tariff shortfalls, which generate liquidity pressures across the value chain and weaken the operational and financial performance of sector institutions,” the report said.
The report added that the sector still suffers from weak distribution systems, transmission limitations, underutilised generation capacity, and recurring financial imbalances.
Despite these challenges, the World Bank acknowledged that the original operation delivered measurable improvements. According to the report, tariff shortfalls declined by 71 per cent between 2019 and 2022, dropping from N581 billion to N166 billion.
It also stated that regulatory cost recovery improved significantly from 56 per cent to 94 per cent within the same period, while electricity supplied annually to the national distribution grid increased by 13 per cent between 2018 and 2021.
“Implementation of the parent operation was satisfactory, brought substantial results, and fully disbursed the PforR component as all DLRs were achieved,” the report stated.
Encouraged by those results, the World Bank approved the additional financing package to tackle unresolved structural issues and support another phase of reforms.