The African Development Bank has disclosed that 70.7 per cent of businesses in Nigeria either own or share electricity generators as they grapple with chronic power shortages, with outages reducing annual sales by an estimated three per cent.
The revelation was contained in the bank’s 2026 African Economic Outlook report, which examined fiscal policy and taxation systems across the continent.
The report noted that inadequate public service delivery continues to place significant hidden costs on households and businesses, undermining productivity and economic growth across Africa.
“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 stated that the heavy reliance on generators highlights longstanding infrastructure deficiencies and governance challenges, which continue to hamper productivity, reduce business profitability, and weaken public confidence in tax systems.
According to the report, households and businesses across Africa are increasingly forced to privately fund essential services that governments are ordinarily expected to provide, including electricity, water supply, security, and logistics.
The AfDB described these additional expenses as “parallel levies,” noting that they diminish household disposable income while significantly increasing operational costs 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 the persistent unreliability of Nigeria’s electricity supply has compelled many businesses to depend on self-generated power, a development it said has contributed to the expansion of the informal economy and weakened voluntary tax compliance.
According to the AfDB, improving the delivery of critical public services such as electricity, healthcare, education, water supply, sanitation, and public administration would help build greater trust in government institutions and enhance tax revenue collection efforts.
“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 AfDB said Africa continues to face major revenue mobilisation challenges amid mounting fiscal pressures driven by rising debt-servicing obligations, declining external financing flows, and increasing demands for development spending.
According to the report, the continent is losing an estimated $469 billion in potential revenue due to weak tax compliance, inefficient tax administration, and poorly designed fiscal policies, leaving governments with limited resources to fund critical public services and infrastructure.
The bank further noted that more than 40 per cent of public investment expenditure across Africa is currently lost to inefficiencies, highlighting the need for stronger governance, improved public financial management, and more effective use of scarce resources.
“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.
The AfDB further stated that Africa could unlock as much as $1.43 trillion in additional financing annually by improving the way resources are mobilised and utilised, particularly through stronger tax systems, better public expenditure management, and reduced inefficiencies in the allocation of funds.
