FG cancels $717m World Bank power loan

The Federal Government has cancelled $717.7 million in undisbursed funding from the World Bank, ending part of a $1.52 billion power sector recovery programme ahead of schedule.

Documents show the decision followed a joint agreement between Nigeria and the bank after key reform targets were not met and sector challenges worsened. The programme’s closing date was also moved forward from June 2027 to May 2026.

The facility was designed to improve electricity supply, strengthen sector finances, and boost accountability. While the initial phase recorded progress, the additional financing struggled due to delays, weak implementation, and changing economic conditions.

A major setback came after the 2023 forex liberalisation, which drove up gas costs for power generation, while electricity tariffs remained largely unchanged. This widened the gap between costs and revenue, pushing tariff shortfalls from N140bn in 2022 to about N1.9tn in 2024 and 2025.

The bank said Nigeria failed to establish a credible financing plan to manage these deficits, making further disbursements impossible.

Despite earlier gains—such as improved cost recovery and reduced tariff gaps—the sector continues to face deep structural issues, including poor distribution, transmission constraints, and financial instability.

The cancellation underscores ongoing difficulties in reforming Nigeria’s power sector amid rising costs, policy gaps, and implementation challenges.