The Federal Government has redirected a $730 million World Bank loan originally tied to the Power Sector Recovery Programme into a new intervention aimed at strengthening Nigeria’s electricity distribution segment.
The revised arrangement will now support the Distribution Sector Recovery Programme, with emphasis on wider metering, stronger distribution networks and the rehabilitation of key infrastructure such as substations and transformers. The goal is to improve revenue collection for distribution companies and enhance electricity supply to consumers across the country.
According to sources, the loan was not cancelled or withdrawn from Nigeria, but repurposed after the country failed to meet the conditions required to unlock an additional $750 million tranche under the earlier programme. Both sides reportedly agreed to shift focus after the original objectives became unworkable.
One major setback was the widening tariff shortfall in the power sector. Although the deficit had been falling before 2023, the unification of the foreign exchange rate that year sharply increased operating costs, especially because gas supply contracts and other sector costs are dollar-linked. That caused the shortfall to rise again and made the earlier recovery targets difficult to achieve.
Political resistance to full tariff subsidy removal also contributed to the programme’s failure. The World Bank required the subsidy gap to be closed, but the government was unable to do so completely, leaving a persistent liquidity problem in the sector.
Under the new framework, distribution companies will be expected to comply fully with the loan conditions since the focus is now on a sector segment largely driven by private operators. Sources said about $20 million of the loan earmarked for technical assistance to agencies such as the Nigerian Electricity Regulatory Commission, the Nigerian Bulk Electricity Trading Plc and the Ministry of Power had not yet been drawn and is expected to remain available in the revised programme.