$717m power loan cancellation deepens sector woes

NIGERIA’S efforts to improve electricity supply face serious uncertainty. This follows the Federal Government’s decision to cancel $717.7 million in undisbursed World Bank funding for the sector. This is an indictment of a segment that has consumed billions of dollars in public and multilateral financing over two decades, yet remains incapable of delivering reliable electricity to citizens and businesses. Once again, this cancellation exposes the deep structural failures, policy inconsistencies and governance weaknesses that continue to cripple Nigeria’s electricity industry. The World Bank’s Power Sector Recovery Operation, approved in 2020 and later expanded to a total package of $1.52 billion, was designed to address the sector’s chronic dysfunction. Its objectives were to improve electricity supply, strengthen financial sustainability, reduce tariff deficits, enhance governance and restore investor confidence. Yet six years later, the programme has ended prematurely, with nearly half of the funds undisbursed because Nigeria failed to meet critical reform milestones. However, alternative power interventions remain fully funded, including the active $500 million Distribution Sector Recovery Programme. This development comes at a particularly embarrassing time. Nigeria remains the third-largest borrower from the World Bank’s International Development Association, with an outstanding exposure of about $18.5 billion, behind only Bangladesh ($22.7 billion) and Pakistan ($19.2 billion). It is Africa’s largest IDA borrower. The Tinubu administration alone has secured approvals for over $9.3 billion in World Bank financing since 2023 and is discussing an additional borrowing of $1.25 billion. Against this backdrop, recent complaints by government officials about delays in World Bank approvals and disbursements sound ridiculous. The problem in this case was not World Bank bureaucracy. It was Nigeria’s inability to implement agreed reforms and create conditions for disbursement. The World Bank’s assessment is disturbing. Despite years of interventions, the sector remains trapped in a vicious cycle of weak distribution performance, inadequate cost recovery, transmission bottlenecks, stranded generation capacity and massive technical, commercial and collection losses estimated at 48 per cent. Nigeria today has an installed generation capacity exceeding 13,000 MW. Yet average daily generation struggles to exceed 5,000 MW. More than half of the available capacity remains stranded because the transmission network cannot evacuate it, and distribution companies cannot