By Radarr Africa
Boluwatife Ogundana
For many Nigerian businesses, the cost of electricity does not end with the bill from their distribution company. When public power supply fails, business owners must find another way to keep their operations running, often by spending more on petrol, diesel, gas or alternative energy systems.
That extra expense can determine whether a business makes a profit, raises its prices or reduces its operating hours.
The problem came into focus again in October 2026, when electricity supply disruptions affected parts of Lagos, Abuja and other locations. On October 19, Ikeja Electric attributed reduced supply hours across its network to a shortfall in electricity allocated from the national grid. Abuja Electricity Distribution Company also reported outages linked to a technical fault.
The disruptions followed repeated complaints about declining supply, leaving households and businesses to contend with the consequences of an electricity system that continues to struggle with reliability.
For businesses, the impact extends beyond inconvenience. Unreliable electricity increases operating expenses, interrupts production and can force owners to spend money on backup power instead of expanding their operations.
The extra cost of keeping the lights on
Nigeria’s electricity problem has created a parallel expense for businesses that cannot operate without a reliable power source.
The African Development Bank’s African Economic Outlook 2026 reported that 70.7% of Nigerian firms own or share generators. It also estimated that electricity outages cost businesses about 3% of their annual sales.
The figures highlight the extent to which companies have had to make alternative arrangements for a service that should ordinarily support their operations.
For businesses that rely on generators, the cost includes fuel, servicing, repairs and the eventual replacement of equipment. Those using solar power face a different financial challenge: the upfront investment in panels, batteries, inverters and installation.
These expenses affect businesses differently. A large company may have the resources to invest in alternative energy, while a small retailer or workshop may struggle to finance even a modest backup system.
The result is that businesses are not only paying for electricity supplied through the grid. Many are also paying to compensate for the hours when that electricity is unavailable.
Small businesses face a difficult choice
For some businesses, an outage means temporarily stopping work. For others, it can threaten the products they sell.
Frozen-food traders, for example, need continuous refrigeration to preserve their stock. When electricity supply becomes unreliable, they risk losing products to spoilage unless they have a dependable backup source.
A report published by BusinessDay on October 22 highlighted the pressure on frozen-food traders in Lagos, some of whom have invested millions of naira in solar systems to protect their stock and reduce dependence on petrol-powered generators.
One trader cited in the report said the business had previously spent between ₦7,000 and ₦10,000 daily on generator fuel before investing about ₦2.2 million in solar power.
At the upper end of that daily fuel range, the expense could amount to approximately ₦300,000 over 30 days if the generator were used and fuelled at that rate every day. This is an illustration based on the reported daily spending, not a verified monthly bill.
The solar investment may reduce dependence on daily fuel purchases, but it requires substantial capital at the outset. For smaller operators without access to affordable financing, making that investment may not be realistic.
Businesses therefore face a difficult calculation: continue paying for generator fuel, risk losses during outages or raise money for an alternative power system.
Each option carries a cost.
Why businesses may pass the cost to customers
When electricity expenses rise, businesses must decide how to absorb them.
Some may accept lower profit margins to keep their prices competitive. Others may increase prices to cover the additional cost of operating generators or maintaining alternative power systems.
The effect can spread across different sectors. A restaurant may spend more to refrigerate food and operate kitchen equipment. A manufacturer may incur additional expenses to keep machinery running. A small service business may have to budget for fuel simply to serve customers during working hours.
However, higher electricity costs do not automatically mean every business will increase its prices. The decision depends on competition, demand, the size of the additional expense and whether customers can afford to pay more.
For businesses already operating on narrow margins, absorbing the cost can leave less money available for wages, inventory, maintenance and expansion.
This is one reason unreliable electricity is an economic issue as well as an infrastructure problem. Its effects can influence how much businesses charge, how many workers they employ and whether they can expand.
The problem goes beyond distribution companies
When customers experience outages, electricity distribution companies are often the first point of contact. However, the challenges affecting supply can originate at different stages of the electricity system.
Power generation companies produce electricity. Transmission infrastructure carries it across the network, while distribution companies deliver available power to customers.
A shortage of generation can reduce the electricity available for distribution. Transmission faults can also restrict how much power reaches particular locations, even when electricity is being generated elsewhere. Problems within a distribution network can create further interruptions.
The October 19 disruption illustrated this complexity. Ikeja Electric cited insufficient allocation from the national grid, while the national system operator reported multiple trips on the transmission network and said restoration measures had been completed.
These developments show why restoring grid stability and restoring electricity supply to the level households and businesses need are not necessarily the same thing.
Addressing the problem requires improvements across the electricity value chain, rather than treating every outage as the result of a single failure.
Nigeria also faces financial challenges within the sector, including obligations owed to power generation companies and gas suppliers. Such pressures can affect the ability of operators across the chain to sustain and improve service.
What needs to change?
Reliable electricity would reduce the need for businesses to maintain expensive alternatives simply to continue operating. But achieving that requires more than responding to individual outages.
Investment in generation, transmission and distribution infrastructure is important, alongside improvements in maintenance, fuel availability, sector financing and the management of electricity supply.
Clear communication also matters. When supply falls, consumers need timely information about the cause, the affected locations and expected restoration times. Businesses that depend on refrigeration, production equipment or other electricity-intensive operations need to plan around disruptions.
For small businesses, access to financing could also determine whether alternative energy systems are affordable. Solar power may help some operators reduce their reliance on generators, but the initial cost can put it beyond the reach of businesses with limited capital.
Such solutions can help individual businesses manage their exposure to unreliable supply. They cannot, on their own, replace the need for a dependable electricity system.
An expensive burden on doing business
Nigeria’s recent power disruptions have again highlighted the vulnerability of businesses to unreliable electricity. The impact is visible in the additional money companies spend on generators and alternative power, the risk of losing products during outages and the pressure on profit margins.
The African Development Bank’s estimate that power outages cost Nigerian businesses about 3% of annual sales offers a measure of the economic burden. Reports of small businesses investing millions of naira in solar systems show how that burden can translate into difficult financial decisions at the individual business level.
The experience is not identical for every company. Some can afford backup power, while others must reduce operations or accept the risk of losses. But the wider challenge remains the same: unreliable electricity makes it more expensive to run a business.
For Nigerian companies to grow sustainably, the country needs an electricity system that can supply power more consistently. Until that happens, many businesses will continue to spend valuable resources securing their own electricity—money that could otherwise support jobs, investment and expansion.
REFERENCES
- Nairametrics — October 19, 2026: Power outages hit parts of Lagos, Abuja as DisCos cite grid shortfall
- The Guardian — October 20, 2026: Nigerians decry declining power supply amid disruption to 29 plants
- BusinessDay — October 22, 2026: Power crisis, high petrol cost push frozen-food traders to solar
- The PUNCH — May 31, 2026: 70% of Nigerian firms depend on generators – AfDB
- The PUNCH — July 8, 2026: Nigeria’s costly blackouts
- Nigerian Electricity Regulatory Commission: Quarterly reports on Nigeria’s electricity supply industry
