Nigeria Cancels $717m World Bank Power Loan

Nigeria has cancelled $717.7 million in undisbursed World Bank funding under the Power Sector Recovery Performance-Based Operation (PSRO), a programme designed to restore financial sustainability in the electricity sector.

According to a restructuring paper obtained by Nairametrics, the Federal Government formally requested the cancellation on March 26, 2026, with the World Bank agreeing to redirect support to alternative interventions. The programme’s closing date was also moved forward from June 2027 to May 2026.

The World Bank said the collapse was largely due to the naira devaluation and frozen electricity tariffs, which widened the sector’s financial gap. Annual tariff deficits rose from ₦140bn in 2022 to ₦1.9trn in 2024 and 2025, undermining reform milestones.

While gas costs surged — since pricing is dollar-denominated — tariffs remained unchanged for most consumers except Band A customers, whose rates were adjusted in April 2024. This mismatch triggered unprecedented shortfalls.

Beyond tariffs, the report highlighted weak distribution performance, transmission bottlenecks, underutilised generation capacity, and high technical and commercial losses, all contributing to poor cost recovery.

The PSRO, approved in 2020, initially delivered gains: tariff shortfalls fell by 71% between 2019 and 2022, and regulatory cost recovery improved from 56% to 94%.

Encouraged, the World Bank approved an additional $750m financing package in 2023, but only 9% was disbursed as reforms stalled.

The restructuring document showed total commitments of $1.51bn, of which $796m was disbursed before cancellation, leaving $717.7m undrawn.

Nigeria’s Accountant-General, Dr. Shamseldeen Ogunjimi, had earlier warned that prolonged delays in approval and disbursement could force Nigeria to withdraw from World Bank loan arrangements, stressing: “Funds being sought are loans, not grants, and Nigeria deserves timely consideration.”