The World Bank has endorsed a $750 million loan through the International Development Association for Nigeria’s Power Sector Recovery Operation to transform the country’s power supply.
The line of credit is the first release of funds from the multilateral to the country following years of stalled talks.
It said in a statement in Abuja on Wednesday that part of the aims of the facility was to achieve fiscal and financial sustainability while improving accountability in the power sector.
Nigeria’s tumbledown power industry has stifled the growth of Africa’s largest economy for years with the World Bank putting the economic cost of power shortages in the country at around $28 billion, equivalent to two per cent of its Gross Domestic Product.
Challenges facing the sector range from deteriorating infrastructure and escalating debts to low tariffs for electricity and a comatose government-owned grid that will collapse if all the country’s power generating companies run at full throttle.
The World Bank said the loan would reduce tariff shortfalls, shield the poor from price adjustments and boost power supplied to the grid in Nigeria, where 47 per cent of the citizenry lack access to grid electricity and those who have face frequent power outages.
Low tariffs imposed by government have compelled the Central Bank of Nigeria to spend billions of dollars in making up the difference owed by power distribution companies to firms generating electricity.
The statement quoted World Bank Country Director for Nigeria, Shubham Chauduri, as saying “lack of reliable power has stifled economic activity and private investment and job creation.”
“This 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 amid the COVID-19 pandemic.”
The World Bank stated that the credit was intended to help Nigeria depart from “highly regressive tariff shortfall financing.”
It noted that getting access to electricity was one of the major impediments to private sector development according to the Ease of Doing Business report.
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