FEATURE: Lagosians Spend N5.3tn Yearly On Generators Amid 4.6% Energy Budget Performance

The Lagos State Ministry of Energy and Mineral Resources Development recorded a 4.6 per cent budget performance in the first nine months of 2025, underscoring persistent implementation gaps in the state’s energy sector even as residents and businesses continue to spend an estimated N5.3tn annually on generator-powered electricity due to inadequate supply from the national grid.

According to the Budget Implementation Report for Q3, 2025, obtained by THE WHISTLER, the ministry was allocated an original budget of N15.26bn, but total expenditure between January and September amounted to just N698.83m, representing 4.6 per cent year-to-date performance.

In the third quarter alone, spending stood at N50.46m, leaving an unutilised balance of about N14.57bn against the original appropriation.

Further analysis shows weak fund releases to agencies under the ministry. Of the N97.4m budgeted for the Lagos State Electricity Board, only N28.12m was released in the first nine months of the year. This translates to a 28.9 per cent performance rate, raising questions about the pace of electricity-related interventions amid worsening power supply challenges.

The low budget utilisation has drawn attention at a time when Lagos State is pursuing major power sector reforms aimed at expanding electricity access, attracting private investment and reducing dependence on the national grid.

Residents Spend N5.3tn Annually on Generator Power

While budget performance remains low, electricity costs for households and businesses continue to rise sharply. The Lagos Economic Development Update (2025), released by the Ministry of Economic Planning and Budget, revealed that more than 80 per cent of Lagos residents and businesses rely on off-grid electricity sources, spending about N5.3tn annually to power generators.

With a population of over 23 million, Lagos requires approximately 9,000 megawatts (MW) of electricity to meet demand. However, supply from the national grid averages only about 1,000 MW, accounting for just 11 per cent of the state’s electricity needs.

This wide supply gap has forced residents and businesses to rely heavily on petrol, diesel and fuel oil-powered generators, which collectively generate an estimated 15,000 MW daily across the state. However, power from these off-grid sources comes at a significantly higher cost, averaging N130 per kilowatt-hour (kWh) compared to about N50/kWh from the national grid.

“Lagos State’s electricity demand far exceeds supply, with a current need of approximately 9,000 megawatts (MW) compared to a meagre supply of 1,000 MW from the national grid, just 11 percent of demand.

“This shortfall forces over 80 per cent of the state’s population and businesses to rely on off-grid generators powered by petrol, diesel, or fuel oil, contributing to significant inefficiencies and environmental degradation,” the report stated.

Recent electricity tariff adjustments have further compounded the situation. Under the current tariff structure, consumers on Band A pay around N227/kWh, while those on Band B pay about N68/kWh. The Band A rate is higher than the cost of some off-grid sources, prompting some consumers to consider increased reliance on generators despite their inefficiencies and environmental consequences.

As of 2020, only 31 per cent of Lagos households had access to electricity from the national grid, leaving 69 per cent dependent on generators and other alternative energy solutions. Businesses, particularly in the industrial and commercial sectors, face frequent power outages that reduce output, increase operating costs and weaken competitiveness. Small and medium enterprises (SMEs) are especially affected, spending billions of naira annually on diesel and petrol to sustain their operations.

Power Reforms, Environmental Costs

The heavy dependence on generators has serious environmental and public health implications. Lagos is estimated to account for about 39 million tonnes of carbon dioxide emissions annually, driven largely by fossil-fuel-powered electricity generation.

The state is home to more than 4.5 million household generators, with households and micro, small and medium enterprises consuming an estimated 15.6 billion litres of fuel each year.

Poor air quality linked to generator emissions has been associated with increased cases of respiratory illnesses, particularly among vulnerable populations in low-income and informal settlements. The situation also undermines Nigeria’s commitments to global climate goals, intensifying calls for a transition to cleaner and more sustainable energy sources.

In response to these challenges, Governor Babajide Sanwo-Olu in December 2024 signed the Lagos State Electricity Law 2024, a legislation designed to ensure access to affordable, reliable and sustainable electricity across the state.

The law promotes investment, competition and innovation in electricity generation, transmission and distribution, while encouraging renewable energy adoption and extending access to underserved areas.

Speaking during the signing ceremony, Sanwo-Olu had expressed his administration’s commitment to lighting up Lagos.

“It is a bill that we believe will change the economic landscape and usher in socio-economic benefits for our citizens in Lagos,” the governor said,

“We want to light up Lagos. We want our citizens to feel the benefit and effects of this legislation.”

Complementing the new law, the Lagos State Government in November 2024 invited bids for the construction of up to 4,000 MW gas-fired power plants under its Clean Lagos Electricity Market initiative.

Four power generation hubs have been identified, each expected to deliver a minimum of 500 MW.

Private developers are expected to finance the projects through power purchase agreements with the state, leveraging the decentralised framework introduced by the Electricity Act 2023, which allows states to generate, transmit and distribute electricity independently.

Although Lagos’ economy was projected to grow from N43.06tn in 2023 to N66.47tn by 2025, analysts believe that for the state to achieve sustainable economic growth, tackling its energy crisis remains a top priority.

The state’s energy demand is expected to reach 29,212 MW by 2030 due to rapid urbanisation and economic growth. For millions of Lagosians and businesses burdened by high energy costs, improved budget execution, accelerated infrastructure investment and effective implementation of power sector reforms remain critical to reducing reliance on generators and delivering affordable, reliable electricity across the state.