NEWS
AfDB Report Exposes Nigeria’s Deepening Power Crisis as 70.7% of Businesses Depend on Generators Amid Heavy Financial Losses
The African Development Bank has revealed that 70.7 per cent of firms in Nigeria own or share generators due to persistent electricity shortages, with power outages costing businesses about three per cent of their annual sales.
The bank disclosed this in its 2026 African Economic Outlook report, which assessed Africa’s fiscal policy and tax systems while raising concerns over the growing burden weak public service delivery places on businesses and households across the continent.
According to the report, unreliable electricity supply in Nigeria has forced thousands of companies to rely on alternative power sources to keep operations running, a situation the AfDB described as a major obstacle to economic growth, productivity, and profitability.
“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 AfDB explained that the widespread dependence on generators reflects deeper infrastructure and governance failures that continue to weaken investor confidence and impose hidden costs on businesses already struggling under difficult economic conditions.
The report further stated that across Africa, households and businesses are increasingly forced to privately fund services that governments are expected to provide, including electricity, water supply, security, sanitation, and logistics support.
The bank described these rising private expenses as “parallel levies” that significantly reduce household disposable income while increasing the operational costs of businesses.
“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 AfDB stated.
The report noted that many Nigerian businesses had turned to self-generated electricity because of the country’s unreliable power infrastructure, warning that the trend continued to widen informality within the economy while discouraging voluntary tax compliance.
According to the AfDB, improving access to reliable electricity, healthcare, education, sanitation, water supply, and public administrative services would not only improve living standards but also restore public trust in governance and strengthen revenue generation efforts.
“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.
The bank also warned that Africa’s broader fiscal challenges remain severe despite growing pressure from rising debt servicing obligations, declining external financing, and increasing development spending needs.
According to the report, nearly $469bn in potential revenue remains untapped across Africa because of poor tax compliance, weak revenue administration systems, and ineffective policy implementation.
The AfDB further disclosed that inefficiencies in public investment spending continue to drain huge financial resources across the continent.
“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.
The bank added that Africa could unlock as much as $1.43tn in additional annual financing if governments effectively address inefficiencies in revenue mobilisation and public resource utilisation.
Speaking in the report’s foreword, President of the African Development Bank Group, Dr. Sidi Tah, stressed the urgent need for sustained economic growth across the continent to tackle poverty and unemployment.
“Africa must raise annual growth to 7 per cent or higher, sustained over decades, to enable large-scale job creation and accelerated poverty reduction,” President of the African Development Bank Group, Dr Sidi Tah, said in the report’s foreword.
The report also highlighted Africa’s heavy dependence on indirect taxes, including Value Added Tax, excise duties, and customs taxes, which accounted for 59.9 per cent of total tax revenue in 2023.
The AfDB noted that Nigeria, alongside other resource-rich African economies, continued to rely heavily on corporate income tax connected to extractive industries, reflecting the uneven and fragile structure of direct taxation systems across the continent.