The Federal Government has re-channelled a $730 million World Bank facility to finance a recovery programme in Nigeria’s electricity distribution segment, following the restructuring of the original Power Sector Recovery Programme (PSRP).
Industry sources disclosed that the loan, initially approved under the PSRP, will now be deployed to support distribution sector recovery, with a strong emphasis on expanding electricity metering and strengthening distribution infrastructure.
The restructuring follows the discontinuation of the original PSRP objectives after Nigeria was unable to meet the conditions required to access an additional $750 million tranche of the facility.
Contrary to reports suggesting that the World Bank cancelled the loan, sources clarified that the funding remains available to Nigeria but has been redirected to a different component of the power sector.
“Nigeria remains the beneficiary of the loan. It has not been withdrawn; rather, it has been re-focused on another critical area of the electricity value chain,” a source familiar with the development said.
The revised programme, which has been agreed upon by both the Federal Government and the World Bank, is expected to improve the financial health of electricity distribution companies (DisCos) by expanding their revenue base through accelerated customer metering. By bringing more electricity consumers into the billing system, the government hopes to reduce commercial losses and improve collections across the distribution network.
In addition to metering, the programme will finance the rehabilitation and reinforcement of distribution infrastructure, including substations, distribution transformers and other critical network assets, with the objective of improving electricity supply and service delivery nationwide.
ALSO READ:
- Nigeria rechannels $730m World Bank Power Loan to Distribution Sector Overhaul
- Crude Price Fall: FCCPC to sanction profiteers over exploitation in Nigeria’s oil market
- Heirs Energies OML 17 JV, Redtech commission Monitoring Centre to accelerate Oilfield Operations
- How AI is transforming Nigeria’s power sector- Adighije
- Ikeja Electric appoints Ogochukwu Onyelucheya as acting CEO
Government officials believe the new focus offers a more practical pathway to addressing longstanding challenges in the distribution segment. However, since the beneficiaries are largely private sector operators, participating DisCos will be expected to meet the conditions attached to the financing before accessing the funds.
“The loan has not been taken away from Nigeria. It is still available for the power sector, but this time it will support recovery in the distribution segment,” another source said.
Why the original PSRP failed
Sources identified two major factors that undermined the original Power Sector Recovery Programme.
The first was Nigeria’s inability to eliminate the electricity tariff shortfall within the agreed timeline. In 2019, the sector’s tariff deficit stood at approximately ₦580 billion. Through a series of tariff adjustments, the shortfall declined to about ₦143 billion by 2022, with projections to reduce it further to around ₦100 billion in 2023 before achieving full cost-reflective tariffs by 2024.
That progress, however, was reversed in June 2023 following the Federal Government’s decision to unify the foreign exchange market.
With gas supply contracts and a significant portion of the electricity industry’s operating costs denominated in or indexed to the United States dollar, the sharp depreciation of the naira—from about ₦350/$ to over ₦1,500/$—dramatically increased generation costs. Consequently, the tariff shortfall, which had been steadily declining, ballooned to an estimated ₦2 trillion by 2025, making compliance with the PSRP targets impossible.
The second factor was the government’s inability to completely remove electricity subsidies as required under the World Bank programme. The continued subsidy regime sustained a significant liquidity gap across the electricity value chain, preventing Nigeria from meeting key performance benchmarks under the PSRP.
According to sources, these two developments—the foreign exchange shock and the inability to fully implement cost-reflective tariffs—prompted both the Federal Government and the World Bank to discontinue the original PSRP objectives and redirect the remaining loan resources toward strengthening the electricity distribution sector.
It was also gathered that about $20 million of the facility, originally earmarked for technical assistance to sector institutions—including the Nigerian Electricity Regulatory Commission (NERC), the Nigeria Bulk Electricity Trading Plc (NBET), and the Federal Ministry of Power—remained largely undisbursed when the original programme was restructured. That portion of the funding is understood to remain available under the revised distribution sector recovery programme.
