Nigeria has cancelled $717.7 million in undisbursed funding under the World Bank-backed Power Sector Recovery Performance-Based Operation (PSRO), marking a major setback for efforts to restore financial sustainability in the country’s electricity sector amid rising tariff deficits, foreign exchange pressures, and persistent operational inefficiencies.
According to a World Bank restructuring paper obtained by Nairametrics on Tuesday, the cancellation followed a formal request by the Federal Government on March 26, 2026, and forms part of a joint decision by both parties to discontinue financing under the programme and redirect support towards alternative interventions.
The restructuring document stated that the undisbursed balance of $717.7 million would be cancelled in full, with the programme’s closing date brought forward by more than a year from June 30, 2027, to May 31, 2026.
What the report is saying
The PSRO programme was originally designed to support reforms aimed at improving the financial and operational viability of Nigeria’s electricity sector.
According to the World Bank document, implementation challenges and evolving sector realities significantly affected disbursement progress under the facility.
The report highlighted several persistent issues affecting the power sector, including:
- Rising tariff shortfalls and subsidy pressures
- Foreign exchange volatility impacting sector obligations
- Weak operational performance across electricity distribution companies
- Liquidity constraints within the electricity value chain
- Delays in implementing key reform measures tied to the programme
The cancellation means that a substantial portion of the financing initially expected to support sector reforms and improve market liquidity will no longer be available under the PSRO framework.
More insights
The World Bank restructuring paper indicated that both parties agreed to discontinue the remaining financing and explore alternative support mechanisms better aligned with Nigeria’s current power sector realities.
The decision comes at a time when Nigeria’s electricity sector continues to struggle with:
- Inadequate cost recovery
- Mounting debts owed to generation companies
- Grid instability and infrastructure deficits
- Limited metering penetration
- Challenges surrounding tariff adjustments and affordability concerns
Industry analysts note that while reforms have been introduced in recent years, implementation has remained uneven, limiting the sector’s ability to attract sustainable private investment and improve service delivery.
The cancellation could also affect ongoing efforts to stabilise the electricity market and reduce the Federal Government’s fiscal burden from power subsidies.
What you should know
The Power Sector Recovery Operation was approved by the World Bank to support Nigeria’s broader electricity sector reform agenda.
The programme aimed to:
- Improve financial sustainability in the power sector
- Reduce fiscal pressures linked to electricity subsidies
- Enhance accountability and transparency in the electricity market
- Improve power supply reliability for consumers and businesses
Nigeria’s electricity sector has remained one of the country’s most challenging infrastructure segments despite years of reforms and privatisation efforts.
Analysts say future progress will likely depend on stronger policy consistency, improved operational efficiency, cost-reflective tariffs, and expanded investment across generation, transmission, and distribution infrastructure.
