World Bank Cancels $717 Million Nigeria Power Loan

The World Bank has cancelled a major electricity sector loan facility for Nigeria, permanently withdrawing an undisbursed balance of $717.7 million after what it described as a severe macroeconomic mismatch that disrupted reforms in the power sector.

According to restructuring documents, the lender also shortened the closing date of the Power Sector Recovery Performance-Based Operation from June 30, 2027, to May 31, 2026, effectively ending one of its largest interventions in Nigeria’s electricity industry.

The programme, originally approved in June 2020, recorded early gains between 2019 and 2022, including a 71 per cent reduction in tariff shortfalls. However, it later struggled following major fiscal and foreign exchange reforms introduced in 2023.

The World Bank attributed the breakdown largely to the impact of naira depreciation after the liberalisation of the foreign exchange market in June 2023. Because most electricity generation depends on natural gas priced in US dollars, production costs rose sharply while retail tariffs remained largely unchanged for most consumers.

This created a widening gap between generation costs and revenue collection, pushing sector tariff deficits from about ₦140 billion in 2022 to around ₦1.9 trillion in 2024 and 2025.

Only a small portion of the additional funding approved in 2023 was disbursed, as Nigeria was unable to meet the required performance conditions. The bank later downgraded implementation progress from satisfactory to moderately unsatisfactory.

The report also highlighted persistent challenges in the sector, including transmission constraints, weak distribution company performance, high technical losses, and poor cost recovery. Of the $1.51 billion total committed, about $796 million was used before the programme was halted.

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