Nigeria’s manufacturing sector is facing a severe challenge due to the country’s unreliable power supply. Over 60% of manufacturing companies have been forced to disconnect from the national grid and rely on self-generated electricity, a move that has drastically increased production costs and made locally manufactured goods less competitive compared to imports.
The alarm was raised by the Minister of Power, Adebayo Adelabu, who highlighted the negative impact of Nigeria’s power crisis during the unveiling of the National Integrated Electricity Policy (NIEP) and the Integrated Resource Plan (IRP), documents aimed at transforming the nation’s power industry. The presentation was made in collaboration with the United Kingdom Nigeria Infrastructure Advisory Facility (UKNIAF).
In his address, Minister Adelabu explained that while many manufacturers are located in areas with access to electricity, the erratic nature of the power supply has forced companies to seek alternative power sources. He said, “Today, more than 60% of our manufacturing industry is completely off-grid. They engage in self-generation, not because they are in rural areas or semi-urban areas, but because the electricity supply is not reliable.”
The power challenges facing Nigerian manufacturers are profound. Sensitive production processes in many industries cannot tolerate even a brief interruption in electricity supply. Instead of risking losses due to power dips or outages, companies prefer to use self-generated electricity, often at a high cost. This shift to self-generation means that manufacturing businesses are relying on expensive diesel or petrol-powered generators, further driving up production costs.
According to the Minister, this trend is making Nigerian goods less competitive. “Our products or commodities being turned out from these factories can never be competitive,” Adelabu said. “The only way we can allow this to contribute to economic growth, industrialisation, and national development is to ensure that there is reliability in grid supply.”
The challenge facing the power sector is not new. Nigeria’s power supply has long been unreliable, and businesses have been grappling with the consequences for years. With many firms dependent on diesel or petrol generators, the rise in fuel prices has only worsened the situation, pushing the cost of production even higher.
The Manufacturers Association of Nigeria (MAN) has expressed concern over the ongoing power crisis, highlighting the significant financial burden it places on businesses. According to MAN, manufacturers in the country spend approximately 40% of their total production costs on generating energy. This is a huge drain on resources and makes local products more expensive than imported goods.
MAN’s President, Francis Meshioye, recently stated that the inadequate power supply has cost Nigeria’s economy N10 trillion annually, representing nearly 2% of the country’s Gross Domestic Product (GDP). The rising cost of energy has further compounded the issue, as electricity tariffs have surged by more than 250% in recent months.
“Manufacturers were hit hard last year with a drastic rise in electricity tariffs, with rates increasing by over 250 percent,” Meshioye said. “This surge in energy costs became one of the highest operating expenses for businesses in the sector in 2024.”
The high cost of energy is particularly damaging to manufacturers already facing other operational challenges, such as fluctuating exchange rates, inflation, and inadequate infrastructure. Many businesses are struggling to remain competitive in both local and international markets, and the power crisis is making it even harder to do so.
The policies aim to increase power generation capacity, improve grid reliability, and encourage investment in the energy sector. The government has projected that an investment of $32.8 billion will be required in the power sector between now and 2030 to achieve universal electricity access across the country. Of this amount, $17 billion is expected to come from the public sector, while $15.8 billion will be contributed by private investors.
“These policy documents are meant to drive the transformation of the power industry, and one of the key objectives is to bring back those manufacturing companies that left the grid,” Adelabu said. “This will reduce their production costs and enable Nigerian products to compete with imports, boosting local industrialisation and economic growth.”
The power crisis has had a ripple effect on other sectors of the economy. The agricultural sector, for instance, faces post-harvest losses due to poor electricity supply, and the healthcare sector is also affected, with hospitals relying on expensive generators to power critical medical equipment.
