The Federal Government has cancelled $717.7 million in undisbursed World Bank funding for Nigeria’s struggling power sector, effectively winding down the remaining tranche of a $1.52 billion electricity recovery programme.
The decision comes amid growing tariff shortfalls, deepening financial strain, and ongoing implementation challenges in the industry.
Documents from the World Bank website on Monday indicated that the cancellation followed a formal request by the Federal Government and a mutual agreement between both parties to discontinue financing under the Power Sector Recovery Performance-Based Operation, citing changing sector conditions and failure to meet key reform targets, according to The Punch.
According to a World Bank restructuring paper, the cancelled sum represents the full undisbursed balance under the programme.
“The restructuring will result in the cancellation of the entire undisbursed balance in the amount of $717.7m equivalent, and no further disbursements will be made under the Program following approval of this restructuring,” the bank stated.
The document also revealed that the programme’s closing date has been advanced from June 30, 2027, to May 31, 2026, effectively bringing the initiative to an end more than a year earlier than planned. The cancelled facility was part of a wider World Bank intervention aimed at supporting reforms in Nigeria’s struggling electricity sector.
The original Power Sector Recovery Performance-Based Operation was approved on June 23, 2020, with financing of about $752.5 million equivalent.
The programme was designed to improve electricity supply reliability, strengthen the sector’s financial and fiscal sustainability, and enhance accountability across key institutions in the electricity value chain.
Following early progress under the initiative, the World Bank approved additional financing of about $763.5 million equivalent on June 9, 2023, to deepen reforms and support a new phase of implementation. The funding became effective on June 19, 2024, and extended the project’s closing date to June 30, 2027.
Combined, the original financing and the additional facility brought the total commitment under the programme to about $1.52 billion.
However, while the parent programme recorded significant progress and largely disbursed its funds, the additional financing struggled to meet key reform conditions, leading to limited disbursement and the eventual cancellation of the remaining balance.
The World Bank noted that Nigeria’s electricity sector continues to grapple with deep structural challenges despite years of reform efforts and substantial financial support.
According to the report, the sector is still constrained by weak distribution performance, transmission bottlenecks, underutilised generation capacity, and persistent financial imbalances across the value chain.
According to the World Bank, high technical, commercial, and collection losses within the distribution segment—alongside inadequate cost recovery—have created a persistent gap between revenues generated by the sector and its actual operating costs.
“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.
The Federal Government developed the Power Sector Recovery Programme as a framework to restore the financial viability of the electricity sector and reduce its burden on public finances.
The initiative was designed to gradually eliminate tariff shortfalls, improve operational efficiency across power sector institutions, and strengthen regulatory oversight as well as accountability mechanisms.
According to the World Bank, the implementation of the original operation delivered notable progress. The report stated that tariff shortfalls declined by 71 per cent between 2019 and 2022, falling from N581 billion to N166 billion.
Over the same period, regulatory cost recovery improved from 56 per cent to 94 per cent, while annual electricity supplied to the distribution grid rose by 13 per cent between 2018 and 2021.
