By Our Correspondent
The Federal Government and the World Bank have jointly agreed to cancel about $717 million in undisbursed financing under Nigeria’s Power Sector Recovery Operation (PSRO), following concerns over implementation challenges, worsening tariff shortfalls and unmet reform conditions in the electricity sector.
According to restructuring documents published by the World Bank, the cancellation followed a formal request by the Nigerian Government and effectively ends the remaining phase of the $1.52 billion programme ahead of schedule.
Confirming the development, the World Bank stated in the restructuring paper: “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 Bank further added that, “The restructuring will result in the cancellation of the entire undisbursed balance in the amount of $717.7 million equivalent, and no further disbursements will be made under the Program following approval of this restructuring.”
The World Bank said the programme had suffered setbacks linked to foreign exchange pressures, persistent liquidity problems and the government’s alleged inability to establish what it described as a “credible and sustainable financing plan” for Nigeria’s electricity market. According to the Bank, the sharp depreciation of the naira following the 2023 foreign exchange liberalisation significantly increased the cost of gas used for electricity generation while tariffs for most consumers remained largely frozen, worsening sector deficits.
Furthermore, the Bank reportedly rated implementation progress under the additional financing window as “Moderately Unsatisfactory,” noting that only about nine per cent of the approved additional financing had been disbursed before the cancellation. The institution also stated that the programme’s original structure had become increasingly misaligned with realities in Nigeria’s electricity sector. “Taken together, these developments point to a misalignment between the design of the operation and the evolving implementation context,” the World Bank reportedly noted.
On its part, the Nigerian Government has maintained that broader reforms in the power sector remain necessary despite the cancellation. While officials are yet to announce a replacement financing structure, government sources quoted in reports insisted that electricity sector reforms remain a priority under the current administration.
Since President Bola Ahmed Tinubu assumed office in May 2023, Nigeria has continued to rely heavily on multilateral and external borrowing to support reforms, infrastructure and budget financing.
Publicly available reports show that the World Bank approved several financing packages for Nigeria during this period, including a $2.25 billion support package in 2024, while the Senate also approved fresh borrowing requests running into tens of billions of dollars. However, there is no verified evidence that the World Bank formally “rejected” all recent Nigeria loan requests outright; rather, the current development specifically concerns the cancellation of undisbursed funds under the power recovery programme.
Despite repeated assurances by government officials that ongoing economic reforms would stabilise the country in the long term, many Nigerians continue to face severe hardship driven by high inflation, rising food prices, transport costs and electricity tariffs. Government officials have consistently defended the administration’s policies as painful but necessary measures intended to rescue the economy from long-standing structural weaknesses.
The World Bank itself had previously acknowledged some early gains under the programme, stating that tariff shortfalls reduced by about 71 per cent between 2019 and 2022 before macroeconomic pressures reversed much of the progress.
Meanwhile, political tensions are gradually rising ahead of the 2027 general elections, with opposition figures and critics alleging that political calculations are beginning to overshadow governance priorities. Those claims remain matters of political opinion and allegation, and there is no evidence proving any plan by the government to manipulate future elections.
Debates also continue over the transparency, effectiveness and long-term sustainability of Nigeria’s rising debt profile, particularly as citizens grapple with worsening living conditions while successive administrations continue to depend heavily on external financing to fund reforms and public spending.