West Africa's Utility Crisis: World Bank Urges Deep Reforms, Not Just Refinancing

The World Bank report reveals deep financial distress among West African power utilities, driven by poor cost recovery, mounting liabilities, and weak governance. It emphasizes that balance sheet restructuring alone is insufficient without broader reforms in tariffs, collections, and sector regulation.

A new World Bank report, produced with technical input from energy consultancy Kuungana Advisory and supported by the Energy Sector Management Assistance Program (ESMAP), presents a sobering diagnosis of West Africa’s power utilities. The report, led by David Loew of the World Bank and co-authored by Stephen Nash and Tim Boyd of Kuungana Advisory, is part of a broader initiative to improve utility performance across the region. Drawing on the World Bank’s UPBEAT database, the study reveals that only six out of twenty-five utilities in West Africa are able to cover their operating and debt service costs even when subsidies are factored in. Without subsidies, just three remain financially sustainable. This failure to recover basic costs has created a downward spiral of underinvestment, service degradation, and eroding public confidence in the sector.

A Vicious Cycle of Financial Dysfunction

The financial distress documented in the report is not just widespread, but deeply systemic. Most West African utilities operate with chronically low cost recovery, driven by a toxic combination of high operational expenses, inefficient fuel use, poorly set tariffs, and rampant non-payment. Public-sector institutions, ironically among the largest consumers, are also some of the worst offenders when it comes to paying their electricity bills. The data paints a dire picture: over 70 percent of utilities have outstanding payables to suppliers exceeding six months, and most hold receivables equivalent to more than six months of their annual revenue. Delaying payments becomes a default liquidity strategy, often directed at state-owned generators, which may tolerate the delays but only up to a point. Short-term debt then fills the gap, but at high costs and poor terms, deepening financial fragility. In extreme cases, such as seven utilities that now report negative equity, liabilities outweigh assets, rendering them technically insolvent.

Balance Sheet Surgery Without Systemic Reform Won’t Work

Although the report explores various methods for cleaning up utility balance sheets, refinancing debt, restructuring payables, offsetting mutual debts between sector entities, or converting debt into equity, it is unequivocal in its conclusion: none of these tools are silver bullets. Cosmetic improvements in financial ratios do not equate to long-term sustainability. Without fixing the fundamental problems, namely low tariffs, inefficient operations, high technical and commercial losses, and poor collections, the benefits of restructuring will be fleeting. Many utilities that underwent restructuring later saw their liabilities reaccumulate because the structural dysfunction remained unaddressed. Reforms must therefore tackle both the ‘stock’ of liabilities and the ‘flow’ problems that caused them. A sound enabling environment, transparent regulation, cost-reflective pricing, good governance, and reliable subsidy mechanisms are essential to give financial restructuring any lasting impact.

Real-World Lessons from Côte d’Ivoire, Albania, and Jordan

Three compelling case studies included in the report provide real-world context for these insights. In Côte d’Ivoire, the government-backed utility CI-ENERGIES struggled with poor collections from the public sector and regional power exports. With payables piling up and short-term debt increasing, the World Bank intervened with a guarantee that helped secure €300 million in commercial financing. This allowed CI-ENERGIES to clear arrears and pay suppliers, but the gains were short-lived. A resurgence of collection issues exacerbated by the COVID-19 pandemic and a coup in neighboring Mali led to a renewed build-up of receivables and payables. In Albania, where hydropower dominates generation, fluctuating water availability forced the utility OSHEE to depend on high-cost imports and incur significant debts. A refinancing deal with the European Bank for Reconstruction and Development helped the state generator KESH consolidate short-term loans into a long-term package, while OSHEE signed a 28-year payables agreement. This improved liquidity temporarily, but the pandemic again disrupted collections and investment plans. Meanwhile, Jordan’s NEPCO faced massive liabilities due to disruptions in gas supplies during the Arab Spring, leading to heavy use of expensive heavy fuel oil. The government implemented a comprehensive debt management plan, including tariff reforms and cross-debt cancellations with the Ministry of Finance. While some debt was successfully refinanced and offset, the legacy of state underpayment for electricity continues to haunt NEPCO’s balance sheet.

A Blueprint for Sustainable Utility Reform

The World Bank’s report does not just diagnose the problem, it offers a pragmatic roadmap for reform. It emphasizes three urgent, no-regret actions that governments and utilities can take: clean up intra-sectoral arrears to improve transparency and payment discipline; build stronger financial planning tools and models within utilities; and ensure regular publication of audited financial statements to foster investor confidence. These foundational steps can support more ambitious reforms, including tariff adjustments, performance-based governance, and least-cost investment planning. Concessional finance, particularly when used to catalyze market-based funding, can play a powerful role in bridging short-term liquidity gaps while long-term reforms take hold. But such instruments must be deployed judiciously and linked to enforceable reform commitments. As the report cautions, financial engineering is only effective when embedded within a coherent policy and regulatory framework.

This latest intervention from the World Bank makes a compelling case that West Africa’s power sector woes are not just about money; they are about management, accountability, and policy coherence. Until utilities are equipped to collect what they bill, charge rates that reflect service costs, and operate free from political interference, no amount of balance sheet restructuring will put them on a sustainable path. The report is both a wake-up call and a guidebook, charting the complex but necessary path from financial triage to long-term resilience.