World Bank Declines $717M Power Loan For Nigeria Amid Worsening Electricity Crisis

The World Bank and the Federal Government of Nigeria has officially cancelled the remaining $717.7 million World Bank loan earmarked for the nation’s power sector, marking an early end to a major electricity recovery programme as the country struggles with deteriorating electricity supply and mounting financial pressures.

According to documents released by the World Bank, both parties agreed to discontinue the funding arrangement after critical reform targets were not met.

The cancelled funds were part of the Power Sector Recovery Performance-Based Operation, initially introduced to improve electricity supply, bolster sector finances, and support reforms across the industry.

A Brief History of the Programme records that: In 2020 the World Bank approved about $752.5 million to kick-start sector reforms.

In 2023 an additional $763.5 million was added to deepen reforms and address long-standing challenges while Total Programme Value earmarked approximately $1.52 billion.

However, the latest restructuring report revealed that the additional financing struggled to meet the conditions required for disbursement.

Consequently, the World Bank confirmed that no further payments would be made, and the project’s closing date was moved forward from June 2027 to May 2026, effectively terminating the programme ahead of schedule.

Challenges in Nigeria’s Power Sector
Despite years of reforms and intervention funds, the sector continues to face structural issues:

Weak distribution networks

Transmission bottlenecks

Poor revenue collection

Mounting tariff shortfalls

The World Bank noted that the situation worsened after the 2023 liberalisation of Nigeria’s foreign exchange market, which sharply depreciated the naira and increased the cost of gas for power generation.

Over 70% of electricity supplied to the national grid relies on USD-priced gas, while electricity tariffs remained largely stagnant, widening the gap between operating costs and sector revenue.

Tariff shortfalls rose from ₦140 billion in 2022 to about ₦1.9 trillion in 2024 and 2025, placing additional strain on government finances.

Only 9% of the additional financing package had been disbursed before the cancellation.

Implementation progress was rated “Moderately Unsatisfactory.”

The cancellation raises urgent questions about the sector’s long-term stability and Nigeria’s ability to meet its energy needs.