As Nigeria steps into 2026, it is appropriate to reflect on a familiar national paradox. Few countries are as richly endowed with energy resources as Nigeria, yet few struggle as persistently to convert those resources into broad-based industrial prosperity. For decades, this contradiction has inflated production costs and constrained national ambition. This reflection examines why Nigeria’s energy outcomes remain below potential despite reforms, investments, and measurable progress.

Energy as an economic system

Energy is not a standalone sector. It is an economic system linking fuel supply, power generation, transmission, pricing, industrial demand, investment confidence, and household welfare. When this system is managed in silos, gains dissipate; when it is managed coherently, gains compound. It is therefore not surprising that self-generation capacity has expanded rapidly. Faced with unreliable supply, households and firms have rationally adopted diesel generators, distributed solar, and battery systems as coping mechanisms. These trends reflect rational adaptation to persistent supply gaps rather than a coordinated energy system. However, while such self-provision can enable isolated investments, it does not substitute for a functioning energy system at the economy-wide level. Fragmented infrastructure forces firms to divert capital, managerial attention, and risk capacity into power solutions rather than core production. This raises entry barriers, limits the scale and diversity of industrial participation, and constrains employment growth.

Even as distributed energy solutions grow—and should be encouraged—grid-scale energy must also expand if Nigeria is to leapfrog into industrialising status, as its non-OECD peers have done. Countries that have industrialised successfully did not choose between grid power and decentralised solutions; they built both deliberately (as seen in Bangladesh’s gas-backed rural electrification and Morocco’s co-location of renewables with industrial zones). Grid-scale energy provides the backbone for industrial density, while distributed systems enhance resilience and extend access. Nigeria’s challenge is therefore to scale the grid system decisively while integrating distributed energy intelligently so that private adaptation evolves into a coordinated national energy-industrial platform.

Industrialisation at scale is ultimately built not on individual self-sufficiency, but on shared infrastructure that lowers costs, broadens participation, and allows investors, large and small, to focus on manufacturing and value creation. Once energy is understood as an integrated economic system, the importance of how limited public resources are prioritised, sequenced, and aligned becomes unavoidable.

Recent gains, persistent gaps, and a comparative lens

It would be inaccurate to suggest that nothing is improving. Recent performance data from the Nigerian Electricity Regulatory Commission (NERC) show modest but visible momentum. In the fourth quarter of 2024, average available generation capacity stood at 5,296.89 MW, with total quarterly delivered grid energy of 9,289.95 GWh. By the first quarter of 2025, average available capacity rose to 5,366.88 MW, while total delivered grid energy increased to 10,304.47 GWh—a 10.9 percent quarter-on-quarter increase. Distributed energy solutions across commercial facilities, universities, residential systems, and mini-grid solar have also continued to expand in response to persistent gaps in grid supply. Taken together, these developments represent real progress relative to where the country once stood. Yet they have not compounded into the scale of reliability required for industrial transformation. Manufacturing costs remain high, small and medium-scale enterprises rely heavily on diesel and petrol self-generation, and agro-processing, cold-chain systems, and industrial clusters struggle to scale under intermittent and costly power. The economy continues to struggle to convert activity into reliable, scalable, and affordable energy for production capable of lifting people out of poverty.

This reality was underscored by repeated nationwide grid collapses, the latest of which occurred on December 29, 2025, while this essay was being composed. Such episodes are not anomalies but symptoms of a structurally overstretched system, where incremental capacity gains are routinely wiped out by transmission fragility and weak coordination. A useful way to ground Nigerian energy poverty is through comparison with non-OECD countries that are advancing industrially by deliberately expanding domestic energy utilisation. Recent indicators show Nigeria’s grid-based electricity consumption per capita hovering around 140–150 kWh per person per year (2024–2025 grid-based estimates), extremely low by global standards even after accounting for fragmented self-generation and distributed solar use. By contrast, Bangladesh exceeds 600 kWh per person per year, Indonesia exceeds 1,150 kWh, Morocco approaches 1,000 kWh, and India exceeds 1,180 kWh. Countries such as Egypt and South Africa are even higher.

Nigeria’s low energy utilisation is therefore not merely a deficit; it is an opportunity space. Moving steadily toward higher levels of reliable energy use, where factories operate predictably and value chains deepen in a 24/7 economy, would represent a structural shift in productivity, employment, and national competitiveness. But such progress does not emerge from isolated projects. It comes from coherent execution, where energy investments reinforce industrial priorities and fiscal choices compound rather than cancel one another.

Budget reality and the case for alignment

The structure of the 2026 federal budget further sharpens this reality. Power, gas development, industrial expansion, and solid minerals are embedded within broader infrastructure and growth-driving capital envelopes, competing for limited fiscal space alongside transport, housing, and other national priorities.

At the same time, fiscal discipline measures, such as the rollover of uncompleted capital projects from previous years, inevitably constrain flexibility and raise the cost of poor prioritisation. In such an environment, outcomes depend not only on how much is allocated but also on how well priorities are aligned and coordinated.

When energy-related investments are fragmented across competing projects and timelines, power may improve where industry is weak; industrial incentives may be announced where energy reliability remains uncertain. The result is not waste, but missed opportunity that erodes growth potential through misalignment.

Conclusion

If Nigeria seeks industrialisation that is not merely aspirational, domestic energy utilisation must grow in a way that outpaces population growth and visibly changes production economics. A practical way to frame ambition is not megawatts on paper but electricity use per person, because it reflects real economic absorption of energy.

Moving Nigeria from average of about 140 kilowatt-hours per person per year toward the 500–1,000 band, where many industrialising countries now sit, would mark a structural shift in national capability and employment potential. Such a shift would lower production costs, expand formal employment, reduce youth economic exclusion, and ease the structural pressures that fuel insecurity and social fragility.

As Nigeria enters 2026, the question is not whether the country is trying hard enough, but whether spending is aligned to deliver sustained growth. With limited fiscal space and ambitious industrial aspirations, system integration and coordination are no longer optional; they are economic necessities in a fiscal environment where infrastructure funds must deliver compounding returns.

History suggests that nations willing to confront this challenge patiently and deliberately eventually convert potential into prosperity. Nigeria’s opportunity remains intact. The task before us is to execute it as a system.

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