Business
Collapse Looms: Nigerians ditch National Grid for self-generated power amid tariff hikes
The accelerating shift of Nigerian homes and businesses toward alternative energy sources, particularly solar power, is posing a serious threat to the stability and profitability of the already struggling national power grid, Business Hallmark can report.
Investigations reveal that many manufacturers, corporate organizations, and academic institutions have abandoned the national grid in favor of self-generated power, citing unreliable electricity supply and frequent blackouts. Increasingly, premium residential customers on Band A and B tariffs are also turning to solar solutions to escape the burden of recent tariff hikes.
Available data obtained by Business Hallmark shows that over 400 major firms and institutions have disconnected from the national grid. Together, these organizations now generate approximately 6,500 megawatts of electricity — roughly 1,500 megawatts more than the current output of the national grid itself.
Major players operating independent power systems include Flour Mills of Nigeria (FMN) Plc; Mobil Producing Nigeria Unlimited; Bank of Industry (BOI); MTN Nigeria; Lafarge Cement; BUA Group; Nigerian National Petroleum Company Limited (NNPCL); Mikano Industries; Nestlé Nigeria; and Shell Petroleum Development Company (SPDC).
Leading academic institutions like Obafemi Awolowo University, Ife; Nnamdi Azikiwe University, Awka; University of Lagos, Akoka; Abubakar Tafawa Balewa University, Bauchi; Federal University Ndufu-Alike Ikwo; Bayero University, Kano; University of Benin; Usmanu Danfodiyo University, and the Federal University of Petroleum Resources, Effurun, Delta State, have also opted for self-generation.
Dangote Industries Limited (DIL) — Nigeria’s largest private electricity producer — alone generates about 1,500 megawatts, with the Dangote Refinery’s 435-megawatt power plant in Ibeju-Lekki, Lagos, contributing nearly one-third of that capacity.
Business Hallmark’s findings indicate that the list of businesses and homes exiting the national grid is likely underreported, as many smaller players are not yet reflected in official statistics.
Notably, on April 7, 2025, the Nigerian Electricity Regulatory Commission (NERC) announced the issuance of new licences to seven organizations, authorizing them to independently generate and distribute electricity. Among the new licensees is Nile University of Nigeria, Abuja, which is permitted to generate up to 30 megawatts under the new arrangement.
The recent awardees of power generation capacities include Nile University of Nigeria in Abuja with a capacity of 10 MW, Quantum Paper Limited in Agbara, Ogun State at 7 MW, Ro-Marong Nigeria Limited in Amuwo-Odofin, Lagos at 4.40 MW, and Psaltry International Company Limited from Alayide village in Oyo State at 1.10 MW. Additionally, the Nigerian Electricity Regulatory Commission (NERC) awarded an off-grid generation licence to Daybreak Power Solutions Limited for a 2.63 MW capacity, set to begin in the last quarter of 2024.
NERC also granted captive power generation permits to four applicants, totaling a capacity of 22.50 MW. These permits are aimed at organizations planning to establish and manage power plants solely for their own use.
In a separate development, President Bola Tinubu recently approved a budget of N10 billion for a solar power grid designated to power the presidential villa, aimed at reducing energy costs. This decision has sparked considerable criticism and concern among Nigerians who question the necessity and appropriateness of the solar project.
Mustapha Abdulahi, the Director General of the Energy Commission of Nigeria (ECN), defended the project, explaining that continuing to pay N47 billion annually for electricity at the presidential villa is not sustainable. During a media briefing, he highlighted that this initiative aligns with the president’s strategy to diversify energy sources and reduce governance costs. He also noted that the solar project will provide clean, uninterrupted energy, create jobs, spur innovation among Nigerian engineers and energy specialists, and lessen the burden on the national grid.
It’s worth mentioning that the Abuja Electricity Distribution Company (AEDC) issued a ‘Notice of disconnection’ to the presidential villa and 86 other government ministries, departments, and agencies last year, demanding payment of N47.1 billion in electricity debts, which necessitates swift action.
In response to rising electricity costs, particularly in residential areas classified under Band A, many customers are turning to solar power to avoid new tariff increases. A survey in several Lagos neighborhoods, including Ikeja, Ifako-Ijaiye, Agege, Ogba, and Ijaiye-Ojokoro, revealed a significant uptake of solar energy, with more than seventy homes on CLEM Road in the Jankara area installed with solar panels, taking advantage of the power supply from the nearby 132kV/33kV powerline.
A landlord in the area, Mr. Tunde Salami, shared his experience with us regarding his switch to solar power due to the rising costs of electricity from Ikeja Electricity Distribution Company (IK). He noted that while they generally enjoy nearly 24 hours of electricity daily when the grid is stable, this was made possible by sharing power designated for nearby industries.
Mr. Salami explained that before the reclassification of power utilization bands last year, they enjoyed consistent electricity at a much lower tariff of around N50 per kilowatt. However, this changed when the Federal Government approved a significant increase in tariffs for Band A users. Although the rate was later moderated to N206.8 following negotiations with organized labor, many people in the community still found it exorbitant.
He recounted the drastic increase in his electricity bill, which rose from N20,000 for about 14 daily units and 400 monthly units to an average of N82,720, amounting to nearly N1 million annually. As a pensioner with a monthly income of less than N70,000, the burden became too much to bear. Thankfully, upon realizing his struggles, his children helped him install a solar system for over N3 million.
Since the increase in tariffs by the Nigerian Electricity Regulatory Commission (NERC) in April 2024, Mr. Salami has saved over N1 million in energy costs. He anticipates that within three years, the initial investment in solar power will have been recouped.
Despite positive experiences for those who have transitioned to alternative power sources, their departure from the national grid is raising concerns among financial and power experts, who warn that a significant shift away from the grid could have detrimental effects on the overall power sector.
The electricity industry regulator, the Nigerian Electricity Regulatory Commission (NERC), blamed the fluctuations in grid voltage, including spikes, dips, flickers, brownouts and commercial losses to the continuos boycott of the grid by heavy users.
Speaking on the matter, an energy expert, Engr. Jire Ojo warned of dire consequences for the power sector if the trend is not halted.
According to him, the power sector will soon collapse if bulk power takers that have been sustaining the sector with their patronage continued to pull out.
“Let me paint a vivid picture of the precarious situation the power sector is for Nigerians to understand is coming.
“The president last week approved the sum of N10 billion for the construction of a solar power plant for the presidential villa and some government ministries and agencies around it.
“According to the presidency, the project will save the nation about N47 billion annually in electricity costs.
“While this is good for public fiscal planning, it portends big trouble for the power industry. In a simple ABC, what it means is that Abuja Electricity Distribution Company, which covers the FCT, will be losing a yearly revenue of N47 billion it used to get from the presidential villa.
“You can imagine if other government MDAs and state governments follow suit? Meanwhile, big energy guzzlers like Shell, NNPC, Dangote Industries, Nestle have all pulled out of the grid.
“I painted this picture for you to understand the drain that is going on in the sector. If the big pockets that everyone thinks can afford paying N206 for a unit of every are pulling out to generate their power, are those on Band B, C, or D that struggle to pay the average energy bill of N40 per kWh unit that will sustain the system?
“I think we are in for a rough ride. Most gencos and discos will lose revenue and will not be able to service the loans they secured from banks.
“That means the financial sector will also feel the brunt. Many of the loans they gave out could be lost. Manufacturers and vendors will also suffer.
“I will advise the government to quickly fix the problems in the power sector so that big energy consumers can come back. If we are not careful, the power sector is on its way to Golgotha”, he said.
Also speaking, the Chief Executive Officer of a renewable energy company, Pam Africa, Patrick Agese, said the demand for solar power substantially increased following the removal of electricity subsidies.
According to Agese, solar energy companies are capitalising on the situation by offering monthly payment plans to many Nigerians who want solar panels installed in their homes, but didn’t have the financial capacity to do so.