The federal government and the World Bank have agreed to cancel $717.7 million in undisbursed financing under a power-sector recovery programme after key reform milestones were not met and sector conditions changed.
World Bank documents show the cancellation ends the remaining portion of a $1.52 billion Power Sector Recovery Programme (PSRP), according to Channels TV report.
The amount cancelled represents the entire undisbursed balance linked to an Additional Financing package approved in June 2023.
The bank said no further disbursements will be made under the programme following restructuring approval.
Launched with initial financing in June 2020, the PSRP was designed to restore the sector’s financial viability, reduce its fiscal burden and improve accountability across the electricity value chain.
The parent programme largely disbursed and recorded substantive gains: tariff shortfalls fell by 71 per cent between 2019 and 2022, regulatory cost recovery rose from 56 per cent to 94 per cent, and electricity supplied to the distribution grid rose by about 13 percent between 2018 and 2021.
An Additional Financing package of roughly $763.5 million was approved on June 9, 2023 and became effective on June 19, 2024, extending the project closing date to June 30, 2027.
Together with the original financing, the two tranches totalled about $1.52 billion.
However, the World Bank found the additional facility struggled to meet disbursement-linked conditions and only disbursed about nine per cent of its funds.
Financial data in the bank’s restructuring note show that under the IBRD component $41.24 million of $449m was disbursed, while under the IDA component $754.82m of $1.063bn was disbursed.
The bank cited deep-rooted structural challenges that persisted in Nigeria’s electricity sector: weak distribution performance, transmission bottlenecks, under‑utilisation of generation capacity and recurring financial imbalances.
These problems created recurrent financing gaps in the form of tariff shortfalls and liquidity pressures across the value chain.
A major trigger was macroeconomic: the June 2023 liberalisation of the foreign exchange market led to a sharp naira depreciation and a large rise in the dollar-priced cost of natural gas, which accounts for more than 70 percent of generation.
At the same time, electricity tariffs for most consumers remained largely unchanged, widening the gap between generation costs and revenues. Annual tariff shortfalls, the bank said, rose from N140 billion in 2022 to about N1.9 trillion in both 2024 and 2025.
The World Bank also pointed to implementation delays — including slow alignment of performance improvement plans and verification challenges — that limited triggering of disbursements even where progress existed. The overall implementation rating for the additional financing was “Moderately Unsatisfactory.”
Consequences and timeline
Because the additional financing could not meet required global indicators and a credible financing plan, the bank and Nigerian authorities agreed to restructure the operation. The programme’s closing date was brought forward to May 31, 2026, ending the operation more than a year early.
The cancellation followed earlier warnings from the Accountant‑General of the Federation, Dr Shamseldeen Ogunjimi, who said Nigeria may decline future World Bank loans if approval and disbursement delays persist.
Ogunjimi said prolonged timelines could undermine Nigeria’s willingness to accept such loans and urged the bank to expedite approvals to align with fiscal planning, noting that loans carry repayment obligations that require predictable disbursement.
The World Bank said the parent programme delivered notable results and was largely disbursed, but it concluded that the original operation’s design became increasingly misaligned with evolving sector realities. The cancellation applies only to the undisbursed additional financing.
