World Bank Explains Cancellation of $718 Million Loan Request by Nigeria

• Nigeria and the World Bank have cancelled $717.7 million in funds for electricity sector reforms amid the ongoing power supply crisis
• Experts blame weak policy coordination and poor implementation for failed outcomes in the electricity industry
• Withdrawal of funding may delay crucial improvements in Nigeria's electricity infrastructure and affordability for consumers

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Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.

Nigeria’s troubled electricity sector has suffered another setback after the Federal Government and the World Bank jointly agreed to cancel $717.7 million in undisbursed funds originally earmarked to support power sector reforms and improve electricity supply across the country.

The cancelled amount formed part of the $1.52 billion Power Sector Recovery Programme (PSRP), a major initiative designed to strengthen Nigeria’s electricity industry, improve revenue collection, and stabilise the national grid.

The decision comes at a time when millions of Nigerians continue to grapple with frequent blackouts, rising electricity tariffs, and inadequate power supply.

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Why was the loan cancelled?

According to a restructuring paper released by the World Bank, significant changes in Nigeria’s economic and power sector environment made it difficult for the programme to achieve its original objectives.

The Bank explained that since the programme was approved in 2023, worsening macroeconomic conditions have widened the gap between the revenue generated by the electricity sector and the amount needed to sustain operations and reforms.

As a result, the scale of financial support required to revive the sector increased substantially, affecting the pace and sequence of planned reforms under the programme.

The World Bank said the cancellation was a practical decision taken jointly with the Federal Government to redirect resources toward projects that are more realistic and capable of delivering measurable improvements within a defined period.

According to the institution, future interventions will focus on programmes that can boost operational efficiency, improve revenue recovery, and reduce long-standing imbalances within the power sector while maintaining support for ongoing reform efforts.

The decision also means that the programme, initially expected to run until June 2027, will now end much earlier than planned, according to a BusinessDay report.

Experts blame poor policy direction

Reacting to the development, energy expert Yakubu Usman argued that the programme failed to deliver expected outcomes because of weak policy coordination and poor implementation within Nigeria’s electricity industry.

According to him, reforms in the sector have often focused heavily on legislation while neglecting the practical realities of electricity generation, transmission, and distribution.

He noted that despite several policy changes and reforms over the years, many of the industry’s biggest challenges remain unresolved.

“These are the same problems we discussed years ago,” Usman said, pointing to persistent generation shortages, gas supply constraints, transmission bottlenecks, distribution inefficiencies, and liquidity crises.

He further maintained that implementation remains one of the sector’s biggest obstacles, arguing that some of those responsible for designing electricity laws lack sufficient technical understanding of how the industry operates.

Concerns over future power supply

Also speaking on the development, BudgIT Deputy Director Vahyala Kwaga warned that the withdrawal of such a significant funding package could slow efforts to expand electricity infrastructure and improve power availability.

According to him, Nigeria already struggles to meet growing energy demand, and losing access to the investment could further delay improvements needed across the value chain.

Kwaga said inadequate investment in transmission networks, distribution systems, and metering infrastructure would continue to affect electricity access while keeping energy costs high for households and businesses.

He stressed that achieving lower electricity prices would require stronger distribution companies, greater efficiency, and large-scale investments capable of delivering more power to consumers.

What it means for Nigerians

The cancellation of the $717.7 million facility highlights the deep-rooted challenges facing Nigeria’s electricity sector.

While the World Bank insists the move will allow resources to be redirected toward more effective projects, industry stakeholders fear it could slow the pace of much-needed reforms.

For millions of Nigerians already struggling with unreliable power supply and rising energy costs, the development underscores the urgent need for practical solutions, stronger policy implementation, and sustained investment to finally address the country’s long-running electricity crisis.

Full breakdown of Tinubu’s borrowing, major creditors

Legit.ng earlier reported that President Bola Tinubu’s government is seeking a fresh loan from the World Bank.

According to data, the new loan request of $1.25 billion will be Nigeria’s second-largest World Bank loan under Tinubu, with the largest being the $1.5 billion in 2024.

Nigeria’s total public debt currently stands at about ₦159.28 trillion (approximately $94.2 billion), reflecting a complex mix of domestic and external obligations.