Nigeria has cancelled $717.7 million in undisbursed funding under a World Bank-supported electricity reform programme, dealing another blow to efforts aimed at improving the country’s troubled power sector.
The cancelled funding was part of the Power Sector Recovery Performance-Based Operation (PSRO), a major initiative created to help Nigeria improve electricity supply, strengthen the financial health of the sector, and reduce long-standing operational problems.
According to a World Bank restructuring document, the cancellation came after the Federal Government formally requested the withdrawal on March 26, 2026. Both Nigeria and the World Bank later agreed to discontinue the remaining financing and focus on other forms of support for the sector.
The document revealed that the entire undisbursed balance of $717.7 million would be cancelled immediately. It also stated that the programme’s closing date was moved forward from June 30, 2027, to May 31, 2026.
This means no additional money will be released under the programme before it officially closes.
The development comes at a difficult time for Nigeria’s electricity industry, which continues to struggle with poor power supply, weak revenue collection, rising subsidy costs, and heavy financial losses across the sector.
The World Bank explained that the programme ran into major difficulties after the naira lost value following the foreign exchange market reforms introduced in June 2023.
Because over 70 percent of Nigeria’s electricity is generated using gas priced in US dollars, the devaluation significantly increased production costs for power generation companies.
Despite the sharp rise in costs, electricity tariffs for many consumers remained largely unchanged. Only Band A customers saw tariff increases in April 2024 after the government approved cost-reflective pricing for that category.
As costs continued to rise without enough tariff adjustments, the gap between electricity revenue and operating expenses widened rapidly.
According to the World Bank, Nigeria’s annual electricity tariff deficit rose dramatically from N140 billion in 2022 to N1.9 trillion in both 2024 and 2025.
The lender noted that the absence of a reliable financing plan to cover these growing shortfalls prevented Nigeria from meeting important reform targets linked to the programme.
Apart from pricing issues, the report also pointed to deeper structural problems within the sector. These include weak performance by distribution companies, transmission limitations, high technical losses, electricity theft, underused generation capacity, and poor cost recovery.
The PSRO programme was originally approved in June 2020 as part of Nigeria’s wider Power Sector Recovery Programme.
Initially, the reforms showed positive results. Between 2019 and 2022, tariff shortfalls reportedly dropped by 71 percent, while cost recovery improved significantly. Electricity supplied to distribution companies also increased during the period.
Encouraged by the progress, the World Bank approved an additional $750 million financing package in June 2023 to expand the reforms and address remaining issues in the sector.
However, the additional financing programme struggled almost immediately after becoming effective in 2024.
The World Bank disclosed that none of the key performance targets attached to the new funding arrangement was achieved. Delays in reform implementation, failure to establish a sustainable financing structure, and challenges in meeting disbursement conditions all contributed to the poor performance.
As a result, only around 9 percent of the additional financing package was disbursed before the cancellation decision was reached.
The World Bank also downgraded the programme’s implementation rating after reform progress slowed and major targets remained unmet.
Records from the restructuring document showed that the total funding commitment under the programme stood at about $1.51 billion, out of which nearly $796 million had already been disbursed before the cancellation.
Meanwhile, the Accountant-General of the Federation, Shamseldeen Babatunde Ogunjimi, recently warned that Nigeria could reconsider some World Bank loan arrangements if delays in approvals and fund disbursement continue.
He stressed that the funds being requested are loans that Nigeria intends to repay and called for faster processing and release of development financing meant to support critical national projects.
