CPPE raises alarm over power sector contraction

Nigeria's power sector experienced a significant contraction of 15.30% in the first quarter of 2026, encompassing both electricity and gas industries. This marks the weakest performance recorded by the sector in recent years, raising serious concerns for the nation's economic trajectory. The Centre for the Promotion of Private Enterprise (CPPE) described the development as deeply troubling, warning that it poses substantial risks to economic growth, industrial productivity, and overall business competitiveness.

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The most troubling aspect of the report is the sharp contraction of the electricity/gas sector by 15.30%, making it the weakest-performing sector in the quarter and the steepest contraction recorded by the sector in recent years. This underscores the deepening fragility of Nigeria’s power sector and raises serious concerns about the sustainability of economic growth, industrial productivity and business competitiveness.

Despite an overall economic growth of 3.89% in Q1 2026 compared to the previous year, the sharp decline in the power sector remains a major point of concern for economic analysts. Dr. Muda Yusuf, Chief Executive Officer of the CPPE, stated that electricity is fundamental to productivity, industrialization, and inclusive economic growth. The magnitude of the contraction, he noted, signals persistent structural weaknesses across the entire power value chain – generation, transmission, and distribution – compounded by ongoing liquidity and governance challenges.

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This development is concerning because electricity is not merely another economic sector; it is the foundation upon which productivity, industrialisation, competitiveness and inclusive growth depend. A contraction of this magnitude signals persistent structural weaknesses across generation, transmission and distribution, as well as continuing liquidity and governance challenges within the power sector.

The CPPE cautioned that the worsening electricity supply will inevitably increase production costs for businesses already struggling with high interest rates, escalating logistics expenses, and weak consumer purchasing power. This situation forces many firms to rely heavily on expensive diesel and petrol-powered generators, eroding profitability across various sectors, including manufacturing, SMEs, hospitality, and agro-processing. The think-tank concluded that sustainable economic transformation is unattainable without stable and affordable electricity, suggesting that gains in other economic areas may not be sustainable given the fragile energy infrastructure.

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The implications for businesses are severe. At a time when firms are already burdened by high interest rates, logistics costs and weak consumer purchasing power, deteriorating electricity supply further escalates production costs and weakens competitiveness. Heavy dependence on diesel and petrol-powered self-generation continues to erode profitability across the manufacturing, SME, hospitality, agro-processing and digital sectors.