Nigerian Manufacturers Spent ₦1.34tn on Alternative Power as Grid Supply Worsens

Nigeria’s manufacturers spent an estimated ₦1.34 trillion on alternative electricity sources in 2025 as unreliable grid supply forced factories to increasingly depend on self-generated power to keep production running.

The figure, contained in data from the Manufacturers Association of Nigeria (MAN), represents a 21 per cent increase from the ₦1.11 trillion spent in 2024.

The increase comes despite significant changes in electricity tariffs and broader economic reforms aimed at improving the country’s fiscal and energy systems. For manufacturers, however, higher electricity costs have not necessarily translated into more reliable supply.

Instead, businesses have continued to spend heavily on diesel, gas, premium motor spirit and other alternative sources to prevent power interruptions from shutting down production.

The scale of the expenditure raises a larger question for Nigeria’s industrial economy: how much longer can manufacturers continue to absorb the cost of generating the electricity they need to operate?

The Cost of Keeping Factories Running

MAN’s figures show how sharply the cost of alternative power has increased over the past decade.

Manufacturers spent about ₦25 billion on alternative power in 2014. The figure rose to ₦129.95 billion by 2016 and reached ₦144.5 billion in 2022.

The increase became much steeper from 2023, when spending climbed to ₦781.68 billion. It crossed the ₦1 trillion mark in 2024, reaching ₦1.11 trillion, before rising further to ₦1.34 trillion in 2025.

That means the cost of alternative electricity is no longer a marginal expense for the industrial sector. It has become a major component of the cost of doing business.

For factories that operate machinery for long hours, an interruption in electricity can mean more than inconvenience. Production lines can stop, raw materials can be damaged, orders can be delayed and workers can remain idle.

Manufacturers therefore have little choice but to maintain alternative power systems, even when doing so significantly increases operating expenses.

Grid Supply Is Becoming a Bigger Problem

The rising expenditure coincided with a deterioration in the amount of electricity manufacturers received from the national grid.

According to MAN, average daily power supply fell from 16.7 hours in the first half of 2025 to 13.1 hours in the second half.

That decline meant manufacturers had to bridge an even larger gap through their own power systems.

The problem is particularly significant because electricity is not an optional input for most industrial operations. Manufacturers of food and beverages, cement, steel, chemicals, pharmaceuticals, plastics and other products depend on consistent power to run equipment and maintain production schedules.

When grid electricity becomes less predictable, businesses are effectively forced to maintain two systems: one connected to the national electricity network and another capable of taking over whenever that network fails.

The result is a double cost.

Higher Power Costs Eventually Reach Consumers

The ₦1.34 trillion spent on alternative electricity does not exist in isolation from the prices Nigerians pay for goods.

When manufacturers spend more on energy, their overall production costs rise. Companies can respond by absorbing some of the additional expense through lower margins, increasing the prices of their products, reducing production or a combination of all three.

For consumers already dealing with high living costs, increased production expenses can add another layer of pressure.

A manufacturer producing everyday products such as food, beverages, household goods or building materials must recover the cost of energy somewhere in its business model.

This means Nigeria’s electricity problem is also a consumer-price problem.

The more expensive it becomes to produce locally, the harder it becomes for Nigerian-made products to compete on price, both within the domestic market and against imported alternatives.

Manufacturing Competitiveness Is Also at Risk

The energy burden is particularly concerning because Nigerian manufacturers are already dealing with several other cost pressures.

Businesses are contending with foreign exchange volatility, high financing costs, logistics expenses and weak consumer purchasing power.

Adding an increasingly expensive power bill makes it more difficult for companies to invest in new machinery, expand production capacity or create additional jobs.

MAN data cited in its assessment of the operating environment showed that manufacturing capacity utilisation declined from 61.3 per cent in the first half of 2025 to 57.7 per cent in the second half.

The decline matters because capacity utilisation provides an indication of how much of the available productive capacity factories are actually using.

When factories operate below their potential, the consequences extend beyond individual companies. Lower production can affect suppliers, transporters, distributors, workers and government revenue.

A manufacturing sector that cannot operate efficiently also has a harder time supporting the broader economic growth Nigeria needs.

Manufacturers Are Increasingly Becoming Their Own Power Providers

The scale of alternative-power spending has also encouraged manufacturers to move further towards self-generation.

Large industrial companies have increasingly invested in dedicated electricity systems using gas and other fuels rather than depending entirely on electricity distribution companies.

For some businesses, this may provide greater control over production. But it also highlights a deeper structural problem.

When companies begin building substantial private power infrastructure simply to guarantee basic production, part of the investment that could have gone into expanding their businesses is redirected towards electricity generation.

This is particularly problematic for smaller manufacturers that may not have the capital to build sophisticated captive power systems.

Large companies may be able to invest in dedicated generation, but smaller factories can struggle to absorb the same costs. The result could be a wider gap between large industrial players and smaller manufacturers.

The Bigger Question Is What ₦1.34tn Could Have Achieved

The most important part of the figure may not be the ₦1.34 trillion itself, but what that money could have supported if manufacturers did not have to spend so much of it keeping the lights on.

The money could potentially have gone towards new equipment, factory expansion, research and development, worker training, hiring, supply-chain investment or other productive activities.

Instead, a significant amount is being used to compensate for weaknesses in the electricity system.

That creates an opportunity-cost problem for the Nigerian economy.

Every naira that a manufacturer must redirect towards expensive self-generation is a naira that may not be available for expansion or productivity improvements.

The issue therefore goes beyond whether manufacturers can afford diesel or gas. It is about whether Nigeria’s industrial sector can become more productive while carrying such a heavy energy burden.

Reliable Power Must Become an Industrial Policy Priority

Reducing manufacturers’ dependence on alternative power will require more than simply increasing electricity tariffs or announcing new reforms.

What businesses ultimately need is reliable and predictable electricity.

That requires sustained investment across generation, transmission and distribution, alongside reforms that improve the financial and operational health of the power sector.

There is also a growing role for decentralised energy solutions, including gas-fired captive generation, solar, battery storage and other technologies that can provide more reliable electricity to industrial clusters.

However, alternative energy should complement a functioning electricity system rather than become a permanent substitute for it.

Nigeria cannot build a competitive manufacturing economy if factories must continually spend billions generating the electricity they need to survive.

The Cost of Power Is the Cost of Production

The ₦1.34 trillion manufacturers spent on alternative power in 2025 is a measure of more than energy expenditure. It is a measure of the economic cost of unreliable electricity.

As grid supply falls and self-generation becomes more expensive, manufacturers face higher production costs, weaker margins and greater pressure to reduce operations or pass costs to consumers.

The challenge for policymakers is therefore not simply to provide more electricity, but to provide electricity that businesses can depend on and afford.

For Nigeria to expand manufacturing, create industrial jobs and reduce its dependence on imported goods, reliable power cannot remain an unresolved business cost.

Until that changes, manufacturers will continue paying to keep their factories running and the wider economy will continue paying the price.

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