Nigeria cancels $717m World Bank power funding after electricity sector reforms faced financial and operational setbacks

The Federal Government of Nigeria has cancelled $717.7 million in unused funding tied to a World Bank-supported electricity reform programme following mounting financial and operational challenges in the country’s power sector.

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According to a World Bank restructuring document, Nigeria formally requested the cancellation on March 26, 2026, with both parties agreeing to terminate the arrangement and pursue alternative support measures.

The programme, known as the Power Sector Recovery Operation, was originally designed to improve electricity supply, strengthen sector finances and drive efficiency reforms across Nigeria’s electricity industry.

Under the new arrangement, the programme’s closing date has been brought forward from June 30, 2027, to May 31, 2026, while no additional funds will be disbursed.

The World Bank power funding programme struggled amid worsening financial pressures triggered largely by Nigeria’s foreign exchange reforms and naira devaluation introduced in 2023.

According to the report, the reforms sharply increased electricity generation costs because gas supplied to power plants is priced in United States dollars.

Despite rising operational expenses, electricity tariffs for most consumers did not increase sufficiently to offset the costs, with only Band A customers experiencing significant tariff adjustments.

As a result, the gap between sector revenues and operating expenses widened dramatically.

The World Bank said tariff shortfalls rose from N140 billion in 2022 to about N1.9 trillion in both 2024 and 2025, placing additional strain on government finances and slowing reform implementation.

The report also highlighted persistent structural weaknesses within the power sector, including poor electricity distribution performance, transmission constraints, underutilised generation capacity and high technical and commercial losses.

Poor cost recovery and operational inefficiencies were also identified as major obstacles undermining the reform programme.

Although the sector recorded improvements between 2019 and 2022, including reduced tariff deficits and better electricity supply, the additional $750 million financing approved in 2023 failed to achieve expected outcomes.

The World Bank disclosed that only about nine per cent of the extra financing was eventually released before the cancellation decision was reached.

Overall, the World Bank power funding initiative had total commitments of approximately $1.51 billion, out of which about $796 million had already been disbursed, leaving $717.7 million unused and now officially cancelled.

The latest development comes amid growing concerns over delays in international loan disbursements and implementation bottlenecks.

Earlier, Shamseldeen Babatunde Ogunjimi warned that Nigeria could reconsider participation in some World Bank loan arrangements if approval and release processes continue to suffer prolonged delays.

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Analysts say the cancellation highlights the deep-rooted challenges confronting Nigeria’s electricity sector despite years of reform efforts and international financial support.