ABUJA, Nigeria (VOICE OF NAIJA)- Persistent electricity shortages have forced more than seven in every 10 firms in Nigeria to rely on generators, with power disruptions costing businesses about three per cent of their annual sales, according to the African Development Bank.
The disclosure was contained in the bank’s 2026 African Economic Outlook report, which examined fiscal policy, taxation, and public service delivery across the continent.
“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 said the heavy dependence on generators highlights longstanding infrastructure and governance challenges that continue to reduce productivity, weaken profitability, and erode confidence in tax systems.
According to the report, households and businesses across Africa increasingly shoulder the cost of services that governments are expected to provide, including electricity, water, security, and logistics.
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The bank described such expenditures as “parallel levies,” noting that they diminish household disposable income and increase operational expenses for 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 unreliable electricity supply has pushed many Nigerian businesses to generate their own power, a trend it said contributes to rising informality and weaker voluntary tax compliance.
It added that improvements in electricity supply, healthcare, education, water, sanitation, and public administration would help rebuild public trust and enhance revenue collection.
“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 highlighted Africa’s broader revenue mobilisation challenges, saying the continent continues to face mounting fiscal pressures from rising debt-servicing obligations, declining external financing, and growing development needs.
According to the report, about $469bn in potential revenue remains uncollected across Africa due to poor tax compliance, weak administration, and ineffective policy frameworks.
The AfDB further estimated that more than 40 per cent of public investment spending on the continent is lost to inefficiencies.
“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.
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It added that Africa could unlock as much as $1.43tn in additional annual financing by improving how resources are mobilised and utilised.
In the report’s foreword, President of the African Development Bank Group, Dr. Sidi Tah, stressed the need for sustained economic growth to address 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,” he said.
The report also noted that indirect taxes such as Value Added Tax, excise duties, and customs levies accounted for 59.9 per cent of Africa’s total tax revenue in 2023.
It added that Nigeria and other resource-rich economies remain heavily dependent on corporate income tax from extractive industries, underscoring the uneven structure of direct taxation across the continent.