Nigeria has formally cancelled $717.7 million in undisbursed World Bank funding tied to its power sector reform programme.
This officially ended an arrangement that was meant to restore financial sustainability to an industry where annual revenue shortfalls have now reached N1.9 trillion.
The cancellation followed a formal request by the Federal Government on March 26, 2026, and was confirmed in a World Bank restructuring paper obtained by this publication.
The closing date of the Power Sector Recovery Performance-Based Operation (PSRO) was brought forward by more than a year, from June 30, 2027 to May 31, 2026, to reflect the cancellation and the completion of disbursement activities.
Of the operation’s total commitments of approximately $1.51 billion from the International Bank for Reconstruction and Development and the International Development Association, roughly $796 million had been disbursed before the cancellation, leaving $717.7 million undrawn. That money will not be replaced.
The collapse of the programme exposes how severely the 2023 naira devaluation damaged the economics of Nigeria’s power sector.
The liberalisation of the foreign exchange market in June 2023 significantly increased the cost of natural gas, which is denominated in US dollars and is used to generate more than 70% of electricity supplied to the national grid.
Tariffs for most consumers were not adjusted to reflect that cost surge as only Band A customers had their tariffs moved to cost-reflective levels, in April 2024 while the rest of the sector continued to be priced below cost.
The fiscal consequences were swift and severe as annual tariff deficits jumped from N140 billion in 2022 to N1.9 trillion in both 2024 and 2025, placing pressure on government finances that the World Bank assessed as incompatible with the reform milestones tied to disbursement.
The lender stated that the absence of a credible financing framework capable of addressing these shortfalls prevented Nigeria from meeting critical performance indicators between 2023 and 2025.
The scale of the failure is thrown into sharper relief by the progress that preceded it. Between 2019 and 2022, tariff shortfalls declined by 71%, from N581 billion to N166 billion, while regulatory cost recovery improved from 56% to 94%, and electricity supplied to distribution companies increased by 13% between 2018 and 2021.
Those gains persuaded the World Bank to approve an additional $750 million financing package in June 2023, which became effective in June 2024. Only about 9% of that additional financing was disbursed before the programme was discontinued.
Implementation was hampered by the inability to establish a fiscally sustainable financing plan, delays in carrying out performance improvement plans for sector institutions, and challenges in meeting verification requirements linked to disbursement conditions.
As such, the World Bank downgraded its assessment of implementation progress from satisfactory to moderately unsatisfactory as timelines slipped.
The structural problems underlying those failures remain unresolved as the World Bank’s restructuring document cited weak distribution performance, transmission bottlenecks, underutilised generation capacity, high technical and commercial losses, and poor cost recovery as persistent features of the sector.
The cancellation comes weeks after the Accountant-General of the Federation, Dr Shamseldeen Babatunde Ogunjimi, warned that Nigeria might withdraw from World Bank loan arrangements if approval and disbursement processes continued to suffer prolonged delays, and stressed that the funds in question were loans, not grants.
The cancellation of the PSRO represents a different kind of exit for Nigeria, one driven not by processing delays, but by a sector that failed to meet the conditions attached to the money.
For Nigeria’s 200 million electricity consumers, none of this is abstract, as they daily experience chronic load shedding, unreliable supply and a distribution network that loses a significant share of whatever power it receives.
The withdrawal of nearly three-quarters of a billion dollars in committed reform financing makes the path back to a functional, financially viable power sector considerably longer.
