‎Unstable Power Grid Drains Up to N10trn Annually from Nigeria’s Economy – CPPE
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‎Nigeria’s fragile electricity supply is costing the economy as much as N10 trillion every year, the Centre for the Promotion of Private Enterprise (CPPE) has warned, raising fresh concerns over the country’s structural exposure to energy-driven inflation.
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‎In its February inflation brief, the private sector advocacy group said unreliable electricity supply continues to impose heavy economic losses estimated at between N7 trillion and N10 trillion annually. It added that Nigerians spend over N3.7 trillion each year on generators, underscoring the scale of dependence on self-generated power.
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‎According to the CPPE, this structural reliance on petrol and diesel for electricity means energy price shocks are rapidly transmitted across the economy, driving up production costs, transportation expenses and overall price levels.
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‎The Centre’s Chief Executive Officer, Dr. Muda Yusuf, noted that ongoing tensions in the Middle East have compounded Nigeria’s vulnerability. He said the conflict has already pushed crude oil prices above $100 per barrel due to disruptions to energy infrastructure and heightened risks to global supply routes, including the Strait of Hormuz.
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‎“For Nigeria, the transmission channels are direct and profound,” Yusuf said. “Rising global oil prices are already feeding into higher petrol and diesel prices, increased transportation and logistics costs, rising production costs across sectors, renewed exchange rate pressures and escalating food prices driven by input and distribution costs.”
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‎He cautioned that the current disinflation trend could be reversed if external pressures persist, stressing that Nigeria’s exposure to energy-driven inflation is amplified by structural weaknesses within the domestic economy.
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‎Yusuf explained that the country’s heavy dependence on fossil-fuel-powered generators, resulting from unreliable grid supply, creates an immediate pass-through effect from global oil price increases to domestic inflation.
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‎Against this backdrop, the CPPE called for urgent and coordinated policy responses to cushion the impact of rising energy costs and preserve recent gains in moderating inflation.
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‎Top on its list of recommendations is the strengthening of domestic refining capacity through stable and reliable crude oil supply to local refineries, including the Dangote refinery, under supportive and predictable terms. The Centre said this would help moderate domestic fuel prices, reduce foreign exchange demand and enhance energy security.
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‎It also urged governments at all levels to scale up investment in efficient and affordable public transportation systems, describing transport costs as a major channel of inflation transmission. Easing commuting expenses, it argued, would provide immediate relief to households already grappling with rising living costs.
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‎The CPPE further advocated the removal of fiscal barriers to renewable energy adoption. Waivers on import duties and taxes on solar panels, inverters and batteries, it said, would accelerate the transition to alternative energy sources and reduce reliance on expensive fossil-fuel-based self-generation.
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‎In addition, the Centre called for the suspension of maritime charges to mitigate rising shipping costs amid sharp increases in global marine insurance premiums.
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‎More fundamentally, the think tank stressed that improving electricity supply remains the most effective long-term solution to Nigeria’s energy cost crisis. Strengthening generation, transmission and distribution infrastructure, alongside support for decentralised energy solutions, would significantly lower production costs and ease inflationary pressures.
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‎As a short-term relief measure, Yusuf suggested the adoption of flexible and remote work arrangements where feasible, to reduce commuting costs and cushion the welfare impact of higher fuel prices.
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‎He also urged monetary and fiscal authorities to exercise caution in the face of mounting external shocks. “The resurgence in monthly inflation and the emergence of external shocks suggest that premature policy easing would be risky,” he said.
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‎According to Yusuf, any oil revenue windfalls should be prudently managed, with a focus on strengthening foreign exchange reserves and supporting productive sectors of the economy.
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‎The CPPE’s position reinforces longstanding concerns that without decisive reforms in the power sector, Nigeria’s grid instability will continue to undermine economic competitiveness, fuel inflation and erode household welfare.