FG Cancels $717m World Bank Power Loan Amid Electricity Sector Crisis
Undisbursed financing withdrawn as Nigeria’s power sector struggles with tariff shortfalls, debt pressure, and reform delays.
FG Cancels $717m World Bank Power Loan Amid Nigeria’s Electricity Sector Challenges
Undisbursed financing withdrawn as tariff shortfalls, sector debts, and implementation setbacks continue to pressure Nigeria’s power industry
The Federal Government has cancelled approximately $717.7 million in undisbursed World Bank financing linked to Nigeria’s electricity sector recovery programme, ending a major portion of a broader $1.52 billion reform initiative earlier than planned.
According to documents released by the World Bank, the cancellation followed a joint decision between Nigeria and the financial institution after concerns emerged over implementation delays, worsening sector finances, and difficulties in meeting critical reform targets.
The cancelled amount represented the remaining undisbursed balance under the Power Sector Recovery Performance-Based Operation, a programme introduced to improve electricity supply, strengthen financial sustainability within the power sector, and enhance accountability among industry institutions.
The World Bank disclosed that the project’s closing date was moved forward from June 30, 2027, to May 31, 2026, effectively ending the programme more than one year earlier than initially planned.
The power sector recovery initiative originally received approval in 2020 with financing worth about $752.5 million. An additional financing package of roughly $763.5 million was later approved in 2023 to deepen reforms and address structural weaknesses within the electricity industry.
While the initial phase of the programme reportedly recorded significant progress and achieved major disbursement targets, the additional financing package struggled to meet several key conditions required for continued funding.
The World Bank stated that Nigeria’s electricity sector continues to face deep-rooted operational and financial difficulties despite years of reforms and external support.
Among the issues highlighted were weak performance across electricity distribution companies, transmission constraints, low revenue collection, and persistent funding gaps caused by tariff shortfalls.
The institution explained that electricity revenues generated within the sector have remained insufficient to cover operational costs, creating ongoing liquidity pressure throughout the power value chain.
According to the report, tariff shortfalls increased significantly after major economic developments in recent years, particularly following the liberalisation of Nigeria’s foreign exchange market in 2023.
The depreciation of the naira reportedly increased the cost of natural gas used for electricity generation, as most gas-related payments are dollar-denominated.
The World Bank noted that although generation costs rose sharply, electricity tariffs for many consumers remained largely unchanged, except for adjustments introduced for Band A customers in 2024.
As a result, annual tariff shortfalls reportedly climbed from around N140 billion in 2022 to approximately N1.9 trillion in both 2024 and 2025, placing additional pressure on government finances.
Financial data contained in the restructuring report showed that only a small portion of the additional financing package was eventually disbursed.
Under one component of the arrangement, just over $41 million was released out of a $449 million commitment, while another section of the programme recorded over $308 million in undisbursed funds.
The World Bank described implementation progress under the additional financing arrangement as “Moderately Unsatisfactory.”
Government previously raised concerns over loan delays
The development comes shortly after the Accountant-General of the Federation, Dr Shamseldeen Ogunjimi, warned that Nigeria could reconsider certain World Bank loan arrangements if approval and disbursement delays continue to affect project timelines.
Speaking during a meeting with a World Bank delegation in Abuja, Ogunjimi stressed the importance of timely processing of development financing, noting that such facilities are loans that must eventually be repaid.
However, World Bank officials clarified that project financing is typically disbursed in phases depending on implementation progress and agreed funding conditions.
Does Nigeria remains major World Bank borrower
Despite the cancellation, Nigeria remains one of the largest borrowers from the World Bank’s International Development Association.
Recent financial statements showed that Nigeria ranked among the top three IDA borrowers globally during the first quarter of 2026, highlighting the country’s continued reliance on concessional international financing for development projects.
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