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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The Federal Government is seeking a fresh $1.25bn loan from the World Bank to support economic reforms, job creation, and national competitiveness, even as Nigeria’s public debt continues to climb and the facility reaches a decisive approval stage.

Findings indicate that the proposed facility, titled Nigeria Actions for Investment and Jobs Acceleration, is expected for World Bank Board consideration on June 26, 2026.

If approved, it would become the second-largest World Bank loan secured under President Bola Ahmed Tinubu, after the $1.5bn development policy financing approved in 2024.

At an exchange rate of N1,361.4/$, the facility amounts to about N1.70tn, further increasing Nigeria’s external debt profile.

Loan Now At Final Approval Stage

According to World Bank documentation, the loan has progressed to the decision meeting stage, where management reviews final appraisal details before presenting it to the Board of Executive Directors.

The Federal Ministry of Finance will implement the programme, which is designed to expand access to finance, digital services, electricity supply, and strengthen competitiveness through reforms in taxation, trade, and agriculture.

The document confirms that negotiations and appraisal processes have largely been concluded, placing the project near final approval.

Nigeria’s Rising World Bank Exposure

Between June 2023 and May 2026, Nigeria has secured about $9.35bn in World Bank financing across sectors including power, education, healthcare, agriculture, and social protection.

If the new loan is approved, total World Bank commitments under Tinubu would rise to about $10.6bn.

However, many of these loans are tied to policy conditions and are released in tranches, often slowing disbursement.

Debt Stock Continues To Rise

Nigeria’s external debt stood at $51.86bn as of December 2025. With the new facility, it could rise to about $53.11bn.

Total public debt may also increase from N159.28tn to about N160.98tn.

World Bank loans already account for over 38% of Nigeria’s external debt stock, according to Debt Management Office data.

Government Raises Concern Over Approval Delays

The Accountant-General of the Federation, Shamseldeen Ogunjimi, has warned that Nigeria may reconsider future borrowing if World Bank approval and disbursement timelines remain slow.

He argued that loan processes extending beyond six months could disrupt project planning and national priorities.

Experts Split Over Borrowing Strategy

Economists remain divided over Nigeria’s growing reliance on multilateral loans.

Adewale Abimbola noted that concessional loans can support development if properly deployed into revenue-generating projects.

However, Aliyu Ilias cautioned that rising debt contradicts government claims of improved revenue after subsidy removal.

Muda Yusuf of the Centre for the Promotion of Private Enterprise stressed that debt sustainability depends on stronger revenue generation and careful management of exchange rate risks.

Fiscal Risks Remain High

The Nigerian Economic Summit Group warned that despite marginal improvements in debt indicators, Nigeria’s fiscal position remains fragile.

It noted that debt pressures continue to fluctuate within a high-stress range, driven largely by weak revenue performance and sustained borrowing needs.

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The World Bank has approved a $500 million loan to support Nigeria’s agriculture sector, targeting enhanced productivity, food security, and rural livelihoods. The financing is part of ongoing efforts to address structural inefficiencies and strengthen the country’s economic resilience.

Financing Framework and Objectives

The funding will focus on:

• Enhancing agricultural productivity across key commodities.
• Improving access to inputs and modern farming techniques.
• Strengthening value chains, including storage, processing, and distribution.
• Promoting climate-resilient agriculture and irrigation systems.

Improving market access for smallholder farmers, who contribute significantly to Nigeria’s agricultural output.

Tackling Food Security Challenges

Nigeria faces growing food security pressures due to population growth, supply disruptions, and rising production costs. The World Bank loan is expected to stabilize domestic food supply, boost production, and reduce dependence on imports, helping to ease food inflation and overall economic pressure.

Strengthening Rural Economies

Agriculture remains a primary source of employment in rural Nigeria. By enhancing productivity and market accessibility, the program is expected to increase farmers’ incomes, reduce poverty, and drive inclusive economic growth.

Infrastructure and Value Chain Development

The program includes strategic investments in agricultural value chains, focusing on logistics, storage, processing, and transportation infrastructure. Improved infrastructure will reduce post-harvest losses, increase efficiency, and improve pricing outcomes for farmers.

Policy and Institutional Implications

The World Bank financing also aims to:

• Modernize farming practices with technology-driven solutions.
• Support economic diversification, reducing Nigeria’s reliance on oil revenues.
• Improve inflation dynamics by increasing food production.

Implementation Challenges

Effective deployment will require addressing:

• Insecurity in farming regions.
• Limited infrastructure and logistics.
• Governance and accountability issues.

Success depends on transparency, coordinated policy, and sustained investment in agriculture and rural development.

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Nigeria has opened discussions with the World Bank for a new $1 billion facility aimed at driving private investment, job creation, and economic diversification.

The programme, titled Nigeria Actions for Investment and Jobs Acceleration (P512892), is a Development Policy Financing (DPF) initiative expected to go before the World Bank Board on December 16, 2025.

According to documents reviewed by Nairametrics, the loan will be split evenly between a $500 million International Development Association (IDA) credit and a $500 million International Bank for Reconstruction and Development (IBRD) loan.

If approved, it will mark the second-largest World Bank loan obtained under President Bola Tinubu’s administration, following the $1.5 billion RESET programme approved in June 2024.

Pushing for private-sector growth

The World Bank said the financing aims to help Nigeria transition from short-term macroeconomic stabilisation to sustainable, private-sector-led growth. The plan includes reforms to expand access to credit, enhance digital finance, ease inflationary pressure, and strengthen key agricultural value chains.

“The DPF supports Nigeria’s shift from stabilisation to inclusive growth and job creation,” the concept note stated. “It aims to catalyse private investment, deepen capital markets and digital services, and promote export diversification.”

With private-sector credit at 21.3% of GDP in 2024, far below emerging-market averages, the initiative will support the implementation of the Investment and Securities Act 2025, improve credit-enhancement facilities, and introduce stronger consumer-protection frameworks under a new CBN rulebook.

Broader economic reforms

The plan also includes the National Digital Economy and E-Governance Bill 2025, designed to establish a legal foundation for electronic transactions and digital authentication.

Additionally, the World Bank is urging Nigeria to liberalise its trade regime, adopt AfCFTA tariff concessions, and simplify agricultural seed certification to boost food supply, cut inflation, and encourage export growth.

Part of a wider World Bank strategy

The loan aligns with three other World Bank-supported programmes — FINCLUDE, BRIDGE, and AGROW — all focused on expanding access to finance, improving digital infrastructure, and strengthening agriculture.

Outlook and debt context

The World Bank projects that these reforms could significantly lower living costs and boost job creation, particularly for small businesses.

As of June 2025, Nigeria’s total external debt stood at $46.98 billion, with the World Bank Group accounting for over 41% of that amount — approximately $19.39 billion in total exposure.

While the Bank praised Nigeria’s ongoing reforms — including fuel subsidy removal and FX unification — it noted that growth remains modest and poverty levels high. The new facility, it said, is designed to close that gap and accelerate inclusive, private-sector-driven recovery.

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The States Action on Business Enabling Reforms (SABER) Programme-for-Results is a $750m initiative supporting business-friendly reforms.

Declaring the event open in Abuja, Mrs Lydia Shehu Jafiya emphasized SABER’s role in promoting Nigeria’s economic growth.

“We are committed to creating an environment that enhances business competitiveness and overall economic attractiveness,” Jafiya said.

The programme encourages state-level reforms by providing financial incentives aimed at improving Nigeria’s business environment.

Jafiya noted that 33 states and the Federal Capital Territory (FCT) have signed the Subsidiary Loan Agreement (SLA).

Additionally, 28 states have received between $1m and $4m each, with total disbursements amounting to $68.36m.

While acknowledging reform challenges, Jafiya reassured states of continued federal support to attract investments and growth.

She stressed transparency and accountability as key factors for successful implementation of the SABER programme.

The initiative streamlines land acquisition processes and reduces bureaucratic obstacles for businesses across participating states.

It also targets increased private investment in fibre optic infrastructure by enhancing regulatory frameworks nationwide.

Moreover, SABER prioritizes strengthening investment promotion agencies and public-private partnership units to boost economic prospects.

The programme’s comprehensive reforms are expected to unlock Nigeria’s investment potential and stimulate long-term economic development.

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