The Federal Government has announced the cancellation of $717.7 million in undisbursed World Bank financing for the power sector after failing to meet key reform conditions.
This was as the World Bank confirmed on Tuesday, May 26, 2026, that no further disbursements will be made following a joint agreement to terminate the programme.
Accordingly, the World Bank moved the programme’s closing date forward from June 30, 2027, to May 31, 2026, thereby ending the initiative more than a year.
The cancellation signals a shift in Nigeria’s approach to power sector financing and highlights the difficulty of aligning international funding with rapidly changing domestic economic conditions.
The cancellation specifically affects the remaining balance of the $1.52 billion Power Sector Recovery Performance-Based Operation that was approved between 2020 and 2023.
The initial $752.5 million tranche, approved in June 2020, was fully disbursed and met its performance targets, but it reduced tariff shortfalls by 71% from N581 billion in 2019 to N166 billion in 2022, improved regulatory cost recovery from 56% to 94%, and increased grid electricity supply by 13% between 2018 and 2021.
However, the additional $763.5 million approved in June 2023 stalled due to unmet reform milestones.
The World Bank said the programme became misaligned with Nigeria’s realities after two major shocks: the liberalization of foreign exchange in June 2023, which raised gas costs for generation, and a freeze on electricity tariffs for most consumers.
It noted that with over 70% of grid electricity gas-fired and priced in dollars, the changes severely strained sector finances.
The issues that remain persistent include high technical and commercial losses in distribution, weak transmission capacity, underused generation assets, and inadequate cost recovery. These issues continue to create liquidity gaps across the power value chain.
Speaking on the development, the Accountant-General of the Federation, Shamseldeen Ogunjimi warned that prolonged delays in loan approval and disbursement could lead Nigeria to reject future World Bank loans, adding that delays beyond six months undermine project execution and fiscal planning.
