Power shortages are costing Nigerian businesses about 3 per cent of their annual sales, highlighting the persistent infrastructure constraints undermining productivity and competitiveness in Africa’s largest economy, according to the African Development Bank.
The estimate is contained in the bank’s African Economic Outlook 2026 report, which examined the impact of unreliable electricity supply on firms across the continent and found Nigeria among the most affected by power disruptions and high reliance on self-generation.
The report said frequent outages are forcing companies to depend heavily on generators, raising operating costs and reducing profit margins in both manufacturing and service sectors.
It revealed that 70.7 per cent of Nigerian firms own or share generators, one of the highest rates in Africa, underscoring the extent to which businesses have substituted public electricity supply with private power solutions.
According to the AfDB, electricity outages alone translate into losses equivalent to 3 per cent of annual sales for Nigerian firms, a burden that compounds broader structural inefficiencies in the power sector.
The report stated, “Electricity outage losses amount to 3 per cent of annual sales in Nigeria and because of this, generator reliance is widespread, with 70.7 per cent of firms in Nigeria owning or sharing generators.”
It added that the situation reflects a broader pattern across countries with weak power infrastructure, though the severity varies significantly by region.
In Mali and Chad, for example, firms reportedly lose as much as 10 per cent of annual sales due to electricity disruptions, the report noted.
Beyond direct revenue losses, the AfDB warned that unreliable electricity supply imposes what it described as “parallel levies” on businesses, as firms are forced to spend heavily on fuel, maintenance, and alternative service provision.
These additional costs, it said, function as hidden taxes that reduce disposable income, erode profitability, and discourage investment and expansion.
“The widespread private provision of essential services reflects persistent gaps in public infrastructure and service delivery,” the report stated.
The Bank also highlighted that businesses in Nigeria increasingly bear the cost of substituting other essential public services such as water supply, logistics, and security, further increasing the cost of doing business.
It warned that such structural inefficiencies undermine productivity and limit the resources available for job creation and long-term investment.
Despite these challenges, the AfDB noted that business conditions in Nigeria showed some improvement in 2025, supported by stronger consumer demand and increased commercial activity.
However, it stressed that sustaining economic momentum would require urgent improvements in electricity supply, transport infrastructure, and overall service delivery to reduce operational costs and improve competitiveness.
