Africa’s economic outlook is sharpening with renewed confidence, as fresh projections point to a continent firmly on the rise. Growth is expected to reach 4.3% in 2026—outpacing many advanced economies—while East Africa is set to record an even stronger 5.8%. Foreign investment is edging back, capital markets are deepening, and a new wave of African entrepreneurs is building companies that few would have imagined two decades ago.
Nigeria remains one of the standout stories, having emerged as a key technology hub with four homegrown unicorns, including Flutterwave and Moniepoint. These firms now process billions of dollars in digital transactions and serve millions of users, reinforcing Lagos, Abuja, Nairobi and Cape Town as anchors of Africa’s rapidly expanding digital economy.
But the continent’s digital surge is placing unprecedented pressure on its power systems. The proliferation of data centres—essential for cloud computing, fintech and digital services—is sharpening the demand for stable electricity. As more African countries enforce data localisation policies and companies shift to domestic hosting, the strain on already fragile grids is intensifying. As Iyinoluwa Aboyeji, co-founder of Andela and Flutterwave, warns, reliable electricity is “a critical enabler” of business operations, underpinning everything from payment systems to data processing.
Yet millions remain without access to power. Africa’s population is growing, cities are expanding, and the demand for housing and industry is rising—all of which depend on electricity.
A Grid Under Severe Stress
Nigeria’s national grid remains emblematic of the challenges. In January 2026, the grid suffered two collapses within five days, at one point dropping to zero megawatts and affecting all eleven distribution zones. Gas shortages continue to undermine generation, with only about 43% of required gas reaching power plants by late February.
These problems carry an enormous economic cost. The World Bank estimates that outages drain roughly $29 billion annually—around 10% of Nigeria’s GDP. Increasingly, businesses are opting out of the national system entirely. In 2025, more than twenty firms disconnected from the grid, adding over 1,000MW of private off-grid power.
Financial pressure continues to choke the sector. Generation companies say they are owed more than ₦6 trillion in unpaid invoices, though a government audit puts the figure at ₦2.8 trillion. However calculated, the shortfall has created a chain reaction: consumers face non-cost-reflective tariffs, distribution companies struggle to remit payments, generation companies lack funds to pay gas suppliers, and gas deliveries continue to fall. With thermal plants providing over 70% of Nigeria’s electricity, the consequences are immediate.
These domestic pressures reflect a broader continental reality. Nearly 600 million people—43% of Sub-Saharan Africa—still lack electricity.
External Shocks Intensify the Crisis
Climate stress and global instability are compounding the problem. For three consecutive years, northern Nigeria has endured severe heatwaves, frequently surpassing 42°C. The World Bank warns that rising air-conditioning demand will further stretch fragile grids, undermining productivity and manufacturing output.
Global conflict has also rattled energy markets. The Israel–Iran confrontation pushed crude oil above $120 per barrel at points, while the temporary closure of the Strait of Hormuz disrupted nearly one-fifth of global oil shipments. Diesel prices in Nigeria have fluctuated between ₦1,000 and ₦1,620 per litre—painful in a country where diesel has become the de facto backup for businesses.
Grid instability pushes companies toward diesel; global oil volatility raises its cost; rising temperatures lift energy demand—all reinforcing each other in a difficult cycle.
Reform Efforts Gather Pace
Despite the challenges, meaningful reforms are underway. The tariff increase to ₦209/kWh for Band A customers has helped improve the commercial viability of the sector. Financial institutions such as United Capital Infrastructure Fund and Sterling Bank have supported investment in new infrastructure.
The 2023 Electricity Act, which decentralises power regulation and empowers states to develop their own electricity markets, represents a major shift. Lagos, Nigeria’s commercial centre, is already establishing its own electricity market, with the Lagos State Electricity Regulatory Commission set to guide private-sector participation and expand generation and distribution capacity. Officials say the goal is to improve reliability for both businesses and residents.
These policy moves signal a shift toward a model in which government creates the environment for investment, and private companies deploy capital and technical capacity.
Private Sector as a Strategic Partner
Companies such as Fenchurch are already building alternative power ecosystems—generation, distribution and gas supply infrastructure—independent of the troubled national grid. Under long-term contracts, firms finance, build and operate dedicated power systems for public institutions and private clients.
Projects such as the Ekiti Independent Power Plant demonstrate how localised generation and distribution can stabilise energy supply for hospitals, schools and government facilities. The 150MW offtake agreement signed with the Niger Delta Power Holding Company and Benin Electricity Distribution Company highlights growing collaboration across the value chain.
Reliable electricity, officials argue, allows states to manage budgets more effectively and protect critical services from market shocks.
A Continental Opportunity
Nigeria’s situation mirrors wider trends across Africa. Countries such as the Republic of Congo possess vast untapped energy resources but lack the infrastructure to deliver electricity to consumers. Congo has plans to double capacity to 1,500MW by 2030, despite exploiting less than 1% of its estimated 27,000MW hydropower potential.
Private investment is expected to play a larger role. Fenchurch says it is partnering with Aries Energies in Central Africa to pursue long-term energy projects rooted in a shared belief: that private infrastructure, anchored by clear regulation, is the fastest path to reliable power on the continent.
Across East, Southern and West Africa, transmission and distribution gaps remain some of the biggest obstacles. Policy reforms such as Nigeria’s Electricity Act are helping create clearer frameworks for decentralised solutions.
The Road Ahead
Africa’s long-term rise is not in doubt. Its population, innovation and investment momentum point toward sustained economic ascent. What remains uncertain is whether the continent can build the energy systems required to support that growth.
Persistent payment delays by government agencies, confrontations between electricity staff and consumers, and unresolved disputes—as seen in the recent Ikeja Electric controversy—continue to send troubling signals to investors. Long-term contracts must be honoured, analysts warn, if private capital is to continue flowing into the sector.
Three priorities stand out: stronger payment discipline, robust regulatory protection for operators and investors, and respect for long-term power purchase agreements as the financial foundation of viable power projects.
Investors are not asking for special favours, experts say—only predictable rules, enforceable contracts and a stable operating environment.
Africa’s future is bright. But its rise depends on light. The reforms are moving, the infrastructure is coming, and the opportunity is clear. What is needed now is sustained commitment to finish the job.
