In a shocking revelation, the World Bank has officially withdrawn a staggering $717 million loan intended for Nigeria's power sector, citing unsatisfactory performance. This decision, confirmed on Tuesday by financial analyst Kalu Aja, follows a formal request from Nigeria's government to terminate the remaining balance of a broader $1.52 billion recovery program. The loan, originally approved on June 23, 2020, represents the entirety of the undisbursed funds that were meant to bolster the struggling power sector in Nigeria.
Aja emphasized that the narrative surrounding the cancellation is misleading; instead of the Nigerian government canceling the loan, it was the World Bank that pulled the funds due to alarming shortfalls in revenue generation. "The persistent mismatch between the revenues in Nigeria's power sector and the actual operational costs has become untenable," Aja explained. The concerns are exacerbated by Nigeria's escalating debt profile, which reached a staggering N159.28 trillion as of early 2026, raising alarms among citizens and financial analysts alike.
This loan cancellation is not just an isolated incident; it reflects a long-standing issue within Nigeria's power sector. The Power Sector Recovery Program (PSRP) was established in 2021 with the hope of addressing these challenges. With $20 million in initial support from the World Bank, the program initially showed promise by reducing tariff shortfalls significantly — from N581 billion in 2019 to N166 billion in 2022. This success led to a fresh loan approval of $750 million in June 2023, but the situation quickly deteriorated following the liberalization of the foreign exchange market.
Experts warn that the ramifications of this loan withdrawal extend beyond mere numbers; they impact millions of Nigerians reliant on a stable electricity supply. The World Bank's decision comes at a time when the tariff shortfalls have skyrocketed from approximately N140 billion in 2022 to an estimated N1.9 trillion in 2024 and 2025. This alarming trend places tremendous pressure on the Federal Government's finances and raises questions about the future of electricity supply in the country. Official statements from the presidency, including a clarification by spokesperson Bayo Onanuga, assert that Nigeria has not overborrowed from international lenders, but skepticism remains high among the populace.
Looking ahead, observers will need to keep a close eye on Nigeria's financial strategies and potential reforms to address these critical issues. As the country grapples with rising costs and dwindling revenue, the question remains: how will the government navigate this financial minefield? The future of Nigeria's power sector hangs in the balance, and urgent action is needed to restore both credibility and stability in the face of these challenges.
