Beyond generators: Can shared power make Nigerian factories competitive? – Businessday NG

For small manufacturers, electricity is more than an operating expense. It determines how much they can produce, what each product costs and whether expansion makes commercial sense. A shared energy model could change the economics.

A small manufacturer considering a new production line faces a difficult calculation. The machinery may be affordable, customers may be available and the business may have secured orders. But before expanding, the owner must answer another question: how much will it cost to keep the factory running?

In Nigeria, that calculation often includes a generator, diesel or petrol, maintenance, fuel storage and the uncertainty of electricity supply. A manufacturer may invest in equipment to increase output, only to discover that the energy required to operate it makes the additional production unprofitable.

For many small factories, the generator has become more than backup infrastructure. It is part of the cost of doing business.

But what if several manufacturers did not have to finance and operate their own power systems? What if businesses within an industrial cluster could share a reliable electricity supply, distribute its costs and pay according to consumption?

The idea is gaining attention in Nigeria’s energy-development conversation. Its significance goes beyond replacing generators. It raises the possibility of treating electricity as shared productive infrastructure rather than an individual burden on every business.

The cost of powering production

The financial pressure is substantial. According to the Manufacturers Association of Nigeria, manufacturers spent approximately ₦1.34 trillion on alternative electricity in 2025, up from ₦1.11 trillion in 2024. The expenditure includes the cost of generating or sourcing power outside the national grid.

The money represents more than an energy bill. It is capital that could otherwise finance raw materials, machinery, wages, maintenance, technology and expansion.

For a large manufacturer, energy expenditure is a major operational challenge. For a small factory operating on thin margins, the consequences can be more severe. Higher power costs can make it difficult to compete with imported products, absorb increases in input prices or offer customers stable prices.

PwC’s 2024 MSME survey found that 68 per cent of surveyed businesses used petrol generators, while 21 per cent relied on diesel generators. Ten per cent reported using solar panels. The survey covered 557 businesses across 13 sectors and 29 states, so its findings should be understood as the experience of its respondents rather than a complete national census.

The problem is not simply that businesses need electricity. They need it at a cost and with a level of reliability that allows production planning.

A factory cannot easily optimise its workforce, machinery or delivery schedules when electricity availability is unpredictable. Interruptions can leave workers idle, disrupt production batches, damage sensitive processes and delay orders.

The economic consequence is lower utilisation of productive assets. A machine that operates for only part of the time it was purchased to operate becomes a more expensive investment per unit of output.

Read also: Shared prosperity on a diesel generator

Why should every factory build its own power system?

The conventional response has been for individual businesses to purchase generators or install independent energy systems. But this approach requires each enterprise to carry the full cost of equipment, maintenance, fuel management and technical expertise.

Smaller manufacturers may not have the capital or the energy demand to justify a dedicated solar and battery installation. Others operate in clusters where several businesses have similar electricity requirements but lack the coordination to invest collectively.

This is where shared power becomes commercially interesting.

Under a shared-energy model, a private energy developer, cooperative or group of businesses can finance and operate a central electricity system serving several users. Depending on the location and demand profile, the system could combine solar photovoltaic panels, battery storage and other generation sources, including gas.

Businesses pay for the electricity they consume rather than independently financing an entire generation system.

The model can spread capital and operating costs across multiple users. It can also make demand more predictable for the energy provider, particularly where manufacturers operate during similar production hours.

However, sharing infrastructure does not automatically make electricity cheaper. The economics depend on the cost of generation, financing, storage, distribution infrastructure, maintenance and the amount of electricity customers actually consume.

A system that is too expensive, poorly sized or underutilised can simply replace one high-cost energy arrangement with another.

A Nigerian model is already being examined

Research by SOAS University’s Anti-Corruption Evidence consortium offers a particularly relevant starting point.

Its March 2025 working paper, Improving Energy Access for SMEs in Abuja through Horizontal Checks and Cooperative Ownership, examined the possibility of establishing embedded electricity networks for small businesses operating in manufacturing clusters.

The research surveyed businesses in Abuja, Nnewi, Onitsha and Aba. It found that all surveyed SMEs in Nnewi, Onitsha and Aba used diesel generators as backup, while 80 per cent of respondents overall identified energy access as their chief constraint. In the South-East, the proportion approached 100 per cent. These are findings from the study’s respondents, not national estimates. The researchers examined a potential pilot around Kugbo International Market in Abuja, where businesses operate within an existing cluster and have incentives to maintain reliable electricity.

Their proposed model involves local electricity networks supported by private investment, with a combination of solar photovoltaic systems, battery storage and compressed natural gas. It also introduces an important governance dimension: businesses within the cluster would have incentives to monitor one another’s compliance with payment and operating rules.

This is significant because shared infrastructure requires more than equipment. It requires customers who pay their bills, transparent management and an operator capable of maintaining the system.

The study found that attracting investors to supply local SME grids was feasible. It presented a model for further development, not evidence that a fully operational shared industrial grid had already been established at Kugbo.

Its larger contribution is to demonstrate that the problem can be approached collectively rather than leaving every manufacturer to negotiate its own energy survival.

Making electricity cheaper by using it productively

Another important lesson comes from Nigeria’s productive-use renewable energy programmes.

The Africa Minigrids Programme reported in May 2025 that its Energizing Agriculture Programme had partnered with Nigerian energy and agricultural companies to deploy 269 electric mills, cold rooms, vehicles and other productive-use equipment in off-grid communities.

The programme reported energy-cost savings of up to 82 per cent in some applications and a 25 per cent reduction in electricity costs. These results relate to the programme’s participating projects and should not be generalised to every industrial or commercial installation. The underlying lesson is important: electricity infrastructure becomes more economically viable when it supports productive activity.

A cold room, milling machine or processing facility creates demand for electricity while generating income from the services it provides. That demand can improve the utilisation of an energy system and spread its fixed costs across more productive activity.

The same logic could apply to industrial clusters. A group of food processors, furniture manufacturers, metal fabricators or packaging businesses may create sufficient concentrated demand to support a shared power system.

The energy provider gains a more predictable customer base. Manufacturers gain access to a potentially more reliable supply without each having to finance a separate generation asset.

The opportunity lies in matching the energy system to the actual production requirements of the businesses it serves.

The conditions for making shared power work

For shared power to become a credible industrial solution, three conditions matter.

First, demand must be aggregated. Businesses need to establish how much electricity they consume, when they consume it and what level of reliability their production processes require. This information determines the appropriate system size and its cost.

Second, financing must match the economics of the asset. Energy infrastructure requires substantial initial investment, while returns are earned through electricity sales over time. Long-term power-purchase arrangements, equipment finance and private investment can help distribute the cost, provided the expected demand and payment arrangements are credible.

Third, governance must be taken seriously. Customers need transparent tariffs, accurate metering, clear service obligations and a reliable process for resolving disputes. The energy operator must also have the technical capacity to maintain equipment and respond to outages.

Government’s role is equally important. The Electricity Act 2023 created a framework for greater participation by states in electricity markets, while regulatory arrangements for mini-grids provide routes for decentralised supply. The opportunity is to translate this policy space into commercially viable electricity services for productive businesses.

The factory needs more than a generator

Nigeria’s industrial ambition will depend partly on whether its smaller manufacturers can produce consistently at competitive costs.

The answer cannot rest entirely on asking individual businesses to buy better generators or install solar panels. That approach leaves each enterprise carrying the full cost of solving a shared infrastructure problem.

Industrial clusters offer another possibility. When businesses aggregate demand, share infrastructure and establish credible payment systems, electricity can become a service organised around production rather than a recurring obstacle to it.

This is not an argument that shared power can replace the need for a reliable national grid. Grid expansion and reform remain essential. But decentralised energy systems can provide a practical route for clusters and businesses whose production cannot wait for improvements across the entire electricity network.

For Go Local, the implication is clear. Building more factories will not necessarily produce more competitive manufacturing. The country must also build the infrastructure and commercial arrangements that allow those factories to operate efficiently.

The next breakthrough in Nigerian manufacturing may not be a bigger factory or a more powerful generator. It may be several factories discovering that they can produce more competitively by powering themselves together.

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