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 has launched a $500 million development initiative aimed at improving irrigation systems, strengthening dam safety, and boosting hydropower generation to support food production across the country.

The project, known as the Sustainable Power and Irrigation for Nigeria (SPIN) Project, is being funded by the and is designed to modernise Nigeria’s water resources management while expanding agricultural productivity.

The initiative was officially flagged off on Tuesday in by the Minister of Water Resources and Sanitation, , who described the project as a major step toward achieving national food security and strengthening energy infrastructure.

Project to modernise irrigation and water management

Utsev, who also chairs the SPIN Project Steering Committee, said the initiative represents a significant milestone in Nigeria’s efforts to transform its agricultural and water management systems.

According to him, the project will introduce modern irrigation technologies, strengthen water governance, and improve dam operations to enhance both farming productivity and electricity generation.

He explained that the SPIN project is expected to support millions of farmers by providing more reliable irrigation systems and reducing the country’s dependence on rain-fed agriculture.

“Today’s flag-off represents much more than the launch of a development project,” the minister said.

“It marks the beginning of a new chapter in Nigeria’s efforts to modernise irrigation, strengthen water governance, enhance agricultural productivity, and improve the livelihoods of millions of farmers.”

Aligning with Tinubu’s food security agenda

Utsev noted that the initiative aligns with the economic and agricultural priorities of , whose administration has declared food security a national priority under the Renewed Hope Agenda.

He said the government’s declaration of a national emergency on food security highlights the urgent need to transform Nigeria’s agricultural system through sustainable irrigation and improved water infrastructure.

The minister added that climate change, unpredictable rainfall patterns, and increasing food demand driven by rapid population growth have made irrigation expansion essential for Nigeria’s long-term agricultural stability.

“With increasing climate variability, erratic rainfall and rising food demand, Nigeria must move beyond dependence on rain-fed agriculture and invest in climate-resilient irrigation systems,” he said.

Four key components of the SPIN project

The SPIN project will focus on four major areas designed to strengthen Nigeria’s water and agricultural infrastructure.

The first component focuses on institutional strengthening and capacity building for water resources management agencies.

The second involves the modernisation of irrigation systems to improve agricultural productivity and water efficiency.

The third component targets improvements in dam operations and safety to enhance water storage and support hydropower generation.

The fourth component focuses on project management to ensure proper coordination, transparency, and accountability during implementation.

Power sector collaboration

Also speaking at the launch, the Minister of Power, , represented by the Permanent Secretary of the ministry, Mahmuda Mamman, emphasised the importance of strong collaboration among government agencies and stakeholders.

He noted that the project would play a key role in improving the integration between water resources management and electricity generation in Nigeria.

World Bank highlights importance of water security

The said the SPIN project builds on the achievements of the , which previously supported irrigation reforms across several states.

The World Bank Country Director for Nigeria, , said water, food, and energy security are essential pillars for sustainable economic growth.

According to him, the SPIN project will help rehabilitate about 14,000 hectares of irrigated farmland, while also encouraging private sector investment in irrigation development.

Need to rehabilitate Nigeria’s dams

Meanwhile, the World Bank’s Global Director for Water, , highlighted the importance of improving Nigeria’s water storage infrastructure.

He noted that Nigeria currently has more than 400 dams, many of which require rehabilitation and upgrades to effectively manage floods, droughts, and irrigation demands.

Improving these dams, he said, would help strengthen the country’s resilience to climate change while supporting agricultural and power generation needs.

Experts believe that if effectively implemented, the SPIN project could significantly boost Nigeria’s food production, enhance water management, and improve electricity generation capacity.

The initiative is also expected to create new opportunities for farmers, strengthen rural livelihoods, and reduce the country’s vulnerability to climate-related agricultural disruptions.

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The Minister of Budget and Economic Planning, Senator Abubakar Bagudu, says many hardworking Nigerians remain stuck in poverty because their economic returns are too low to sustain meaningful progress.

Bagudu made the remark in Abuja during a meeting with the World Bank Regional Manager for Social Protection and Labour for West and Central Africa, Robert Chase.

The ministry released details of the engagement in a statement on Wednesday.

According to the minister, limited earnings continue to keep millions of Nigerians vulnerable despite their resilience and work ethic. He said this reality underscores the urgency of strengthening social protection systems nationwide.

Bagudu noted that ongoing macroeconomic reforms and federally driven social programmes have benefitted significantly from the partnership between Nigeria and the World Bank. He also welcomed the ministry’s new Permanent Secretary, Dr Deborah Odoh, describing her expertise in social policy and reform implementation as an asset to ongoing national programmes.

He emphasised that the Nigerian Constitution mandates all tiers of government to prioritise social welfare and inclusive development. This legal provision, he said, guides the ministry’s work in coordinating social protection policies across federal, state and local levels.

The minister further called for better alignment among programmes such as NG-CARES, the Nigeria for Women Project and the HOPE Agenda, warning that fragmented implementation weakens impact. He advocated functional governance structures at ward level to reduce overlap, improve coordination and boost community involvement.

Addressing the rising poverty rate, Bagudu said many Nigerians are stuck not because they lack diligence, but because their economic activity yields minimal returns.
“Although most Nigerians are hardworking, they are trapped in poverty because their economic returns are limited,” the statement quoted him as saying.

He added that President Bola Tinubu has directed ministries to convert ongoing reforms into visible improvements in people’s lives.
“Our goal is to lift millions out of poverty by 2030 through coordinated programmes, strengthened efficiency and expanded financing,” Bagudu said.

World Bank representative Robert Chase commended Nigeria’s leadership and expanding social protection systems, noting that initiatives like NG-CARES now serve as models across Africa. He disclosed that the bank’s $750m contribution has been complemented by more than $2.2bn in state-led investments.

The Permanent Secretary, Odoh, assured the delegation of the Federal Government’s commitment to building a more inclusive and resilient economy through targeted social programmes.

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