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The Federal Government has officially cancelled a massive $717.7 million World Bank power sector loan amid worsening electricity challenges, rising tariff shortfalls, and persistent blackouts across the country.
Documents obtained from the World Bank revealed that the cancelled funds were part of a larger $1.52 billion electricity sector recovery programme originally designed to improve Nigeria’s struggling power supply system.
According to the World Bank, the decision followed a formal request by the Nigerian government after both parties agreed that the programme could no longer meet key reform targets under current economic realities.
The cancelled amount represents the remaining undisbursed portion of the facility, effectively ending the project earlier than expected.
Originally scheduled to run until June 2027, the programme has now been terminated ahead of time, with its closing date moved to May 31, 2026.
The World Bank explained that Nigeria’s electricity sector continues to face serious structural problems despite years of reforms and billions spent on interventions.
Among the major challenges listed were weak electricity distribution systems, poor transmission infrastructure, underutilised power generation capacity, and mounting financial losses within the sector.
According to the report, electricity tariffs have failed to keep up with the rising cost of power generation, especially after the naira depreciation caused by the liberalisation of the foreign exchange market in 2023.
The situation reportedly became worse because over 70 per cent of Nigeria’s electricity is generated using natural gas priced in US dollars.
While generation costs surged, electricity tariffs remained mostly frozen for consumers, except for Band A customers whose rates were adjusted in 2024.
As a result, the financial gap in the sector widened dramatically.
The World Bank disclosed that Nigeria’s annual electricity tariff shortfall jumped from N140 billion in 2022 to nearly N1.9 trillion in both 2024 and 2025.
The bank said the government failed to establish a sustainable financial recovery plan capable of addressing the growing deficits and stabilising the sector.
Although the original phase of the power programme recorded some progress — including improvements in electricity supply and tariff recovery — the additional financing package struggled badly.
Out of the $763.5 million approved under the second phase, only about nine per cent was eventually disbursed before the cancellation.
The World Bank also blamed implementation delays, policy inconsistencies, and verification challenges for slowing down the reforms.
According to the report, the programme’s design eventually became “misaligned” with Nigeria’s worsening economic and power sector realities.
The development comes at a difficult time for millions of Nigerians already battling unstable electricity supply, rising energy costs, and frequent grid collapses.
Despite years of reforms, power generation and distribution challenges continue to affect homes, businesses, and industries nationwide.
Meanwhile, Nigeria remains one of the World Bank’s largest borrowers in Africa, with the country still owing billions of dollars under several development financing arrangements.
Source: The PUNCH / World Bank
