The Federal Government and the World Bank have mutually agreed to discontinue about $717.7 million in undisbursed funding under the Power Sector Recovery Operation (PSRO), following ongoing challenges in Nigeria’s electricity reform process.
The decision comes amid persistent tariff shortfalls, implementation setbacks, and shifting dynamics within the power sector that have affected the programme’s progress.
According to a World Bank document, the Federal Government formally requested the cancellation on March 26, 2026. This followed clarifications from the Office of the Accountant-General, which denied claims suggesting the loan might be abruptly withdrawn due to prolonged delays in approval processes.
The document noted that the restructuring exercise is a response to Nigeria’s official request, stating:
“The proposed Level Two restructuring is undertaken in response to a formal request from the Federal Government of Nigeria (FGN), received on March 26, 2026.”
It further confirmed that the entire undisbursed balance under the programme will be cancelled, with no further withdrawals permitted once the restructuring is approved.
“The restructuring will result in the cancellation of the entire undisbursed balance for US$717.7 million equivalent, and no further disbursements will be made under the Program following approval of this restructuring.”
The adjustment also brings forward the programme’s closure date from June 30, 2027, to May 31, 2026, effectively winding down remaining activities in line with World Bank procedures.
Despite the cancellation, the World Bank noted that early phases of the programme recorded notable improvements, including a 71 per cent reduction in electricity tariff shortfalls between 2019 and 2022.
However, it added that gains were partially reversed following the depreciation of the naira after the foreign exchange market liberalisation in June 2023, which impacted sector stability and cost recovery.
The PSRO, launched in 2020, was designed to improve the financial viability and operational efficiency of Nigeria’s electricity sector.