FG, World Bank cancel $717.7m undisbursed power sector recovery funds
The federal government and the World Bank have agreed to cancel about $717.7 million in undisbursed financing under the Power Sector Recovery Operation (PSRO), following implementation challenges and worsening tariff shortfalls in Nigeria’s electricity sector.
The decision was contained in a restructuring paper obtained by TheCable on Tuesday, which stated that the move followed a formal request by the federal government on March 26, 2026, to discontinue the financing and close the programme ahead of schedule.
According to the document, the cancellation covers the entire undisbursed balance under the programme, with no further disbursements to be made after approval of the restructuring. The closing date of the operation has also been advanced from June 30, 2027, to May 31, 2026, to allow for an orderly wind-down in line with World Bank procedures.
“The proposed Level Two restructuring is undertaken in response to a formal request from the Federal Government of Nigeria (FGN), received on March 26, 2026,” the paper stated.
“The restructuring will result in the cancellation of the entire undisbursed balance in the amount of US$717.7 million equivalent, and no further disbursements will be made under the Program following approval of this restructuring.”
The PSRO was designed to support reforms in Nigeria’s power sector and had previously recorded progress, including a reported reduction in tariff shortfalls from N581 billion to N166 billion between 2019 and 2022, and an improvement in regulatory cost recovery from 56 percent to 94 percent.
However, the World Bank said several gains were reversed following the liberalisation of the foreign exchange market in June 2023, which led to a sharp depreciation of the naira and increased the cost of gas used for electricity generation.
The bank noted that over 70 percent of electricity supplied to the national grid is generated from gas priced in dollars, worsening cost pressures in the sector.
