The Federal Government has cancelled $717.7 million in undisbursed electricity sector funding from the World Bank, ending the remaining portion of a $1.52 billion reform programme aimed at stabilising Nigeria’s power industry.
The decision was reached jointly by both parties following a formal request from Nigerian authorities, with the programme now set to close on 31 May 2026, earlier than the original completion timeline. The cancelled amount represents the full unused balance under the additional financing component of the Power Sector Recovery Programme, which was designed to strengthen electricity supply reliability, improve financial sustainability, and reduce persistent fiscal exposure linked to subsidies.
The programme was initially launched with about $752.5 million in 2020 and later expanded by an additional $763.5 million in 2023 to deepen reforms across the electricity value chain. While the earlier phase recorded stronger performance and full disbursement of allocated funds, the expanded phase faced delays in meeting key performance conditions required for continued financing.
Data from restructuring documents show that structural weaknesses in the power sector, including transmission constraints, distribution inefficiencies, and weak revenue recovery, continued to limit progress. The Transmission Company of Nigeria was among institutions affected by implementation delays tied to performance improvement plans and verification requirements.
A major factor behind the setback was the widening gap between electricity generation costs and tariffs collected from consumers. Following the liberalisation of Nigeria’s foreign exchange market in 2023, the naira depreciated sharply, pushing up the cost of gas used for power generation, which accounts for more than 70 percent of grid supply. Despite rising costs, tariffs for most customers remained largely unchanged, creating significant revenue shortfalls.
According to programme data, annual tariff deficits rose from about N140 billion in 2022 to approximately N1.9 trillion in 2024 and 2025. The World Bank stated that this imbalance undermined the financial viability of the sector and made it difficult for Nigeria to meet agreed reform indicators under the additional financing arrangement.
The bank also noted that Nigeria did not establish a credible and sustainable financing framework to address the widening deficit, while several implementation milestones were not achieved within the required timeframe. As a result, disbursement under the additional financing remained low, at roughly 9 percent, leaving more than $700 million unused.
Although earlier phases of the programme recorded measurable improvements, including reduced tariff shortfalls and improved cost recovery ratios, those gains were not sustained under the expanded financing phase due to macroeconomic pressures and policy delays.
Nigeria remains a major recipient of concessional lending from the International Development Association, with exposure still above $18 billion as of early 2026, despite slight fluctuations in outstanding balances.
