The World Bank Group has approved a US$750 million loan to strengthen Nigeria’s energy sector. The loan for Project ID P174622 was approved on June 9, 2023, making it the first World Bank loan approved under the new administration of President Bola Tinubu.
The new loan provided additional funding for the Power Sector Recovery Performance-Based Operation, which was first approved on June 23, 2020, according to information on the bank’s website.
In his May 19 document entitled Nigeria – Power Sector Recovery Performance-Based Operations Project, he stated:
Additional Funding” announced that the parent project will be closing on his June 30, 2023.
Also, of the $750 million originally approved in 2020, only 72 percent of the $535.09 million funding has been paid, with the balance of the parent project due by June 30, 2023. It was also announced that it was planned. Of the newly approved additional funding, the International Bank for Reconstruction and Development will provide $449 million and the International Development Association will provide $301 million.
The International Development Association and the International Bank for Reconstruction and Development, which make up the World Bank, have provided loans to Nigeria for many years.
IBRD provides loans to middle-income and high-credit low-income governments, while IDA provides concessional loans and grants to governments of the poorest countries.
“This program document seeks Board approval to provide additional funding to the Federal Republic of Nigeria through a $301 million loan from the International Development Association and the International Bank for Reconstruction and Development. $449 million to the power sector. dollar loan,” the document said. Recovery performance-based operations (PSRO, P164001).
“The proposed AF will build on the tangible results achieved and lessons learned under the parent Program. The proposed AF will continue supporting the implementation of the FGN’s Power Sector Recovery Plan’s critical actions to address the next set of power sector challenges and facilitate the achievement of the FGN’s ambitious access and energy transition targets.”
The document further disclosed that the new financing would run from 2023 to June 30, 2027. Justifying the reason for the loan, the document noted that Nigeria has the largest electricity access deficit in the world.
It read in part, “Nigeria has the world’s largest absolute electricity access deficit. Lack of access to the electricity grid affects 45 per cent of the population (90 million people), making Nigeria the country with the largest number of people not connected to electricity.
“As such, Nigeria accounts for 12 per cent of the global access deficit. Large disparities exist in access to electricity between urban areas (84 per cent) and rural ones (26 per cent). The net access deficit has increased by over seven million citizens over the last decade, as the pace of population growth has overtaken the pace of electrification.
“Even those Nigerians who are connected to the grid face frequent outages and hence do not get reliable supply.”
The document placed economic loss from poor electricity supply at $25bn annually, with firms saying that it is a major business challenge.
“Economic losses from unreliable electricity supply are estimated to be around N7-10tn (~$25bn equivalent) annually, or 5-7 percent of GDP. Firms cite a lack of reliable electricity as the top constraint to their business.
“Faced with unreliable and insufficient supply, businesses and households fill the gap with expensive petrol and diesel-run generators. It is estimated that over 20 GW of gasoline generator capacity is employed by households and small businesses, nearly twice as much as the 12 GW capacity connected to the national grid. Over 22 million diesel/gasoline generators power about 26 percent of total households and 30 per cent of micro, small and medium-sized enterprises (MSMEs) in Nigeria,” the document added.
