The Federal Government has cancelled $717.7 million in undisbursed World Bank funding meant for Nigeria’s troubled power sector amid worsening blackouts, rising tariff shortfalls and mounting financial pressure in the industry.
Documents obtained from the World Bank showed that the cancellation affected the remaining balance of a $1.52 billion Power Sector Recovery Programme jointly financed by Nigeria and the global lender.
The World Bank said the cancellation followed a request by the Federal Government after both parties agreed to discontinue the financing due to implementation challenges and inability to achieve key reform targets.
“The restructuring will result in the cancellation of the entire undisbursed balance of $717.7m and no further disbursements will be made,” the bank stated.
The programme, originally approved in 2020, was designed to improve electricity supply, strengthen the financial stability of the power sector and reduce the government’s subsidy burden.
While the initial phase recorded some progress, the additional financing approved in 2023 reportedly struggled due to worsening economic realities and policy setbacks.
The World Bank blamed the crisis partly on the sharp depreciation of the naira following the liberalisation of the foreign exchange market in 2023, which increased the cost of gas used for electricity generation.
According to the bank, over 70 per cent of electricity on Nigeria’s national grid is generated with gas priced in dollars.
The report added that electricity tariffs remained largely frozen for most consumers despite rising production costs, causing tariff shortfalls to surge from N140bn in 2022 to about N1.9tn in both 2024 and 2025.
The bank noted that the growing gap between electricity generation costs and revenues created severe liquidity pressures across the sector.
It also disclosed that only about nine per cent of the additional financing package had been disbursed before the cancellation.
The World Bank further stated that delays in implementing reforms, weak distribution performance, transmission bottlenecks and poor revenue collection continued to frustrate efforts to revive the power sector.
Meanwhile, the Accountant-General of the Federation, Dr. Shamseldeen Ogunjimi, recently warned that Nigeria could reject future World Bank loans if approval and disbursement delays persist.
