Nigeria’s ongoing power challenges are costing the economy approximately $26 billion each year, as reported by the Africa Trade Barometer from Standard Bank.
The report highlights that businesses in the country spend about $22 billion annually on off-grid fuel to mitigate the effects of unreliable electricity, further increasing operational costs.
It states: “In Nigeria, businesses face a national grid that frequently fails to meet daily peak demand, which is nearly four times its generation capacity. Economic losses due to electricity shortages are estimated at $26 billion annually, not including the additional $22 billion spent on off-grid fuel.”
Electricity supply was identified as a major barrier to business operations in Nigeria and across other African markets.
The report outlines the repercussions of power outages, noting that blackouts disrupt production, compromise the quality of temperature-sensitive goods, affect water supply, and impact telecommunications infrastructure critical for payment systems. These disruptions lead to decreased sales and revenue for businesses.
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“Among the 10 African markets surveyed, power supply infrastructure is reported as the most significant obstacle to business operations. It is one of the most poorly perceived infrastructural elements and presents a major challenge to business functioning.
“Blackouts result in production downtime, jeopardize the quality of goods requiring controlled environments, disrupt water supplies, and impact telecommunications systems relied upon for payments. This ultimately results in reduced sales and income,” the report added.
To tackle these issues, the report stresses the importance of diversifying the energy mix to lessen reliance on the national grid. It also calls for policy interventions to stabilize electricity generation and attract investments in renewable energy solutions.
Key Points to Understand
The Association of Power Generating Companies (APGC) has reported that the national electricity grid in Nigeria has failed 162 times over the past 11 years.
Just recently, on October 19, 2024, the grid crashed for the eighth time this year, with the first collapse happening on February 4.
After the government stopped giving electricity subsidies to certain high-usage customers, Minister of Power Adebayo Adelabu announced that this change saved the government about N1.4 trillion each year. However, the electricity sector still has many problems. There’s not enough investment, the equipment is outdated, and companies responsible for distributing electricity (known as DisCos) are struggling financially. Because of this, they cannot keep up with the increasing demand for power, upgrade their systems, improve how they measure electricity usage, or reduce power losses. These challenges make it hard for consumers to receive the reliable service they expect.
The current government, led by President Tinubu, is working on a reform plan to tackle these issues. Minister Adelabu emphasized that the government plans to completely remove subsidies and adjust electricity prices so that they are closer to the actual costs of producing and delivering power.
As part of the reform strategy, the government is also looking to attract private investments to strengthen the electricity sector and improve services.
In addition, Nigeria has obtained around $1.25 billion in loans from organizations like the World Bank and the African Development Bank (AfDB) to enhance electricity supply. For example, on December 14, 2023, the World Bank approved a $750 million project aimed at expanding access to renewable energy in Nigeria. More recently, on July 31, 2024, the AfDB provided an additional loan of $500 million to help improve the country’s electricity infrastructure and increase access to cleaner energy sources.
Overall, despite securing nearly $2 billion in loans from international organizations, the power sector in Nigeria is still facing significant challenges, and citizens continue to experience inadequate electricity supply.
