By Kofoworola Fakeye, JKNewsMedia Reporter
ABOUT $717.7 million in undisbursed World Bank (WB) loan financing under the power sector recovery operation programme has been cancelled following a joint agreement between Nigeria’s Federal Government (FG) and the WB, according to a restructuring paper shared with the media.
JKNewsMedia.com reports that the cancellation followed worsening tariff shortfalls, implementation delays and changing realities in Nigeria’s electricity sector.
The WB said the development came after a formal request from the FG on March 26 to discontinue financing and close the operation ahead of schedule.
The Office of the Accountant General of the Federation earlier denied threatening to cancel the WB loans with delayed approvals beyond six months.
“The proposed Level Two restructuring is undertaken in response to a formal request from the Federal Government of Nigeria (FGN), received on March 26, 2026,” the document reads.
“The restructuring will result in the cancellation of the entire undisbursed balance in the amount of US$717.7 million equivalent, and no further disbursements will be made under the Programme following approval of this restructuring.”
It added that the programme closing date would move from June 30, 2027, to May 31, 2026, to reflect the cancellation and completion of disbursement activities, saying that it was designed to support Nigeria’s power sector recovery programme, recorded substantial results under its initial phase approved in 2020.
It added that these included a 71 percent reduction in tariff shortfalls between 2019 and 2022.
Tariff shortfalls declined from N581 billion to N166 billion over the same period, while regulatory cost recovery improved from 56 per cent to 94 percent.
The bank said gains were reversed following the liberalisation of the foreign exchange market in June 2023, which triggered a sharp depreciation of the naira and increased the cost of gas used for electricity generation.
It noted that over 70 per cent of electricity supplied to the national grid is generated from gas priced in United States dollars.
Electricity tariffs remained largely frozen since early 2023, except for Band A customers whose tariffs were raised to cost reflective levels in April 2024.
“Due to the mismatch between the electricity generation costs and the sector tariff revenues, the tariff shortfalls increased sharply in the last three years, moving from a low of N140 billion in 2022 to a high of N1.9 trillion per year in 2024 and 2025,” the document reads.
The WB also said the absence of a credible financing plan and rising tariff deficits prevented Nigeria from meeting key disbursement linked indicators tied to the additional financing package approved in 2023.
The additional financing, valued at $750 million, was intended to support reforms including performance improvement plans for key institutions such as the Transmission Company of Nigeria (TCN) and measures to improve governance and accountability.
However, only 9 percent of the financing was disbursed due to implementation delays and failure to meet global disbursement linked indicators as the progress rating was downgraded from satisfactory to moderately unsatisfactory, while progress toward achieving development objectives was also downgraded in March 2025.
The WB said recent financing plans failed to identify adequate sources to cover tariff shortfalls or establish a credible trajectory for reducing them.
JKNewsMedia.com also reports that the programme had total commitments of about $1.51 billion from the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).
However, it says the closing date has now been moved forward from June 2027 to May 2026, ending the operation ahead of schedule.
The document also notes that despite the cancellation, the World Bank said previously achieved results under the programme remain valid, while the FG continues to pursue power sector reforms through alternative financing arrangements.
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