More trouble for hobbled electricity market as 20 more firms dump national grid

…Generate 1,045MW independently

No fewer than 20 additional Nigerian companies exited the national electricity grid between January and September 2025, installing captive power plants with a combined capacity of 1,045.54 megawatts (MW), deepening concerns over the fragility of the nation’s central power system and the rising cost of doing business.

Data from the Nigerian Electricity Regulatory Commission (NERC) revealed that the latest wave of self-generation spans academia, manufacturing, energy, and agriculture, bringing the total number of firms generating their own electricity far above levels envisaged under Nigeria’s power sector reform programme.

The development reflects persistent grid instability, frequent system collapses, unreliable supply from distribution companies (DisCos) and rising tariffs that have failed to deliver commensurate service improvements.

In January, reports indicated that amid persistent nationwide power outages, around 250 manufacturers and academic institutions had disengaged from their respective electricity distribution companies to generate electricity on their own.

Captive power generation permits are issued to entities that intend to own and maintain power plants exclusively for their consumption, meaning no sale of electricity generated from the plant to any third party.

Grid unreliability pushes firms off the system

Nigeria’s national grid has suffered repeated partial and total collapses in recent years, disrupting supply to households and businesses alike. For energy-intensive firms, these disruptions translate directly into production losses, damaged equipment and higher operating costs.

For context, the latest national grid collapse took place on Monday, December 29, cutting electricity supply to near-zero levels across the country. By mid-afternoon, distribution data showed that power flow to consumers had almost completely dried up.

Load figures released at 3:12 pm on the day indicated that just two electricity distribution companies were receiving supply at all.

Executives at several firms that recently commissioned captive power plants said the decision to disconnect from the grid was driven less by tariff levels and more by the inability of DisCos to guarantee stable electricity.

“We don’t put pressure on the grid. We produce about 1,500 megawatts of power for self-consumption,” Aliko Dangote, founder, Dangote Group, said last year at the Afreximbank Annual Meetings and AfriCaribbean Trade & Investment Forum in Nassau, The Bahamas.

1,045MW outside the grid

The additional 1,045MW generated independently between January and September 2025 is equivalent to nearly a quarter of Nigeria’s average grid-distributed power, highlighting the scale of capacity migrating outside the formal electricity market.

Industry analysts note that this capacity, largely gas-fired with a smaller share of diesel and solar hybrid systems, is not dispatched through the Transmission Company of Nigeria (TCN) and therefore does not strengthen national supply.

According to the NERC, Kwale Genco FZE in Ikot Abassi, Akwa Ibom State, got a permit to generate 700MW of electricity while Obu Cement Company Limited (BUA) in Okpella, Edo State, to generate 160.95MW.

Some of the companies include: NNPC Towers, CCK Electric Power Tech. Company, Pulkit Alloy And Steel Limited, Everest Pulp and Paper Limited, and Nigeria Pipes Limited.

Others include: West African Container Terminal Nigeria Ltd, Nile University of Nigeria, Sequoia International Development Ltd, Yinson Operations & Productions West Africa Ltd and Azura Power West Africa Limited.

Cost implications for businesses and consumers

Captive power generation significantly raises operating costs. Gas infrastructure, generators, maintenance and fuel logistics add to production expenses, which are often passed on to consumers through higher prices for goods and services.

For bigger firms like the Dangote Refinery, plans to expand to generate an additional 1,000 megawatts of electricity has been announced by the richest black man in the world, highlighting the company’s push toward full operational self-sufficiency as part of a broader $10 billion expansion that will double refining capacity to 1.4 million barrels per day (bpd).

For smaller firms unable to afford large-scale self-generation, unreliable grid supply forces dependence on diesel generators, worsening cost pressures and environmental impact.

Regulatory, policy gaps

The Electricity Act 2023 liberalised power generation and distribution, allowing states and private entities greater latitude to generate and distribute electricity.

While the reform has encouraged investment in captive and embedded power, analysts argue that it has also exposed weaknesses in the national grid framework.

Distribution companies continue to struggle with high technical and commercial losses, limited metering and liquidity constraints, while transmission infrastructure remains overstretched.

Adebayo Adelabu, power minister, has expressed concern over the growing number of bulk electricity consumers abandoning the national grid in favour of self-generation.

Adelabu warned that the trend poses a serious challenge to the stability of the power sector, stressing that grid-supplied electricity remains more reliable and cost-effective than the captive power plants currently operated by many large users.

He lamented that, even as electricity generation improves, distribution companies are often unable or unwilling to take up the power allocated to them, largely to avoid accumulating debts arising from poor revenue recovery.

“The majority of bulk electricity users, particularly industries, moved off the grid because of a lack of trust and confidence built up over the years,” Adelabu said. “They now rely on captive power plants within their facilities, even though this option is far more expensive.”

The minister said the federal government is working to rebuild confidence in the electricity market and persuade large consumers to reconnect to the grid.

“Once consumers and industries begin to see the trust, confidence and stability we are providing, they will be encouraged to return to the grid, which offers a cheaper and more sustainable source of power,” he added.

Adetayo Adegbemle, executive director of PowerUp Nigeria, also raised alarm over the pace at which bulk consumers are exiting the grid.

He noted that these companies should ideally function as ‘anchor tenants’ whose consistent demand would help stabilise the electricity network.

“Many of the grid collapses we have experienced can be linked to these large consumers leaving the system, which weakens demand stability,” Adegbemle said. “I have said repeatedly that if we truly want a stable and affordable grid, a major priority should be bringing these companies back.”