By Ayo Kehinde
The Federal Government has cancelled $717.7 million in undisbursed funding under the World Bank-backed Power Sector Recovery Performance-Based Operation (PSRO), dealing a major blow to Nigeria’s efforts to restore stability and financial sustainability in the electricity sector.
According to a World Bank restructuring document obtained on Tuesday, the cancellation followed a formal request by the Federal Government on March 26, 2026.
Both parties also agreed to discontinue financing under the programme and redirect support to alternative interventions.
The restructuring paper stated that the programme’s closing date had been moved forward from June 30, 2027, to May 31, 2026, effectively ending further disbursements under the facility.
The decision comes as Nigeria battles worsening electricity shortages, mounting subsidy obligations, weak revenue collection, and persistent operational inefficiencies across the power value chain.
The World Bank blamed the collapse of the programme on the deteriorating financial position of the sector, worsened by the naira devaluation and the failure of electricity tariffs to reflect rising generation costs.
The report noted that the liberalisation of the foreign exchange market in June 2023 significantly increased the cost of gas used for power generation, with over 70 percent of electricity supply dependent on gas priced in US dollars.
Despite rising costs, tariffs remained largely unchanged for most consumers, except Band A customers whose rates were adjusted in 2024. As a result, annual tariff deficits surged from N140 billion in 2022 to N1.9 trillion in both 2024 and 2025.
The World Bank also cited weak distribution performance, transmission bottlenecks, poor cost recovery, and delays in implementing critical reforms as factors that undermined the programme.
Data from the restructuring report showed that only about $796 million out of the $1.51 billion total commitment had been disbursed before the cancellation.
