Nigeria’s persistent energy crisis is placing increasing pressure on businesses and threatening the country’s ambition to become a major industrial economy, according to an editorial by The PUNCH.
Manufacturers in parts of Lagos and Ogun are reportedly paying more than N2,000 per litre for diesel, while petrol prices have risen above N1,400 per litre in many filling stations. For factories that depend on generators because of unreliable electricity supply, energy costs have become a major burden.
The Manufacturers Association of Nigeria (MAN) says production costs have increased by more than 400 per cent, while energy-related expenses have risen from about 40 per cent to more than 50 per cent of operating costs.
Manufacturers reportedly spent N782 billion on alternative energy in 2023, N1.1 trillion in 2024 and N1.34 trillion in 2025. Spending during the first half of 2026 was already said to be comparable to the entire amount spent in 2025.
Small and medium-sized businesses are also affected. The Association of Small Business Owners of Nigeria says energy costs can consume as much as 60 per cent of SME profits, compared with about 40 per cent previously.
According to the association’s president, Femi Egbesola, rising energy costs have contributed to higher prices, reduced profit margins, lower production, job losses and business closures.
The situation has created a cycle in which higher energy costs increase production expenses, forcing businesses to raise prices. Higher prices then reduce consumer demand, leading to lower production, shrinking profits and possible job losses.
Large companies are facing similar challenges. An analysis by The PUNCH of unaudited first-quarter 2026 accounts found that 24 listed companies spent N400.83 billion on diesel, gas and other alternative energy sources in just three months, compared with N386.67 billion during the same period a year earlier.
The World Bank has previously estimated that unreliable electricity costs Nigeria about $28 billion to $29 billion annually, equivalent to roughly eight per cent of the country’s GDP.
Nigeria’s electricity challenges have persisted despite the 2013 privatisation of the power generation and distribution sectors, which was expected to attract private investment, improve efficiency and reduce losses.
The International Monetary Fund has noted that the privatisation did not close the sector’s infrastructure financing gap or produce the expected improvement in electricity services. Distribution companies have struggled with investment, while technical and commercial losses have remained high.
The country’s power sector is also facing debts estimated at more than N4 trillion. Meanwhile, the World Bank has previously reported that only about 4,000MW to 4,500MW of Nigeria’s approximately 13,600MW installed generation capacity is effectively available, while as much as 50 per cent of electricity can be lost through transmission and distribution.
The editorial argues that Nigeria needs major investment in transmission infrastructure, greater use of industrial microgrids and embedded power generation, and increased development of gas-to-power projects.
It also recommends greater support for solar power, battery storage and other renewable energy systems, alongside affordable financing to help businesses reduce their dependence on diesel-powered generators.
The government is also urged to hold electricity distribution and generation companies accountable for their contractual obligations and enforce penalties where necessary.
According to the editorial, Nigeria’s ambition to build a $1 trillion economy will be difficult to achieve if manufacturers and businesses continue to spend a significant share of their resources simply keeping their operations powered.
The central challenge, it argues, is to develop a reliable electricity system capable of supporting industrialisation rather than forcing businesses to bear the cost of inadequate national infrastructure.
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