Unreliable electricity supply is costing Nigerian businesses an estimated three per cent of their annual sales, forcing many firms to spend heavily on generators and alternative power sources, according to the African Development Bank (AfDB).
The finding is contained in the AfDB’s African Economic Outlook 2026 report, which highlights the significant economic burden imposed by Nigeria’s persistent power shortages.
According to the report, the financial impact goes beyond lost production and sales. Businesses are increasingly forced to provide their own electricity and other essential services that would ordinarily be supplied through public infrastructure, driving up operating costs and reducing profitability.
The report revealed that 70.7 per cent of Nigerian businesses either own or share generators, underscoring the extent of dependence on self-generated electricity.
Nigeria recorded one of the highest rates of generator usage among countries surveyed by the AfDB, surpassing South Africa, where 63.3 per cent of firms rely on generators, and Tanzania, where the figure stands at 38.7 per cent.
The bank noted that electricity outages result in losses equivalent to three per cent of annual sales for Nigerian firms. While this is lower than the 10 per cent losses recorded in Mali and Chad, it remains a significant drain on business performance and competitiveness.
“Electricity outage losses amount to 3 per cent of annual sales in Nigeria and 10 per cent in Mali and Chad. Because of this, generator reliance is widespread, with 70.7 per cent of firms in Nigeria, 63.3 per cent in South Africa, and 38.7 per cent in Tanzania owning or sharing generators,” the report stated.
The AfDB described the additional costs incurred by businesses to secure essential services as “parallel levies” that effectively function as hidden taxes on economic activity.
Beyond electricity, many firms spend substantial resources on private security, water supply, logistics, and other services due to gaps in public infrastructure and service delivery.
According to the report, these expenses reduce disposable income, erode business profits, and limit the capacity of firms to invest, expand operations, and create jobs.
“The widespread private provision of essential services reflects persistent gaps in public infrastructure and service delivery,” the report noted.
The bank warned that these costs weaken productivity and discourage formal economic activity, making it harder for businesses to thrive.
