Nigeria’s biggest firms feel heat of 77% energy cost jump

Nigeria’s largest corporations are grappling with a severe surge in energy costs, with expenditure skyrocketing by 77 percent in 2024 amid the nation’s power crisis.

The spike, driven by unreliable grid electricity and soaring diesel prices, is squeezing profit margins, forcing production cuts, and raising fears of job losses and higher consumer prices in Africa’s largest economy.

An exclusive BusinessDay analysis of Nigeria’s 17 largest firms by market capitalisation revealed that their combined energy costs ballooned by 77 percent to N1.4 trillion in 2024, up from N838.3 billion in 2023.

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Among the 17 surveyed companies are household names such as BUA Foods, Dangote Sugar, GTCO, Conoil, BUA Cement, Okomu Oil, Fidelity Bank, Julius Berger, First Holdings, Transnational Corporation, UBA, Nigerian Breweries, International Brewery, Lafarge Africa, Transcorp Hotels, Zenith Bank and Dangote Cement.

They span across sectors from manufacturing and banking to hospitality and telecommunications. But the common thread across them all is the rising burden of keeping the lights on and operations running.

From manufacturing to finance: Everyone pays the price

Manufacturing firms have taken the hardest hit. With the national grid unable to provide steady electricity, companies have leaned more heavily on diesel-powered generators—an expensive and environmentally harmful alternative.

BusinessDay survey showed the firms with the highest increase include Okomu Oil (931 percent); Zenith Bank (145 percent); BUA Cement (129 percent); Lafarge Africa (109 percent), and Transcrop (94 percent).

According to Segun Ajayi-Kadir, director general of the Manufacturers Association of Nigeria (MAN), spending on alternative energy sources jumped to N1.11 trillion in 2024 from N781.68 billion in 2023—a 42.3 percent increase.

“Diesel is now eating up a bigger share of production costs than even raw materials or labour,” Ajayi-Kadir said. “That’s not sustainable.”

Aisha Mohammed, an energy analyst at the Lagos-based Centre for Development Studies, concurred.

“The cost of power is now the biggest threat to manufacturing in Nigeria,” she said. “We’re seeing situations where factories operate for just a few hours a day because they simply cannot afford the diesel to keep machines running.”

The crisis extends beyond manufacturing. In the banking sector, financial institutions such as Zenith Bank, GTCO, and UBA are grappling with the rising cost of powering data centres, branches, and automated teller machines (ATMs).

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Many of these facilities require 24/7 power, and the inability to rely on the grid means banks must turn to diesel and petrol to fill the gap. These costs, although less visible to consumers, are ultimately reflected in higher service charges and reduced investments in technology and infrastructure.

A problem with national implications

While only 17 companies disclosed specific energy cost figures, experts warn that the true scale of the problem is likely far worse. Many large firms either did not report their energy expenditures in detail or lumped them together with other operational costs. This opacity makes it difficult for policymakers to appreciate the full scope of the crisis—and for businesses to coordinate an effective response.

At the consumer level, the knock-on effects are already being felt. Price tags for basic goods like cement, beer, sugar, and bread have risen steadily throughout the year, even as inflation already stands at record levels.

Last September, AbdulSamad Rabiu, chairman of BUA Cement, said high energy costs, enabled by naira devaluation, and removal of fuel subsidy have elevated the cost of cement production and inflated the prices of the commodity.

He said energy costs, primarily gas from the Nigerian National Petroleum Company (NNPC), which are invoiced in naira but paid at the prevailing exchange rate, have been a major contributor to rising costs, despite the company’s efforts to make cement more affordable and available to Nigerians.

High electricity cost

Manufacturers over time have raised the alarm over the damaging impact of the rising cost of energy, which has seen the pump price of petrol rise by about 430 percent and electricity tariff up by 212 percent for ‘Band A’ consumers over the past one year.

On April 3, the Nigerian Electricity Regulatory Commission (NERC) approved an increase in electricity tariff for customers under the Band A classification. The commission said customers under the category, who receive 20 hours of electricity supply daily, would begin to pay N225 per Kilowatt-hour (kWh) up from N66/kWh, but later reduced it to N209/kWh.

MAN had labelled the hike in power tariff as detrimental to economic growth and in its quest for survival. It instituted a legal action at the Federal High Court in Lagos against the NERC and joined the electricity distribution companies (DisCos) as respondents to challenge the implementation of electricity tariff hike.

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The manufacturers sought four reliefs: that due process stated in the Act for the review was not fulfilled before the DisCos applied to NERC for the tariff review on 31 July 2023; and that regulatory requirements for tariff reviews were not followed before NERC issued the Supplementary Order of 3 April 2024 and the subsequently reviewed rate of 6 May 2024.

MAN also held that placing the burden of the tariff increase on only ‘Band A’ feeders and leaving out other bands amounted to discrimination against such consumers. It noted that the defendants must comply with administrative procedures for tariff review before rightfully implementing the April and May Supplementary Orders.

The NERC, however, objected to the suit, stating that MAN’s case constitutes an abuse of court processes, being hasty and prematurely filed without following due process of the law.

But in a significant setback to the manufacturers’ efforts to reverse the electricity tariff to its previous price, the court struck out the case.