Nigeria has cancelled $717.7 million in undisbursed World Bank intervention financing designed to revive Nigeria’s struggling electricity sector.
The cancellation followed a formal request by the federal government and a joint decision by both parties to discontinue financing under the Power Sector Recovery Performance-Based Operation due to evolving sector realities and the inability to achieve key reform milestones.
According to documents obtained from the World Bank, the development effectively terminates the remaining portion of a $1.52 billion power sector recovery programme.
The cancelled amount represents the entire undisbursed balance remaining under the programme.
“The restructuring will result in the cancellation of the entire undisbursed balance in the amount of $717.7 million equivalent, and no further disbursements will be made under the Program following approval of this restructuring,” the bank stated.
The federal government developed the Power Sector Recovery Programme as a framework to restore the sector’s financial viability and reduce its fiscal burden on public finances.
The programme included plans to progressively eliminate tariff shortfalls, improve operational performance among power sector institutions, and strengthen regulatory oversight and accountability mechanisms.
The loan was approved on June 23, 2020, with financing of about $752.5 million equivalent. The programme was structured to improve electricity supply reliability, strengthen the sector’s financial and fiscal sustainability, and enhance accountability among key institutions in the electricity value chain.
Following initial progress recorded under the programme, the World Bank approved an Additional Financing package of approximately $763.5 million equivalent on June 9, 2023, to consolidate earlier gains and support a new phase of reforms. The financing became effective on June 19, 2024, and extended the project’s closing date to June 30, 2027.
Together, the original financing and the additional facility amounted to about $1.52 billion.
However, while the additional financing struggled to meet critical reform conditions, resulting in limited disbursements and eventual cancellation of the remaining funds, the parent programme achieved substantial results and largely disbursed its resources.
According to the bank, high technical, commercial, and collection losses across the distribution segment, combined with inadequate cost recovery, have created a recurring mismatch between revenues generated by the sector and its actual operating costs.
The World Bank noted that Nigeria’s electricity sector continues to face deep-rooted structural challenges despite years of reforms and significant financial support.
The report stated that the sector still suffers from weak distribution performance, transmission bottlenecks, underutilisation of available generation capacity, and persistent financial imbalances.
“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.
According to the World Bank, implementation of the original operation delivered notable results. The report stated that tariff shortfalls fell by 71 per cent between 2019 and 2022, declining from N581 billion to N166 billion.
During the same period, regulatory cost recovery improved significantly from 56 per cent to 94 per cent, while annual electricity supplied to the distribution grid increased by 13 per cent between 2018 and 2021.
The bank said all standard disbursement-linked indicators and global indicators attached to the original programme were fully achieved. “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 gains, the World Bank approved the additional financing package to address remaining structural weaknesses and deepen reforms under the Power Sector Recovery Programme.
The new facility was expected to support the development of a sustainable financing framework for the sector, improve operational performance through implementation of performance improvement plans, and strengthen governance arrangements among electricity institutions.
However, the anticipated reforms failed to materialise within the expected timeframe. The World Bank attributed much of the setback to major macroeconomic developments that dramatically altered the operating environment.
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