The World Bank has approved a $750 million International Development Association (IDA) credit for Nigeria to address the perennial epileptic power supply in the country.
The intervention is part of the bank’s Power Sector Recovery Operation (PSRO).
A statement from the Washington-based multilateral institution said the fund would help improve the reliability of electricity supply, achieve financial and fiscal sustainability, and enhance accountability in the power sector in Nigeria.
According to the World Bank Country Director for Nigeria, Shubham Chaudhuri, 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,” he added.
The bank noted that about 47 per cent of Nigerians do not have access to grid electricity and those who do, face regular power cuts.
In addition, the economic cost of power shortages in Nigeria is estimated at around $28 billion – equivalent to two per cent of its Gross Domestic Product (GDP).
The bank added that 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 PSRO provides results-based financing to support the implementation of the government’s Power Sector Recovery Programme (PSRP),” it stated.
The PSRP is a comprehensive programme to restore the power sector’s financial viability, improve service delivery and reduce its fiscal burden.
According to the bank, 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, it noted, would enable the turnaround of 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,” it added.
The World Bank’s IDA, established in 1960, helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programmes that boost economic growth, reduce poverty and improve poor people’s lives.
IDA is one of the largest sources of assistance for the world’s 76 poorest countries, 39 of which are in Africa.