The Federal Government has cancelled $717.7m in undisbursed funding from the World Bank meant for Nigeria’s power sector recovery programme, raising fresh concerns over the country’s worsening electricity crisis and growing financial pressures in the industry.
Documents released by the World Bank showed that the cancellation followed a request by the Nigerian government and a mutual agreement to discontinue the remaining portion of the programme after key reform targets were not achieved.
The cancelled amount was the outstanding balance from a broader $1.52bn electricity sector support package introduced to improve power supply, strengthen sector finances, and boost accountability among key institutions in the industry.
The World Bank also shortened the project’s closing date from June 2027 to May 2026, effectively ending the initiative earlier than initially planned.
The original financing arrangement, approved in 2020, was valued at about $752.5m and focused on improving electricity reliability and reducing the financial burden of the sector on government finances. An additional $763.5m facility was later approved in 2023 to deepen reforms and address lingering structural problems.
While the first phase recorded major progress and achieved full disbursement targets, the additional financing struggled due to economic and operational setbacks.
According to the World Bank, Nigeria’s electricity sector continues to battle weak distribution networks, transmission limitations, inadequate revenue collection, and rising operational costs. These problems have created severe liquidity challenges across the power value chain.
The report noted that the liberalisation of the foreign exchange market in 2023 significantly worsened the situation, as the depreciation of the naira increased the cost of gas used for electricity generation. Since most of Nigeria’s electricity is generated from gas priced in US dollars, production costs rose sharply.
Despite rising generation expenses, electricity tariffs remained largely unchanged for many consumers, except for Band A customers whose tariffs were adjusted in 2024. This widened the gap between production costs and revenues collected by power companies.
As a result, annual tariff shortfalls reportedly surged from N140bn in 2022 to about N1.9tn in both 2024 and 2025, placing additional strain on government finances.
The World Bank said Nigeria failed to establish a sustainable financing framework capable of reducing the growing deficits, making it difficult to meet conditions tied to the additional funding package.
The institution also cited delays involving performance improvement plans and verification processes linked to the Transmission Company of Nigeria as part of the reasons disbursements remained low.
Financial records from the restructuring document showed that only about nine per cent of the additional financing package had been disbursed before the cancellation.
Despite the setback, the World Bank acknowledged that the earlier phase of the programme delivered some positive results, including a significant reduction in tariff shortfalls between 2019 and 2022 and improved cost recovery within the sector.
Meanwhile, the Accountant-General of the Federation, Dr Shamseldeen Ogunjimi, recently warned that Nigeria could reconsider future World Bank loans if approval and disbursement processes continue to experience lengthy delays.
He argued that prolonged bureaucratic procedures could disrupt project execution and affect the country’s development plans, stressing that Nigeria expects quicker access to funds since the facilities are loans that must eventually be repaid.
Nigeria remains one of the largest borrowers from the World Bank’s International Development Association, with exposure estimated at $18.5bn as of March 2026.
