World Bank Approves $750 Mn Credit to Help the Power Sector in Nigeria

By Ayush Verma/ Updated On Thu, Jun 25th, 2020

World Bank has approved the PSRO of USD 750 million in IDA credit to improve the reliability of electric supply and enhance the overall power sector in Nigeria.

The World Bank Board of Directors approved the Power Sector Recovery Operation (PSRO) of USD 750 million in International Development Association (IDA) credit to improve the reliability of electricity supply, achieve financial and fiscal sustainability, and enhance accountability in the power sector in Nigeria.

About 47 percent of Nigerians do not have access to grid electricity and those who do have access, face regular power cuts. In addition, the economic cost of power shortages in Nigeria is estimated at around USD 28 billion – equivalent to 2 percent of its Gross Domestic Product (GDP). Getting access to electricity ranks as one of the major constraints for the private sector according to the 2020 Doing Business report. Hence, improving power sector performance, particularly in the non-oil sectors of manufacturing and services, will be central to unlocking economic growth post COVID-19.

“The lack of reliable power has stifled economic activity and private investment and job creation, which is ultimately what is needed to lift 100 million Nigerians out of poverty,” said Shubham Chaudhuri, World Bank Country Director for Nigeria. “The objective of this operation is to help turn around the power sector and set it on a fiscally sustainable path. This is particularly urgent at a time when the government needs all the financial resources it can marshal to help protect lives and livelihoods amidst the COVID-19 pandemic.”

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The PSRO provides results-based financing to support the implementation of the Government’s Power Sector Recovery Program (PSRP). The PSRP is a comprehensive program to restore the power sector’s financial viability, improve service delivery and reduce its fiscal burden. The PSRO is expected to increase annual electricity supplied to the distribution grid, enhance power sector financial viability while reducing annual tariff shortfalls and protecting the poor from the impact of tariff adjustments.

This will enable the turnaround of the power sector while helping the Federal Government to redirect large fiscal resources from highly regressive tariff shortfall financing towards critical crisis-responsive and pro-poor expenditures. It will also increase public awareness about ongoing power sector reforms and performance.

Specifically, the PSRO will ensure that 4,500 MWh/hour of electricity is supplied to the distribution grid by 2022 by strengthening the regulatory, policy and financing framework. It will also enhance the accountability and financial viability of the sector, helping the sector create a track record of sustainable operation necessary for unlocking much needed private investments in the future.