By Boluwatife Oshadiya | May 26, 2026
Key Points
- Federal Government cancels $717.7m undisbursed World Bank power sector loan facility
- World Bank closes Power Sector Recovery Programme earlier than scheduled amid reform failures
- Nigeria’s electricity sector faces worsening tariff shortfalls and liquidity pressures
Main Story
The Federal Government has cancelled $717.7 million in undisbursed financing from the World Bank’s Power Sector Recovery Programme, effectively terminating the remaining balance of a $1.52 billion electricity sector support initiative amid ongoing structural challenges in Nigeria’s power industry.
According to restructuring documents from the World Bank, the cancellation followed a joint decision between both parties and a formal request from the Nigerian government. The move also shortens the programme’s closing date from June 30, 2027, to May 31, 2026, bringing the intervention to an early conclusion.
The programme, initially approved in June 2020, was designed to improve electricity reliability, strengthen financial sustainability in the sector, and enhance governance across the power value chain. An additional financing package approved in 2023 was meant to deepen reforms but recorded significantly low disbursement due to unmet performance conditions.
World Bank data shows that while the original component of the programme achieved strong results and full disbursement, the additional financing struggled due to rising tariff shortfalls, regulatory delays, and weak implementation of sector reforms.
The institution reported that Nigeria’s electricity sector continues to face systemic constraints, including transmission bottlenecks, high technical losses, and insufficient cost recovery mechanisms. These challenges have widened the gap between operational costs and revenue collection across the sector.
Tariff shortfalls have also escalated sharply in recent years, rising from ₦140 billion in 2022 to approximately ₦1.9 trillion in 2024 and 2025, according to World Bank figures, placing additional pressure on public finances.
The Federal Government had earlier sought to stabilise the sector through performance-based reforms, but the programme’s progress slowed due to macroeconomic shifts, including foreign exchange liberalisation and rising gas pricing pressures tied to dollar-denominated costs
What’s Being Said
“The restructuring will result in the cancellation of the entire undisbursed balance, and no further disbursements will be made under the programme,” World Bank restructuring document.
“If approvals take more than six months, the Nigerian Government may no longer honour such arrangements,” Dr Shamseldeen Ogunjimi, Accountant-General of the Federation, Federal Republic of Nigeria.
What’s Next
- Nigeria is expected to reassess its engagement strategy with multilateral lending institutions
- World Bank will continue monitoring Nigeria’s electricity sector under existing frameworks
- Government may explore alternative financing mechanisms to address power sector liquidity gaps
Bottom Line
The Bottom Line: The cancellation signals a deepening disconnect between Nigeria’s power sector reform ambitions and implementation realities, reinforcing investor concerns about structural inefficiencies that continue to undermine long-term energy stability.
