World Bank approves $75m loan to help finance Nigeria's problematic power sector

NIGERIA has received a lifeline in her quest to resolve the nagging problem of epileptic electricity supply after the World Bank approved a $750m International Development Association (IDA) credit for the country's Power Sector Recovery Operation (PSRO).

Currently the world's largest importer of small and medium sized generators, Nigeria has a chronic power supply shortage crisis as she only generates about 7,000MW of the 50,000MW she needs. Of this generated volumes, only 4,000MW are distributed to consumers due to problems with the transmission and distribution network.

Over the last 20 years, successive Nigerian governments have been grappling with the problem trying to find a solution to the crisis. Earlier today, the World Bank  said that the target was to also achieve financial and fiscal sustainability and enhance accountability in Nigeria’s power sector.

It explained that about 47% of Nigerians did not have access to grid electricity and those who had access, faced regular power cuts. According to the bank, the economic cost of power shortages in Nigeria is estimated at around $28bn, which is equivalent to 2% of the country's gross domestic product (GDP).

According to the World Bank,  getting access to electricity was one of the major constraints for the private sector. It added that improving power sector performance, particularly in the non-oil sectors of manufacturing and services, would  be central to unlocking economic growth post Covid-19.

Shubham Chaudhuri, the World Bank country director for Nigeria, said: “The lack of reliable power has stifled economic activity, private investment and job creation. This is ultimately what is needed to lift 100m Nigerians out of poverty.

“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 fiscal resources it can marshal to help protect lives and livelihoods amid the Covid-19 pandemic”.

He added that PSRO would provide results-based financing to support the implementation of the Government’s Power Sector Recovery Programme. Furthermore, Mr Chaudhuri explained that PSRP was a comprehensive programme 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 a turnaround in 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 4,500MW per 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,” Mr Chaudhuri added.