Nigeria Government Cancels $717.7 Million in Undisbursed World Bank Power Sector Funding
The Federal Government of Nigeria has cancelled $717.7 million in remaining undisbursed funding from the World Bank, effectively terminating the balance of a major power sector recovery programme amid ongoing challenges in the electricity industry.
According to World Bank restructuring documents, the cancellation follows a formal request by the Nigerian government on March 26, 2026, and a mutual agreement between both parties to discontinue the remaining financing under the Power Sector Recovery Performance-Based Operation (PSRO). The programme’s closing date has been advanced from June 2027 to May 2026.
The PSRO, originally approved in 2020 with an initial $750 million, formed a core component of the government’s broader Power Sector Recovery Programme (PSRP). Additional financing of approximately $750 million was later approved in 2023, bringing the total commitment to around $1.52 billion. The initiative aimed to achieve three primary objectives: improve the reliability and quantity of electricity supply, enhance financial and fiscal sustainability of the sector, and strengthen accountability and transparency among operators.
Key targets included reducing tariff shortfalls, improving collections by Distribution Companies (DisCos) to the Nigerian Bulk Electricity Trading Plc (NBET), minimising government subsidies, and attracting private investment. Earlier phases recorded notable successes: sector fiscal subsidies dropped significantly from ₦581 billion ($1.6 billion) in 2019 to ₦166 billion ($410 million) in 2022, while DisCos’ invoice payment rates to NBET rose from 29% to about 80%. Many DisCos also began publishing financial statements online.
Despite these gains, the programme faced persistent implementation hurdles. Reports cite mounting tariff shortfalls, worsening financial pressures on DisCos, failure to meet key reform milestones, and broader sector challenges, including frequent blackouts and inadequate power supply. The decision reflects a strategic pivot by the government to redirect resources toward alternative national power interventions deemed more effective under current conditions.
The entire undisbursed balance has now been cancelled, with no further disbursements planned under this facility.
Nigeria continues to grapple with chronic electricity shortages, with generation often falling short of demand despite reforms since the 2013 privatisation of distribution and generation assets. The cancellation comes as the government explores other avenues, including recent $500 million World Bank loans for distribution infrastructure and metering, as well as potential solar and renewable initiatives.
This move is likely to spark discussions on the effectiveness of performance-based lending in complex reform environments and the need for more adaptive strategies to address Nigeria’s energy deficit, which hampers economic growth, industrialisation, and daily livelihoods.
The Federal Government has not yet issued a detailed public statement on alternative interventions, but officials have consistently emphasised commitment to reliable power supply as a cornerstone of economic recovery. The World Bank is expected to continue engagement with Nigeria on energy access through other portfolio programmes.
