The Federal Government has cancelled the remaining $717.7 million World Bank loan meant for Nigeria’s power sector, ending a major electricity recovery programme earlier than planned as the country continues to battle worsening electricity supply and rising financial pressure in the sector.
Documents published by the World Bank showed that both parties agreed to discontinue the funding arrangement after key reform targets were not achieved.
The cancelled funds were part of the Power Sector Recovery Performance-Based Operation introduced to improve electricity supply, strengthen the finances of the sector and support reforms across the industry.
The project was initially approved in 2020 with about $752.5 million in funding. In 2023, the World Bank added another $763.5 million to deepen reforms and address long-standing problems in the sector. Combined, the programme was valued at about $1.52 billion.
However, the latest restructuring document showed that the additional financing struggled to meet major conditions required for disbursement. The World Bank said no further payments would be made under the programme after the cancellation of the undisbursed balance.
The bank also moved the project’s closing date from June 2027 to May 2026, effectively ending the operation ahead of schedule.
According to the report, Nigeria’s electricity sector still faces deep structural problems despite years of reforms and intervention funds. The bank identified weak distribution networks, transmission bottlenecks, poor revenue collection and mounting tariff shortfalls as some of the major issues affecting the sector.
The World Bank noted that the situation worsened after the liberalisation of the foreign exchange market in 2023, which caused a sharp depreciation of the naira and increased the cost of gas used for power generation.
It explained that over 70 per cent of electricity supplied to the national grid depends on gas priced in United States dollars. At the same time, electricity tariffs remained largely unchanged for most consumers, creating a wide gap between operating costs and revenues generated in the sector.
The report stated that tariff shortfalls rose from N140 billion in 2022 to about N1.9 trillion in both 2024 and 2025, putting fresh pressure on government finances.
The World Bank further disclosed that only about nine per cent of the additional financing package had been disbursed before the cancellation. It described the implementation progress under the programme as “Moderately Unsatisfactory.”