The Federal Government of Nigeria and the World Bank have mutually agreed to cancel approximately $717.7 million in undisbursed financing under the Power Sector Recovery Operation (PSRO) programme. This decision stems from worsening tariff shortfalls, implementation delays, and evolving realities within Nigeria's electricity sector.
Background of the Cancellation
According to a World Bank document, the Federal Government formally requested the cancellation on March 26, 2026. This followed a denial by the Office of the Accountant-General regarding threats to cancel World Bank loans due to delayed approvals exceeding six months.
The document states: "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. 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."
Program Closure and Adjustments
The restructuring also advances the program closing date from June 30, 2027, to May 31, 2026, to reflect the cancellation and completion of disbursement activities. After this, the operation will proceed toward closure in accordance with World Bank procedures.
The World Bank noted that substantial results were evident when the programme was approved in 2020, including a 71 percent reduction in tariff shortfalls between 2019 and 2022. However, gains recorded under the initial phase were reversed after the liberalisation of the foreign exchange market in June 2023, due to naira depreciation.
