NIGERIA’S efforts to improve electricity supply face serious uncertainty. This follows the Federal Government’s decision to cancel $717.7 million in undisbursed World Bank funding for the sector. This is an indictment of a segment that has consumed billions of dollars in public and multilateral financing over two decades, yet remains incapable of delivering reliable electricity to citizens and businesses.
Once again, this cancellation exposes the deep structural failures, policy inconsistencies and governance weaknesses that continue to cripple Nigeria’s electricity industry.
The World Bank’s Power Sector Recovery Operation, approved in 2020 and later expanded to a total package of $1.52 billion, was designed to address the sector’s chronic dysfunction.
Its objectives were to improve electricity supply, strengthen financial sustainability, reduce tariff deficits, enhance governance and restore investor confidence.
Yet six years later, the programme has ended prematurely, with nearly half of the funds undisbursed because Nigeria failed to meet critical reform milestones.
However, alternative power interventions remain fully funded, including the active $500 million Distribution Sector Recovery Programme.
This development comes at a particularly embarrassing time. Nigeria remains the third-largest borrower from the World Bank’s International Development Association, with an outstanding exposure of about $18.5 billion, behind only Bangladesh ($22.7 billion) and Pakistan ($19.2 billion). It is Africa’s largest IDA borrower.
The Tinubu administration alone has secured approvals for over $9.3 billion in World Bank financing since 2023 and is discussing an additional borrowing of $1.25 billion. Against this backdrop, recent complaints by government officials about delays in World Bank approvals and disbursements sound ridiculous.
The problem in this case was not World Bank bureaucracy. It was Nigeria’s inability to implement agreed reforms and create conditions for disbursement.
The World Bank’s assessment is disturbing. Despite years of interventions, the sector remains trapped in a vicious cycle of weak distribution performance, inadequate cost recovery, transmission bottlenecks, stranded generation capacity and massive technical, commercial and collection losses estimated at 48 per cent.
Nigeria today has an installed generation capacity exceeding 13,000 MW. Yet average daily generation struggles to exceed 5,000 MW.
More than half of the available capacity remains stranded because the transmission network cannot evacuate it, and distribution companies cannot effectively distribute or collect payment for the power generated.
Such infrastructure waste amounts to sheer folly.
The World Bank was obviously troubled that the figures were not adding up. Following reforms initiated under the PSRO, tariff shortfalls fell from N581 billion in 2019 to N166 billion in 2022, while regulatory cost recovery improved from 56 per cent to 94 per cent.
These gains were, however, short-lived.
The naira’s collapse following foreign exchange liberalisation in 2023 dramatically increased generation costs because over 70 per cent of Nigeria’s electricity comes from gas-fired plants whose fuel costs are dollar-denominated.
Yet electricity tariffs remained largely frozen for political reasons. Apart from Band A consumers, most customers continue to pay tariffs far below actual production costs.
Predictably, tariff deficits exploded from N140 billion in 2022 to an astonishing N1.9 trillion annually in both 2024 and 2025.
This is the central contradiction at the heart of Nigeria’s electricity crisis. Consumers justifiably reject higher tariffs because supply remains poor and unreliable.
Yet investors cannot commit capital to a sector where revenues do not cover costs. The government lacks the fiscal capacity to sustain multi-trillion-naira subsidies indefinitely. The result is a sector permanently starved of investment and trapped in financial insolvency. The N4 trillion power sector bailout can only be implemented in trickles due to fiscal constraints.
The danger now is obvious. With the World Bank facility withdrawn and fiscal pressures mounting, the government may seek to bridge the gap through broader cost-reflective tariffs. Such increases will almost certainly encounter fierce public resistance.
Nigerians are already grappling with inflation, currency depreciation, high fuel prices and declining living standards. Asking households and businesses to pay substantially more for electricity without corresponding improvements in service would be a political nightmare.
Nevertheless, avoiding reform is no longer an option. Reliable electricity is the foundation of industrialisation, job creation and economic competitiveness.
The Manufacturers Association of Nigeria recently said that electricity shortages result in annual economic losses of about N10.1 trillion, or a 2.0 per cent share of the country’s GDP.
Small businesses depend on expensive diesel and petrol generators. Households endure blackouts that diminish productivity, education, healthcare and quality of life. In 2023, Nigerians spent N16.5 trillion on fuelling generators.
The uncomfortable truth is that Nigeria’s electricity market remains structurally defective. The partial privatisation of 2013 failed to deliver expected outcomes because many DisCos were acquired by investors lacking the technical expertise, financial strength and operational competence required for such a complex business.
Several DisCos remain effectively insolvent and dependent on regulatory protection.
The solution requires far more than periodic tariff adjustments. Nigeria must finally establish credible commercial and legal frameworks capable of attracting long-term private investment.
Distribution monopolies should be dismantled to encourage competition and efficiency. DisCos currently under the management or influence of the Asset Management Corporation of Nigeria should be sold transparently to proven technical operators and financially capable investors.
The country must also accelerate the diversification of electricity generation beyond its excessive dependence on gas. Solar, hydro, wind and embedded generation should be aggressively expanded.
The national grid itself requires fundamental restructuring. A single centralised grid serving over 230 million people has become an albatross.
The constitutional and legislative reforms allowing states to participate directly in electricity generation, transmission and distribution should be fully implemented. Regional and state-level power markets can unlock investment and improve service delivery.
Above all, Nigeria must stop treating electricity reform as a political exercise and begin treating it as an economic imperative. No country has achieved sustained industrialisation without reliable power.
No economy can become globally competitive while factories run on diesel generators and households spend days in darkness.
The cancellation of the $717.7 million World Bank loan is not merely the end of a financing programme. It shows that money alone cannot solve Nigeria’s electricity crisis.
In contrast, South Africa, Egypt, Algeria and Morocco have made good strides in the sector.
Billions have come and gone. What remains absent is the political courage to implement difficult reforms, enforce accountability and build institutions capable of sustaining a modern electricity market.
Until Nigeria gets power right, its aspirations for industrial growth, economic diversification and improved living standards will remain elusive.