The Federal Government of Nigeria has cancelled $717.7 million in undisbursed financing from the World Bank, effectively ending the remaining portion of a $1.52 billion power sector recovery programme. The move follows mounting tariff shortfalls, deepening financial strain, and ongoing implementation challenges across the country’s electricity industry.
According to official documents obtained from the World Bank on Monday, the cancellation was initiated by the Nigerian government and agreed upon jointly by both parties. The decision brings to a close the Power Sector Recovery Performance-Based Operation, a programme originally designed to stabilise Nigeria’s struggling electricity market through policy reforms and financial support.
In its restructuring paper, the World Bank confirmed that the cancelled amount represents the full undisbursed balance under the programme. “The restructuring will result in the cancellation of the entire undisbursed balance in the amount of $717.7 million equivalent, and no further disbursements will be made under the programme following approval of this restructuring,” the institution stated.
The development underscores persistent difficulties in Nigeria’s power sector, where reform efforts have long been hampered by inadequate cost-reflective tariffs, liquidity constraints, and operational inefficiencies. Industry analysts say the inability to meet key reform milestones played a central role in the programme’s termination.
“The programme was ambitious, but the realities on the ground—especially around tariff adjustments and revenue collection—made implementation extremely challenging,” said an energy economist familiar with the matter. “Without addressing these structural issues, external financing alone cannot deliver sustainable results.”
Nigeria’s electricity sector has struggled for years with a mismatch between the cost of generating and distributing power and the tariffs paid by consumers. This gap has placed significant financial pressure on distribution companies and government finances, often requiring subsidies to keep the system afloat.
The Power Sector Recovery Programme was initially introduced to address these imbalances by improving governance, enhancing transparency, and ensuring financial viability across the value chain. However, progress has been uneven, with several reform targets falling behind schedule.
Stakeholders within the sector have expressed concern that the withdrawal of the remaining funds could further slow reform momentum. Others, however, view the decision as a pragmatic step, allowing authorities to reassess strategies in light of current economic realities.
A senior government official, speaking on condition of anonymity, said the decision reflects “a need to recalibrate expectations and focus on achievable reforms that align with Nigeria’s present fiscal and social conditions.”
Looking ahead, analysts suggest that Nigeria may need to explore alternative funding models and policy approaches to stabilise its electricity sector. This could include increased private sector participation, targeted subsidies, and gradual tariff reforms designed to balance affordability with sustainability.
The cancellation marks a critical moment for Nigeria’s power sector, raising fresh questions about the path forward in one of the country’s most vital yet troubled industries.