In a significant development on May 26, 2026, the Federal Government of Nigeria has formally cancelled $717.7 million in undisbursed financing from the World Bank. This move effectively ends the remaining portion of a $1.52 billion Power Sector Recovery Performance-Based Operation, a program originally designed to revive the country's struggling electricity sector.
Background of the Programme
The initiative started in 2020 with about $752.5 million to improve electricity supply reliability, reduce tariff shortfalls, and strengthen financial sustainability in the power value chain. An additional $763.5 million was approved in 2023 to build on early gains, extending the closing date to June 2027.
The parent program saw notable successes: tariff shortfalls dropped 71% between 2019 and 2022 (from N581 billion to N166 billion), regulatory cost recovery improved from 56% to 94%, and electricity supplied to the grid rose 13% from 2018 to 2021. All key indicators were achieved, and most funds disbursed.
However, the additional financing struggled. Only about 9% was disbursed due to macroeconomic shocks, particularly the 2023 foreign exchange liberalization that caused sharp naira depreciation. This inflated natural gas costs (used for over 70% of grid power), while tariffs remained largely frozen, ballooning annual shortfalls to around N1.9 trillion in 2024 and 2025.Why the Cancellation?The World Bank and Nigerian government jointly agreed to restructure and cancel the undisbursed balance.
Key reasons include:
The parent program saw notable successes: tariff shortfalls dropped 71% between 2019 and 2022 (from N581 billion to N166 billion), regulatory cost recovery improved from 56% to 94%, and electricity supplied to the grid rose 13% from 2018 to 2021. All key indicators were achieved, and most funds disbursed.
However, the additional financing struggled. Only about 9% was disbursed due to macroeconomic shocks, particularly the 2023 foreign exchange liberalization that caused sharp naira depreciation. This inflated natural gas costs (used for over 70% of grid power), while tariffs remained largely frozen, ballooning annual shortfalls to around N1.9 trillion in 2024 and 2025.Why the Cancellation?The World Bank and Nigerian government jointly agreed to restructure and cancel the undisbursed balance.
Key reasons include:
- Failure to meet reform milestones, such as establishing a credible financing plan for tariff deficits.
- Evolving sector realities, including persistent technical, commercial, and collection losses.
- Implementation delays and misalignment with current conditions.
- The program's closing date has been brought forward to May 31, 2026
This decision follows warnings from Accountant-General Shamseldeen Ogunjimi that Nigeria might reject future World Bank loans if approval and disbursement delays exceed six months, as they hinder project timelines.
Nigeria remains the World Bank's third-largest IDA borrower, with exposure at $18.5 billion as of March 2026 (down slightly from $18.7 billion in December 2025 but up $1.2 billion year-on-year).
The country continues seeking new facilities, including a proposed $1.25 billion for reforms, jobs, and competitiveness. Yet public backlash has been fierce, with Nigerians flooding the World Bank's social media urging them to stop lending amid concerns over debt sustainability and past utilization.
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