KEY POINTS

• Nigeria cancelled $717.7million in undisbursed World Bank power-sector financing.
• The 2023 naira float spiked gas costs while tariffs stayed frozen.
• Tariff shortfalls jumped from N140billion in 2022 to about N1.9trillion in 2024 and 2025.

Nigeria has cancelled $717.7 million in undisbursed World Bank loan financing meant to fix its troubled power sector, after both sides agreed the program could no longer meet its targets. The cancellation ends the unused portion of a $1.52 billion recovery package. Moreover, it lays bare how the 2023 currency float upended the sector’s finances.

Why the World Bank loan was cancelled

The Federal Government formally asked to discontinue the financing, and the World Bank agreed. Specifically, the cancellation wipes out the entire undisbursed balance under the Power Sector Recovery Performance-Based Operation. Therefore, no further money will flow under that arm of the program.

The World Bank loan came in two phases. The original $752.5 million loan, approved in 2020, largely worked, and the bank said Nigeria disbursed about 95 percent of it while hitting its targets. However, a $763.5 million top-up approved in 2023 stalled, with only about 9 percent released before the cancellation.

How the FX float broke the math

The second phase ran into a wall. Specifically, the World Bank blamed the June 2023 liberalization of the foreign exchange market, which sank the naira and drove up the cost of gas. Since gas, priced in dollars, fuels more than 70 percent of grid electricity, generation costs soared.

Meanwhile, tariffs barely moved. The government froze most electricity prices from early 2023, lifting only Band A customers to cost-reflective rates in April 2024. Consequently, the gap between costs and revenue exploded. Tariff shortfalls jumped from N140 billion in 2022 to about N1.9 trillion in both 2024 and 2025, the bank said, squeezing already tight public finances.

Earlier gains and a blunt warning

The program had once shown promise. According to the World Bank, tariff shortfalls fell 71 percent between 2019 and 2022, while regulatory cost recovery climbed from 56 to 94 percent. However, the later reforms never materialized, and the bank rated the top-up’s progress “moderately unsatisfactory.” It also brought the closing date forward to May 31, 2026, more than a year early. Nigeria privatized much of its power sector in 2013, yet supply remains erratic, with the grid often delivering only a few thousand megawatts to more than 200 million people.

The cancellation follows a sharp warning from Abuja. Accountant-General Shamseldeen Ogunjimi recently said Nigeria might reject World Bank facilities if approvals and disbursements keep dragging. “If approvals take more than six months, the Nigerian Government may no longer honor such arrangements,” he said, stressing that the funds are loans, not grants. The cancelled funds will not be replaced for now, leaving the government to plug the sector’s gaps from its own stretched budget. Together, the episode shows a government impatient with slow money and a sector still hungry for reform.