The World Bank has approved the sum of $750 million as a loan to Nigeria’s power sector after years of negotiations over long term reforms in the sector.
The loan which was approved by the board of directors of the Bretton wood Institution, was for Power Sector Recovery Operation (PSRO) to improve the reliability of electricity supply, achieve financial and fiscal sustainability, and enhance accountability in the power sector in Nigeria.
This was disclosed in a press release by the World Bank on Tuesday, June 23, 2020.
In the statement, the World Bank noted that about 47% 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 $28 billion which is equivalent to 2% of the country’s Gross Domestic Product (GDP).
According to the ease of doing business report 2020, lack of power has been one of the major challenges facing the private sector. 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 World Bank Country Director for Nigeria, Shubham Chaudhuri said, “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. 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 amidst the COVID-19 pandemic.”
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 and 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.