The Federal Government has cancelled $717.7 million in unused funding from a World Bank-supported electricity reform programme.
According to a World Bank restructuring document, Nigeria officially requested the cancellation on March 26, 2026, and both sides agreed to end the funding arrangement and focus on other support options.
As part of the decision, the programme will now end earlier than planned moving from June 30, 2027, to May 31, 2026 and no more money will be released under the project.
The programme, known as the Power Sector Recovery Operation (PSRO), was created to improve electricity supply, strengthen the finances of the power sector, and make the industry more efficient.
However, the World Bank said the programme struggled because Nigeria’s electricity sector became financially weaker.
One major challenge was the naira devaluation and foreign exchange reforms introduced in 2023, which increased the cost of generating electricity because gas used by power plants is priced in US dollars.
At the same time, electricity tariffs did not rise enough for most consumers to cover those costs.
Only Band A customers experienced major tariff adjustments.
As a result, the gap between electricity revenues and operating expenses widened sharply.
The World Bank reported that tariff shortfalls increased from N140 billion in 2022 to about N1.9 trillion in both 2024 and 2025, creating pressure on government finances and slowing reforms.
The report also pointed to long-standing issues in the sector, including:
Weak electricity distribution performance
Transmission constraints
Unused generation capacity
High technical and commercial losses
Poor cost recovery
Despite earlier progress between 2019 and 2022, where tariff deficits reduced and electricity supply improved, the additional $750 million financing approved in 2023 failed to deliver expected results.
Only around 9% of that extra funding was eventually released before the cancellation.
Overall, the programme had total commitments of about $1.51 billion, with approximately $796 million already disbursed, leaving $717.7 million unused and now cancelled.
Earlier, the Accountant-General of the Federation, Dr. Shamseldeen Babatunde Ogunjimi, warned that Nigeria could withdraw from World Bank loan arrangements if approval and release of funds continue to face delays.
