In an analysis on an X account on Tuesday, Aja said, contrary to claims that the Nigerian government cancelled the loan, the World Bank actually withdrew the facility over unsatisfactory performance.
Recall that a report emerged that the Nigerian government, in a formal document to the World Bank, requested to terminate the remaining portion of a $1.52bn power sector recovery program.
The cancelled loan amount represents the entire undisbursed balance remaining under the program.
DAILY POST reports that the loan was approved on June 23, 2020, by the World Bank, with financing of about $752.5 million equivalent.
The development comes amid criticisms by Nigerians on the country’s growing debt profile, which stood at N159.28 trillion as of the first quarter of 2026, according to the Debt Management Office.
However, the presidency, in a statement by spokesperson Bayo Onanuga, clarified that Nigeria has not over borrowed from the World Bank or any lender.
Reacting, Aja said the World Bank’s cancellation of a $717 million loan for Nigeria’s power sector was largely driven by rising tariff shortfalls following the country’s foreign exchange liberalisation.
He explained that the World Bank, in a report made public, identified a persistent mismatch between revenues generated in Nigeria’s power sector and the actual costs required to sustain operations.
According to him, the international lender noted that recurrent financing gaps, particularly tariff shortfalls, meant Nigeria was not generating enough revenue to support the electricity sector.
He recalled that Nigeria had developed a Power Sector Recovery Programme, PSRP,in 2021, with $20 million in support from the World Bank, adding that the program achieved substantial results.
Aja said the reforms reduced tariff shortfalls by 71 percent between 2019 and 2022, dropping from N581 billion to N166 billion.
He added that regulatory cost recovery improved from 56 percent to 94 percent within the same period, while annual electricity supplied to the national distribution grid increased by 13 percent between 2018 and 2021.
Aja further explained that the successes recorded under the program led to the approval of a fresh $750 million World Bank facility on June 9, 2023.
However, he said the situation changed after Nigeria liberalised the foreign exchange market in June 2023, leading to a sharp increase in the naira cost of gas used for power generation because gas payments are denominated in dollars.
According to Aja, the development pushed tariff shortfalls from about N140 billion in 2022 to an estimated N1.9 trillion in 2024 and 2025, placing severe pressure on the Federal Government’s finances.
He noted that although the World Bank acknowledged that earlier reform targets had been achieved and verified, broader disbursements under the additional financing arrangement failed to materialise because of the widening tariff gaps.
Aja added that the devaluation of the naira significantly increased Nigeria’s power sector liabilities, while the government only adjusted electricity tariffs for Band A consumers.
“In summary, Nigeria devalued its currency and thus could not cover the cost of gas priced in USD, resulting in soaring power liabilities. Also, only Band A tariffs were raised. As a consequence, the World Bank withdrew the loan, citing that progress remains “moderately unsatisfactory,” he stated.
