A new report by the African Development Bank has revealed that a large share of businesses in Nigeria still rely heavily on generators to stay operational, a reflection of the country’s ongoing electricity challenges.
According to the bank’s 2026 African Economic Outlook, about 70.7 per cent of firms in Nigeria either own or share generators. The report also noted that power outages are costly, reducing business sales by roughly three per cent each year.
The AfDB explained that this dependence on self generated power highlights deeper structural issues affecting infrastructure and governance, which continue to weigh down productivity and reduce business confidence across the country.
It added that many households and businesses across Africa are increasingly forced to provide services for themselves, including electricity, water, security, and logistics, due to gaps in public service delivery.
These extra costs, described in the report as hidden or parallel charges, reduce disposable income for families and raise operating expenses for companies, creating pressure on both sides of the economy.
The bank warned that when governments collect more revenue without matching improvements in basic services, it weakens trust in the system and affects willingness to pay taxes. It said this imbalance can gradually damage the relationship between citizens and the state.
The report further observed that in Nigeria, unreliable electricity supply has pushed many firms into self generation, a trend that also encourages informality and limits voluntary tax compliance.
It stressed that improving essential services such as electricity, healthcare, education, water supply, sanitation, and public administration would help rebuild public trust and strengthen tax systems across the continent.
By reducing the need for private provision of basic services, the AfDB said governments could improve tax compliance, expand the formal economy, and strengthen fiscal stability.
Despite rising financial pressures across Africa, including debt servicing and reduced external funding, the bank noted that the continent still loses significant revenue due to inefficiencies in tax systems and public spending.
It estimated that about 469 billion dollars in potential revenue remains untapped annually due to weak compliance and policy challenges, while more than 40 per cent of public investment is lost through inefficiencies.
The report added that addressing these inefficiencies could unlock up to 299 billion dollars each year for development focused investments, with even greater potential gains if broader reforms are implemented.
Overall, it suggested that Africa could generate as much as 1.43 trillion dollars in additional annual financing by improving how resources are mobilised and managed.
The AfDB also emphasized that sustained economic growth of at least seven per cent over several decades would be necessary for the continent to create enough jobs and significantly reduce poverty.
It further highlighted that many African countries continue to rely heavily on indirect taxes such as value added tax, excise duties, and customs revenue, which made up nearly 60 per cent of total tax collections in 2023.
In Nigeria and other resource dependent economies, corporate taxes linked to the extractive sector remain a major source of revenue, reflecting the uneven structure of taxation systems across the continent.
