Nigerian businesses are losing an estimated three per cent of their annual sales to power outages, compelling firms to spend heavily on alternative energy sources, according to the African Development Bank's (AfDB) African Economic Outlook 2026 report. This highlights the economic toll of the country's infrastructure gap.
The report identified unreliable electricity supply as a significant constraint on business profitability, pushing companies towards dependence on self-generated power. The financial burden extends beyond lost production, as businesses are forced to invest in generators and other privately-sourced services that would have been delivered through public systems.
High Generator Dependence
The report revealed that 70.7 per cent of Nigerian firms own or share generators, capturing the scale of the private-sector response to chronic electricity shortfalls. Nigeria ranks among the highest for generator dependence, ahead of South Africa, where 63.3 per cent of firms own or share generators, and Tanzania, where the proportion is 38.7 per cent.
The bank placed Nigeria's electricity losses at the equivalent of three per cent of yearly sales, while businesses in Mali and Chad face steeper losses, as much as 10 per cent of annual sales, from power disruptions.
Parallel Levies on Incomes and Profits
“These costs act as parallel levies on incomes and profits that reduce disposable income, erode firm profitability, and encourage informality,” the report stated. “Enterprise surveys highlight the scale of these burdens: electricity outage losses amount to three per cent of annual sales in Nigeria and 10 per cent in Mali and Chad, and 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 added that widespread generator dependence reflects the failure of existing public infrastructure to meet business energy demand, with consequences for operating costs and competitive capacity.
Hidden Tax on Economic Activity
The AfDB characterized the additional expenses businesses and households bear to secure essential services as “parallel levies”, costs that compress disposable income and eat into profitability. Beyond electricity, firms are increasingly spending on private water supply, security, logistics, and services routinely provided by the state in more developed economies.
These outlays function in effect as a hidden tax on economic activity, raising the cost of doing business and deepening the pull toward informality. “The widespread private provision of essential services reflects persistent gaps in public infrastructure and service delivery,” the bank stated.
