The Federal Government has cancelled $717.7 million in undisbursed World Bank funding for Nigeria’s power sector, ending the remaining portion of a $1.52 billion electricity recovery programme amid worsening tariff shortfalls and persistent sector challenges.

Documents obtained from the World Bank revealed that the cancellation followed a request by the Federal Government and a joint decision by both parties to discontinue financing under the Power Sector Recovery Performance-Based Operation after key reform targets failed to materialise.

According to the World Bank, the cancelled amount represented the entire undisbursed balance under the programme.

“The restructuring will result in the cancellation of the entire undisbursed balance in the amount of $717.7m equivalent, and no further disbursements will be made under the programme,” the institution stated.

The programme’s closing date was also moved from June 30, 2027, to May 31, 2026, effectively ending it more than one year earlier than originally planned.

Power Sector Recovery Programme Hits Major Setback

The Power Sector Recovery Performance-Based Operation was approved in June 2020 with financing of about $752.5 million aimed at improving electricity supply reliability, strengthening financial sustainability and enhancing accountability across Nigeria’s electricity value chain.

In June 2023, the World Bank approved an additional financing package worth approximately $763.5 million to deepen reforms and support further recovery efforts.

Combined, both facilities amounted to approximately $1.52 billion.

However, despite progress recorded under the original programme, the additional financing struggled to achieve critical reform benchmarks.

Tariff Shortfalls Rise to N1.9tn

The World Bank report identified deep-rooted structural problems within Nigeria’s electricity sector, including:

• Weak distribution performance
• Transmission bottlenecks
• Underutilised generation capacity
• Poor cost recovery
• Persistent financial deficits

According to the report, tariff shortfalls increased significantly from N140 billion in 2022 to approximately N1.9 trillion annually in both 2024 and 2025.

The institution explained that rising generation costs and frozen electricity tariffs widened the gap between actual sector expenses and revenue collection.

Naira Depreciation Worsened Sector Pressure

The World Bank noted that foreign exchange reforms introduced in 2023 contributed significantly to the challenges.

The liberalisation of the forex market led to a sharp depreciation of the naira, increasing the cost of natural gas used in electricity generation.

Since more than 70 per cent of electricity supplied to Nigeria’s national grid depends on gas-powered plants, rising gas costs placed further strain on the sector.

Low Disbursement Rate Triggered Cancellation

Financial records showed weak implementation under the additional financing package.

Out of the $763.5 million approved:

• Only about 9 per cent was disbursed
• Large portions remained undrawn
• Several reform conditions were not achieved

The World Bank described overall implementation progress as “Moderately Unsatisfactory.”

It also cited delays involving the Transmission Company of Nigeria and broader implementation constraints.

FG Warns Over Delayed Loan Approvals

Meanwhile, Accountant-General of the Federation, Dr Shamseldeen Ogunjimi, recently warned that Nigeria could reconsider future World Bank loans if lengthy approval and disbursement processes continue.

He stressed that development financing should align with project timelines, especially as such facilities are loans rather than grants.

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President Bola Ahmed Tinubu has nominated Mr Joseph Olasunkanmi Tegbe as Nigeria’s Minister of Power, subject to confirmation by the Senate.

The nomination has been formally transmitted to the Senate for screening and approval in line with constitutional requirements. It follows the resignation of the former Minister of Power, Adebayo Adelabu, who stepped down to pursue elective office.

Mr Tegbe, an indigene of Oyo State, brings over 35 years of experience spanning both the public and private sectors, with a strong background in fiscal policy, economic reform, and institutional development.

He previously served as Senior Partner and Head of Advisory Services at KPMG Africa, where he led major assignments in governance reform, regulatory restructuring, and public sector transformation across several African economies.

Beyond his private sector experience, Tegbe has advised government institutions and private organisations on investment structuring, policy reforms, and regulatory frameworks aimed at improving efficiency and attracting capital.

He currently serves as Director-General and Global Liaison for the Nigeria-China Strategic Partnership (NCSP), where he coordinates bilateral development initiatives between Nigeria and China. The role also involves engagement with public sector stakeholders to advance economic cooperation in line with the Forum on China-Africa Cooperation (FOCAC) objectives.

Within the power sector, Tegbe has been involved in advisory engagements related to regulatory and institutional reforms, working with agencies such as the Nigerian Electricity Regulatory Commission (NERC) and the Nigerian Bulk Electricity Trading Company (NBET).

His nomination is expected to support ongoing reforms in the electricity sector, particularly in improving grid stability, strengthening governance structures, and attracting long-term investment under the administration’s Renewed Hope Agenda.

If confirmed by the Senate, President Tinubu expects him to deploy his experience to accelerate reforms and improve power supply outcomes across the country.

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Three West African countries — Benin, Togo, and Niger — owe Nigeria a total of $9.55 million for electricity supplied in the last quarter of 2025, according to the Nigerian Electricity Regulatory Commission.

Data from the commission’s Q4 2025 report showed that invoices worth $20.44 million were issued to the three countries, but only $10.89 million was paid, reflecting a 53.28% remittance performance.

The report revealed varying levels of compliance among the countries’ power utilities. While some operators recorded moderate payments, others failed to meet obligations, with one supplier making no payment at all during the period.

Despite the shortfall, the Société Béninoise d’Energie Electrique (SBEE) later paid an additional $3.54 million to offset part of its outstanding debt.

Within Nigeria, domestic bilateral customers showed stronger compliance, remitting ₦3.5 billion out of ₦4.17 billion, representing an 84.23% payment rate. However, Ajaokuta Steel Company, classified as a special customer, was billed ₦1.26 billion but made no payment during the period.

The development highlights Nigeria’s ongoing struggle to recover payments for electricity exports, even as the country grapples with internal power supply challenges. Analysts warn that persistent payment defaults could place additional financial pressure on power generation companies and disrupt the stability of the electricity market.

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The Federal Government has taken a fresh step to address Nigeria’s persistent electricity challenges with the inauguration of a Gas-to-Power Monitoring Committee aimed at resolving gas supply disruptions crippling power generation.

Speaking at the inauguration, Minister of Power, Adebayo Adelabu, described the move as a strategic intervention to tackle one of the most critical bottlenecks in the Nigerian Electricity Supply Industry.

The initiative follows a sharp drop in electricity generation earlier this year after gas suppliers cut supply to power generation companies over a debt estimated at more than $1.3 billion, exposing the fragile link between gas availability and electricity output.

Adelabu noted that gas-fired plants account for about 80 percent of Nigeria’s electricity generation, making consistent gas supply essential for stabilising the national grid. However, the sector continues to face disruptions caused by pipeline vandalism, infrastructure gaps, liquidity constraints, and weak coordination among stakeholders.

According to the minister, the newly inaugurated committee is expected to provide targeted solutions to these longstanding challenges by monitoring supply chains and driving the resolution of operational and commercial bottlenecks.

He explained that the committee emerged from deliberations at the first quarter 2026 Ministerial Power Sector Working Group meeting, where stakeholders identified key issues affecting the gas-to-power value chain.

Among its core responsibilities, the committee will oversee the repair and maintenance of damaged gas pipelines, facilitate the settlement of outstanding debts owed to gas suppliers, and address pricing and supply inconsistencies affecting generation companies.

Adelabu emphasised that the committee must move beyond routine oversight and adopt a proactive, data-driven approach to ensure sustainable improvements in electricity generation. He added that members would be held accountable through measurable targets, regular reporting, and timely escalation of critical issues requiring government intervention.

The minister expressed confidence in the committee’s capacity, noting that its membership reflects broad representation across the sector, including the Transmission Company of Nigeria, Nigerian Independent System Operator, the Niger Delta Power Holding Company, the Nigerian Gas Association, and generation companies.

Earlier, Permanent Secretary in the Ministry of Power, Mahmuda Mamman, represented by the Director of Distribution, said the move aligns with ongoing efforts to urgently address the structural constraints limiting gas supply to power plants.

He identified infrastructure deficits, pipeline vandalism, liquidity challenges, and coordination gaps as major factors undermining electricity generation and slowing economic growth.

Industry observers say the success of the committee will be critical to improving Nigeria’s power output, as resolving gas supply issues remains central to achieving stable and reliable electricity nationwide.

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The federal government has said it is actively taking measures to address persistent gas supply shortages affecting Nigeria’s Generation Companies (GenCos), which have constrained electricity production nationwide.

The assurance was given by the Minister of Power, Adebayo Adelabu, in his Eid al-Fitr message. He expressed confidence that these interventions are gradually improving electricity supply, although he did not provide specific details on the steps being taken.

Despite chronic gas shortages, thermal power plants—responsible for about 70% of Nigeria’s electricity—have been operating at less than 43% of required gas volumes. This has led to power generation dropping below 3,940MW, triggering nationwide blackouts and higher operational costs for businesses relying on backup power.

GenCos cited N3.3 trillion in debt owed to gas suppliers and N6.8 trillion in government and NBET debts as key contributors to supply disruptions and plant shutdowns. The Nigerian Independent System Operator (NISO) reported that gas constraints were responsible for reductions in power supply to 4,300MW in February 2026 and 3,940MW in March 2026.

Minister Adelabu highlighted ongoing efforts to ensure more reliable and sustainable electricity for homes, businesses, and industries, crediting President Bola Ahmed Tinubu’s reforms for laying the groundwork. He urged Nigerians to apply the same spirit of discipline and sacrifice from Ramadan to national development, emphasizing public trust, cooperation, and collective responsibility as key to achieving progress.

The minister also encouraged unity, patience, and dedication to the administration’s policies, citing recent international engagements by President Tinubu as steps toward boosting investment and economic growth.

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Electricity workers under the National Union of Electricity Employees (NUEE) have issued a 21-day nationwide strike notice to the Federal Government over alleged wage violations, non-remittance of statutory deductions, and worsening labour conditions in the Nigerian Electricity Supply Industry (NESI).

The union warned that failure to address the concerns within the stipulated period could trigger industrial action capable of disrupting electricity generation and distribution across the country.

Union Accuses DISCOs, GENCOs of Labour Violations

In a letter dated January 26, 2026, and addressed to the Minister of Power, NUEE’s Acting General Secretary, Igwebike Dominic, expressed frustration over what he described as persistent anti-labour practices since the privatisation of the electricity sector more than a decade ago.

According to the union, several power generation companies (GENCOs) and distribution companies (DISCOs) have failed to negotiate or implement collective agreements and conditions of service.

The workers also alleged non-implementation of the 2025 National Minimum Wage Act and its consequential adjustments across parts of the sector.

Non-Remittance of PAYE, Pension Contributions

NUEE further accused employers in the power sector of deducting Pay As You Earn (PAYE) tax, pension contributions, and union dues without remitting them to the appropriate authorities.

The union claimed that pension deductions in some distribution companies have remained unpaid for extended periods, in certain cases spanning several years.

This, according to the workers, exposes employees to long-term financial uncertainty and undermines trust in the pension system.

Restriction of Union Activities

The union also alleged that some companies have restricted workers’ constitutional rights to unionise and engage in collective bargaining.

It stated that union activities are allegedly prohibited within company premises, while deducted union dues are not remitted.

NUEE described the situation as a violation of labour laws and freedom of association guaranteed under the Constitution.

Tariffs Up, Workers’ Welfare Stagnant

Electricity workers argued that despite repeated electricity tariff increases and band reclassifications, employees have not benefited from improved welfare packages.

According to the notice, there have been no promotions, salary increments, or bonuses, even as revenues to power companies have reportedly increased.

The union noted that workers often face public frustration over poor electricity supply while operating under what it termed difficult and insecure working conditions.

Privatisation Under Scrutiny

The union also criticised investors in the electricity sector, alleging failure to meet post-privatisation commitments such as capital injection, improved metering, network expansion, and enhanced power supply.

It described the situation as a reflection of systemic challenges within NESI and called for urgent government intervention.

Call for Federal Government Action

NUEE urged the Federal Government to convene stakeholders to resolve the crisis within 21 days of receipt of the letter.

The union warned that failure to address the grievances may compel workers to deploy legitimate labour actions permitted under Nigerian labour laws.

The strike notice raises concerns about potential disruptions in Nigeria’s already fragile power sector if negotiations fail.

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Nigeria’s electricity subsidy rose to ₦1.05 trillion in the first half of 2025, almost equal to the ₦1.12 trillion revenue earned by the nation’s 11 electricity distribution companies (DisCos). A Proshare Research report shows a sector burdened by rising costs and unsustainable subsidies.

The subsidy, meant to make tariffs affordable, continues to drain public funds and discourage private investment. Despite higher tariffs for Band A consumers and improved collection efficiency of 76%, subsidy costs climbed alongside revenue growth.

Liquidity remains tight for every ₦100 billed, about ₦25 is lost to poor remittance, theft, and weak compliance. In July 2025, DisCos recorded a ₦49.18 billion shortfall as tariffs lagged behind real costs.

Metering improved slightly to 54%, yet nearly half of electricity consumers remain unmetered. Generation companies (GenCos) recovered only 28% of debts in 2024, with total sector arrears exceeding ₦4 trillion.

Although President Bola Tinubu approved the securitisation of these debts, rising subsidy bills have eroded the gains. Power generation remains stagnant at 5,396MW, far below the 13,000MW capacity.

The government has introduced major reforms  including the National Integrated Electricity Policy (NIEP), Mission 300, and several multibillion-dollar funding plans but analysts say real progress is still lacking.

“Government efforts are commendable, but results remain on paper,” Proshare noted.

Until deeper structural reforms take hold, Nigeria’s power sector will remain caught in a cycle where every gain is offset by the cost of keeping the lights on.

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