The Federal Government has cancelled $717.7 million in undisbursed intervention funding from the World Bank meant to support Nigeria’s troubled electricity sector after both parties agreed to discontinue the Power Sector Recovery Performance-Based Operation.
The cancelled amount represents the remaining balance of the $1.52 billion power sector recovery programme initiated to improve electricity supply, strengthen financial sustainability, and reform key institutions within the sector.
According to the World Bank, the decision followed the government’s inability to meet critical reform targets tied to the additional financing package approved in 2023. The bank noted that worsening macroeconomic conditions, especially the sharp depreciation of the naira after the foreign exchange market liberalisation in June 2023, significantly increased the cost of electricity generation.
The report explained that since over 70 per cent of Nigeria’s electricity is generated using gas priced in dollars, the weaker naira pushed production costs sharply higher while electricity tariffs remained mostly unchanged for consumers outside Band A.
As a result, tariff shortfalls surged from N140 billion in 2022 to about N1.9 trillion annually in 2024 and 2025, creating severe financial pressure across the power sector value chain.
Although the original phase of the programme recorded notable achievements, including a 71 per cent reduction in tariff shortfalls between 2019 and 2022 and improved cost recovery, the additional financing struggled to meet key conditions required for further disbursement.
The World Bank disclosed that only about nine per cent of the additional financing package had been released before the cancellation, while the programme’s closing date was moved forward from June 2027 to May 2026.
The development comes shortly after the Accountant-General of the Federation, Shamseldeen Ogunjimi, warned that Nigeria could reject future World Bank loan arrangements if delays in approvals and disbursements continue to affect project execution timelines.
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