Amanze Chinonye
The Federal Government has cancelled the remaining $717.7 million World Bank intervention loan meant to support reforms in Nigeria’s troubled electricity sector, effectively bringing a major power recovery programme to an early end amid worsening financial pressures and persistent electricity shortages.
Documents released by the World Bank showed that the cancellation followed a formal request by the Nigerian government and a joint decision by both parties to discontinue financing under the Power Sector Recovery Performance-Based Operation (PSRO).
The affected funds represented the undisbursed balance of the broader $1.52 billion electricity sector recovery programme introduced to improve power supply, strengthen the financial position of the sector and reduce fiscal pressure on the government.
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According to the World Bank restructuring document, no further disbursements would be made under the programme following the cancellation approval.
The bank also moved the project’s closing date from June 30, 2027, to May 31, 2026, effectively terminating the operation more than one year earlier than originally planned.
The Power Sector Recovery Programme was initially approved in June 2020 with financing of about $752.5 million to support reforms aimed at improving the performance and financial sustainability of Nigeria’s electricity industry.
Following what the World Bank described as encouraging early progress, an additional financing package of about $763.5 million was approved in 2023 to deepen reforms and consolidate gains already recorded.
However, the World Bank said the additional financing arrangement struggled to achieve key reform conditions tied to disbursement, resulting in poor implementation performance and eventual cancellation of the remaining balance. Only about nine per cent of the additional financing package had been disbursed before the programme was halted.
The lender identified several long-standing structural challenges affecting the power sector, including weak distribution infrastructure, transmission bottlenecks, underutilised generation capacity, poor revenue collection and mounting tariff deficits.
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According to the report, the financial situation in the sector deteriorated sharply after the liberalisation of Nigeria’s foreign exchange market in 2023, which triggered a major depreciation of the naira and increased the cost of natural gas used for electricity generation.
The World Bank noted that more than 70 per cent of electricity supplied to the national grid depends on gas-fired plants priced in United States dollars.
Despite rising operating costs, electricity tariffs for most consumers remained largely unchanged, except for Band A customers whose tariffs were adjusted in April 2024. The bank said the mismatch between generation costs and revenues caused tariff shortfalls to rise from about N140 billion in 2022 to nearly N1.9 trillion annually in both 2024 and 2025.
The World Bank further disclosed that Nigeria failed to establish a credible financing framework capable of reducing the growing deficits in the sector, making it difficult to achieve the programme’s reform milestones.
While the bank acknowledged that the original phase of the programme recorded substantial progress, including improvements in cost recovery and reductions in tariff shortfalls between 2019 and 2022, it said later reforms suffered setbacks due to economic realities, implementation delays and verification bottlenecks.
The World Bank consequently downgraded implementation progress under the programme from “Satisfactory” to “Moderately Unsatisfactory,” citing missed reform timelines and failure to meet verification conditions tied to funding releases.
The development comes as Nigeria continues to grapple with chronic electricity shortages, mounting subsidy obligations and liquidity challenges across the power value chain despite years of reforms and intervention programmes backed by both local and international institutions.
Amanze Chinonye is a Staff Correspondent at Prime Business Africa, a rising star in the literary world, weaving captivating stories that transport readers to the vibrant landscapes of Nigeria and the rest of Africa. With a unique voice that blends with the newspaper's tradition and style, Chinonye's writing is a masterful exploration of the human condition, delving into themes of identity, culture, and social justice. Through her words, Chinonye paints vivid portraits of everyday African life, from the bustling markets of Nigeria's Lagos to the quiet villages of South Africa's countryside . With a keen eye for detail and a deep understanding of the complexities of Nigerian society, Chinonye's writing is both a testament to the country's rich cultural heritage and a powerful call to action for a brighter future. As a writer, Chinonye is a true storyteller, using her dexterity to educate, inspire, and uplift readers around the world.
