By Sola Adebawo
A factory should convert capital into goods, jobs and productive growth. In Nigeria, too much of that capital must first be spent creating the basic conditions under which production is possible.
In 2025, Nigerian manufacturers reportedly spent ₦1.34 trillion on alternative electricity sources, including diesel, gas and other self-generation systems. According to recently published reports citing the Manufacturers Association of Nigeria, the expenditure was 21 per cent higher than the ₦1.11 trillion recorded in 2024.
The figure represents capital spent on industrial survival instead of new production lines, modern machinery, research, worker training, exports and jobs.
The same MAN assessment shows that average daily grid supply to manufacturers fell from 16.7 hours in the first half of 2025 to 13.1 hours in the second. Manufacturing capacity utilisation also declined from 61.3 per cent to 57.7 per cent. Expensive credit, exchange-rate exposure, logistics constraints and weak demand also contributed, but the alternative-energy expenditure shows that unreliable power has become central to industrial competitiveness.
This is Nigeria’s infrastructure survival tax. It is not listed separately on a packet of noodles, a bottle of medicine or a bag of cement. Yet consumers pay it every day.
How the cost reaches consumers
Backup-power costs do not stop at the factory gate. Electricity is needed to process food, operate machinery, refrigerate products, pump water and package goods. When grid supply fails, production stops, materials may be damaged, workers and machines remain idle, and generators must be fuelled.
The widespread use of independent generators also produces emissions, noise and local air pollution that a more efficient electricity system could reduce.
Manufacturers must accept lower margins, raise prices, reduce output or close operations. Weak purchasing power limits what they can pass to consumers, so businesses also absorb the burden through shrinking margins and production.
Unreliable electricity is only one inflation driver, but it is a persistent supply-side pressure. Monetary policy can restrain demand and second-round price increases, but it cannot remove the production bottleneck. High interest rates may deepen it by raising the cost of financing both production and backup power.
When factories operate below capacity, fewer goods reach the market, fixed costs are spread across fewer units, shifts are reduced, job creation slows and existing employment comes under pressure. Imports become more attractive, exposing consumers to exchange-rate movements. Nigeria pays twice: through expensive local production and through importing what its factories cannot competitively supply.
The cash-flow failure behind the darkness
Nigeria’s power crisis is not simply a shortage of generating plants. The deeper problem is that electricity, gas and money do not move reliably through the value chain.
The Nigerian Electricity Regulatory Commission’s fourth-quarter 2025 report shows that DisCos billed ₦795.06 billion and collected ₦630.93 billion, leaving approximately ₦164.13 billion uncollected within the reporting period. Aggregate collection efficiency was 79.36 per cent.
Metering gaps, estimated billing, theft, network losses, inadequate supply, unpaid accounts and weak payment discipline all contribute. Blaming DisCos alone would be too convenient. They remitted about 93 per cent of their adjusted generation invoice that quarter. The crisis also reflects historically inadequate tariffs, unfunded subsidies, legacy obligations and weak contracts.
Without adequate revenue, GenCos struggle to pay gas suppliers, maintain turbines and finance operations. Pipelines, vandalism, equipment availability, gas pricing and transmission also constrain generation, but payment insecurity remains a major obstacle.
By February 2026, gas-fired plants were receiving only 692 million standard cubic feet of gas daily, about 43 per cent of the 1.63 billion required. National generation fell to around 4,300 megawatts, while accumulated sector debt was estimated at approximately ₦6 trillion. At one point in March, NISO data showed that 16 of 33 grid-connected plants were not generating. The operating plants produced about 3,705 megawatts. This was a system snapshot, not a permanent classification, but it illustrated the severity of the crisis.
A vicious circle follows. Inadequate collections and unfunded obligations weaken payments. GenCos cannot fully pay suppliers or maintain assets. Generation falls, DisCos receive less electricityfinder electricity, and payment compliance and willingness to pay deteriorate as service becomes less reliable. Creditworthy industries adopt private alternatives, putting the grid at risk of losing its strongest customers.
Stopping the cycle
The Federal Government has responded through tariff reforms, the Electricity Act 2023, the approved ₦4 trillion legacy-debt refinancing programme and arrangements for gas-supply debts. These interventions are necessary, but restructuring old debts will provide only temporary relief if new ones keep accumulating.
Verified legacy debts should be settled transparently, while new arrears are prevented. Any subsidy retained for vulnerable consumers should be explicitly appropriated and paid on schedule. An unfunded subsidy is merely a debt transferred to another participant in the electricity chain.
Metering must also be treated as financial infrastructure. Better metering, lower losses, improved collections and enforcement against electricity theft are as important as building additional generation capacity.
Industrial clusters need enforceable power arrangements. Embedded generation, eligible-customer contracts, state markets and gas, solar and battery projects can improve supply. State governments empowered by the Electricity Act must convert regulatory authority into bankable projects backed by credible contracts, payment security and predictable regulation.
Existing payment-allocation and cash-waterfall arrangements should be strengthened, made more transparent and designed to protect critical obligations, including gas supply and essential plant maintenance.
Finally, Nigeria needs financially sustainable tariffs, but sustainability cannot come from higher charges alone. It also requires lower losses, improved collections, funded subsidies and measurable service. Asking manufacturers to pay more while maintaining costly backup systems formalises the double burden.
Nigeria cannot industrialise through endurance. An economy in which productive enterprises must recreate essential infrastructure will remain expensive and uncompetitive.
The ₦1.34 trillion power bill is more than evidence of manufacturing resilience. It is a warning. Industrial survival is not industrial development. Until dependable electricity becomes an ordinary service rather than a private achievement, factories will keep paying to produce power before they can produce goods, and Nigerians will keep paying for that failure in the price of almost everything they buy.
Sola Adebawo is an energy industry executive and strategic advisor with nearly three decades of experience across Africa’s oil and gas sector. He is the Chief Executive Officer of Hyphen Partners Limited, a specialist advisory firm focused on policy and regulatory intelligence, strategic communications, market entry, stakeholder strategy, and institutional and executive positioning in complex and highly regulated industries. His writing explores reform, political economy, leadership, the relationship between institutions and public life, and the institutional forces shaping Africa’s development. He is an author, scholar and ordained minister.
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