The African Development Bank has revealed that 70.7 per cent of firms in Nigeria own or share generators due to persistent electricity shortages, with power outages costing businesses about three per cent of their annual sales.
The bank disclosed this in its 2026 African Economic Outlook report, which, among other items, assessed Africa’s fiscal policy and tax systems. It warned that weak public service delivery continued to impose hidden financial burdens on households and businesses 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 widespread use of generators reflected deep infrastructure and governance challenges that were weakening productivity, eroding profitability, and undermining confidence in taxation systems.
According to the report, households and firms across Africa increasingly pay privately for services that governments are expected to provide, including electricity, water, security, and logistics.
The bank described these expenses as “parallel levies” that reduce disposable income and raise operating 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 many businesses in Nigeria had resorted to self-generated power because of unreliable electricity supply, adding that this trend continued to widen informality and reduce voluntary tax compliance.
The AfDB added that stronger delivery of electricity, healthcare, education, water supply, sanitation, and public administrative services could improve trust in government and strengthen tax 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 bank said Africa’s revenue mobilisation challenges remained significant despite increasing fiscal pressures caused by rising debt servicing costs, shrinking external financing, and growing development spending needs.
According to the report, nearly $469bn in potential revenue remains untapped across Africa due to weak tax compliance, poor administration, and ineffective policy design.
The AfDB also stated that more than 40 per cent of public investment spending across the continent was currently 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.
The bank further noted that Africa could unlock up to $1.43tn in additional annual financing by addressing inefficiencies in resource mobilisation and utilisation.
It added that Africa needed to sustain economic growth at seven per cent or higher over several decades to create jobs on a large scale and accelerate poverty reduction.
“Africa must raise annual growth to 7 per cent or higher, sustained over decades, to enable large-scale job creation and accelerated poverty reduction,” President of the African Development Bank Group, Dr Sidi Tah, said in the report’s foreword.
The report also highlighted the continent’s dependence on indirect taxes such as Value Added Tax, excise duties, and customs taxes, which accounted for 59.9 per cent of total tax revenue in 2023.
The AfDB noted that Nigeria, alongside other resource-rich economies, relied heavily on corporate income tax linked to extractive industries, reflecting the uneven nature of direct taxation across Africa.
