Power Crisis Forces 70% Of Nigerian Firms To Run On Generators, AfDB Reports
Nearly seven in every ten businesses operating in Nigeria own or share private generators to stay afloat amid chronic electricity shortages, with power outages eroding about three per cent of their annual sales, according to fresh findings from the African Development Bank.
The disclosure, contained in the AfDB’s 2026 African Economic Outlook report, paints a sobering picture of how decades of unreliable public power supply have forced Nigerian enterprises into a costly parallel energy economy, weakening productivity, shrinking profit margins, and quietly draining billions from the formal sector.
“Electricity outage losses amount to three 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,” the report stated.
The bank framed the trend as a symptom of deeper infrastructural and governance failures, warning that the heavy dependence on self generated power is undermining business confidence, depressing tax compliance, and corroding the broader social contract between citizens and the state.
Across Africa, the AfDB observed, households and firms now routinely pay privately for services that ought to be publicly delivered, including electricity, water, security, and logistics. The bank labelled these payments “parallel levies,” noting that they erode disposable income and inflate operating costs for businesses already squeezed by inflation, currency depreciation, and high lending rates.
“Higher domestic resource mobilisation without corresponding improvements in public service delivery imposes large implicit tax burdens on households and firms, which undermines the legitimacy and effectiveness of taxation and leads to a breakdown in the social contract,” the report stated.
The findings arrive at a delicate moment for Nigeria’s electricity sector. Despite the unbundling of the Power Holding Company of Nigeria over a decade ago and successive reform efforts, the national grid has continued to suffer repeated collapses, while distribution companies remain entangled in disputes over metering, tariff hikes, and unpaid subsidies.
Beyond the power crisis, the AfDB flagged Africa’s broader fiscal vulnerabilities, citing rising debt servicing costs, shrinking external financing, and widening development spending gaps. The bank estimates that nearly $469bn in potential revenue remains untapped across the continent due to weak tax compliance, poor administration, and ineffective policy design.
It further disclosed that more than 40 per cent of public investment spending in Africa is currently lost to inefficiencies. “More than 40 per cent of public investment is currently lost to inefficiencies, and closing this gap could generate up to $299bn each year for growth enhancing investments,” the report stated.
Cumulatively, the bank projects that Africa could unlock as much as $1.43tn in additional annual financing by tackling inefficiencies in both revenue mobilisation and public expenditure.
The report also drew attention to the continent’s heavy reliance on indirect taxation. Value Added Tax, excise duties, and customs levies accounted for 59.9 per cent of total tax revenue across Africa in 2023, a structure widely considered regressive because it disproportionately burdens low income earners. Nigeria, alongside other resource rich economies, was singled out for its dependence on corporate income tax tied to the extractive sector, reflecting the lopsided architecture of direct taxation on the continent.
The President of the African Development Bank Group, Dr Sidi Tah, in his foreword to the report, stressed that Africa must sustain annual economic growth of at least seven per cent over several decades to make meaningful progress on jobs and poverty.
“Africa must raise annual growth to 7 per cent or higher, sustained over decades, to enable large scale job creation and accelerated poverty reduction,” Tah stated.
The AfDB concluded that improved delivery of electricity, healthcare, education, water, sanitation, and administrative services would not only ease the burden on households and firms, but also rebuild public trust and strengthen voluntary tax compliance.
“By reducing the need for households and firms to self provide these services, strengthening performance in these priority areas can enhance taxpayer trust, improve voluntary compliance, broaden the formal tax base, and reinforce the fiscal social contract,” the report stated.