Electricity as a Development Lever
This is the opinion of a Nigerian, I might be wrong but discussions are good.
On Twitter, the following question was asked
One thought about power supply in Nigeria that sounds controversial but it bothers me is, if there's 24/7 power supply, what percentage of Nigerians presently can have power on for 24/7/365?
-Olori Ebi @eDante_
And another Twitter user replied with
It will start off with not many people being able to afford it but that will quickly change. More businesses will quickly spring up, rapid cash injection into the economy, accelerated GDP growth and pretty quickly majority of people will begin to afford it.
-Nonso @Seriousist_
Then, one of my favorite economics Twitter accounts gave a controversial viewpoint to the discussion.
The impact of 24/7 power on growth is always exaggerated.
-dangbana orisa (@Adheydayor)
With the above context, I’d love to give a few points that I have around the discussion. The question crux was on affordability of 24/7 power supply - what percentage of Nigerians presently can have power on for 24/7/365? - especially given that Nigeria’s earning power has incredibly eroded over the last decade, and quite a lot in the past 3 years with double-digit inflation.
The initial reply agrees that affordability will be an issue initially (though time period not stated) but believes the affordance will change due to electricity affording business players - entrepreneurs, startup founders, and existing businesses - to scale up which causes cash injection (here, I assume is via mediums like job creation and contracts that trickle down to other businesses) leading to GDP growth. With more jobs and more markets to play with, the average Nigerian will afford it.
However, the economics expert disagrees and then explains in a substack article that electricity is just one tool in the toolshed in driving GDP growth and that the productivity gains from 24/7 electricity will be minimal as he referenced that we already have some semblance of electricity access via our noisy alternative like generators. He makes about 8 points to buttress his points.
A wrong question
Humans like to typical ask hypotheticals about situations around them, it is often a starting point for research but any researcher and academic knows a good research is only as good as the question itself that spurs it.
I think the Olori Ebi question is wrong because the word presently presents a logic mismatch to the if there is as the former represents a current reality and the if there is represents a hypothetical or future possibility which makes for a poor basis.
Because if there is 24/7 electricity, the current reality of Nigerians would must certainly not be what it is. And also, for 24/7 electricity to happen, infrastructures - physical (grids, power plants), financial (subsidies or investment from govt), e.t.c - need to be built to make them happen which can’t happen in the current reality of Nigerians.
A better question would be
If there will be 24/7 power supply in the future, what percentage of Nigerians will have uninterrupted electricity?
or maintain an hypothetical state.
If there were 24/7 power supply, what percentage of Nigerians could have uninterrupted electricity?
For the hypothetical, if suddenly people have uninterrupted electricity (24/7/365), looking at our earning numbers, not a lot of people will afford it, including the businesses that would be expected to potentially created jobs according to Nonso, as it’s evident with the initial outcry with Band A introduction and even more recently the increase in data prices. But as we all know, nothing happens suddenly, and almost certainly, the road to 24/7/365 electricity will be a gradual one - even if fast-tracked by the government - as with any development in any sector or area.
Slowly but surely
Nonso postulates the following sequential steps
Low electricity usage by the average Nigerian
Business Growth triggered by uninterrupted electricity (from here on, I will use just electricity, unless otherwise stated)
Cash injection into the society increasing earning potential
GDP growth
But the issues here is quickly, I don’t believe all of these will happen quickly. Even China, one of the anomalies to nation growth, didn’t arrive at any of their development horizon quickly. So, the definition of quickly needs to be explicitly clear. However, it’s understandable as it’s Twitter and we will not be absolutely clear about the ideas we have within a 280 character space.
I will address what I think are problems with each part and how there is a possibility that it prevents the next step.
If the average Nigerian (and including some businesses) can’t afford it as Nonso states, the economics of scale of providing 24/7 electricity will not make sense as every electricity business players (especially for power plants) wants to have large customer base to spread their high startup and operating cost on. The more people they serve, the more likely they can spread their cost (and inevitably drive down prices). If they can serve only 1 million people, the cost spread is lower than when they can serve 10-15 million people, and so on. So, they need millions of paying customers for it to make sense to start and continually run their operations which as he rightly says Nigeria doesn’t have.
Since it’s agreed that Nigerians currently can’t afford it, the way the electricity players can afford to build plants, grids, and distributions networks is to take a couple of losses now for the long-term return of onboarding more Nigerians in the future. But the country’s current situation doesn’t look favorably and convincing for them to take that bet because (1) subsidy payments that could help cushion their operation cost are not often paid timely, (2) Revenue efficiency is often low in a couple of areas in the country, and (3) Electricity theft is quite high in Nigeria. And with that, the likelihood of having a power plant, grid network, and distribution company provide electricity reduces, and ultimately, won’t spur the business growth we expect.
The issue of the second step of business growth is simple. Electricity is not the only thing that spurs business growth. The type and quality of labour you have, the country’s economic conditions, access to financial investment, security, land reforms, and many others are near-weighted important things that will spur business growth.
(Rapid) cash injection will increase earning potential is not as simple as it seems. Economic or business growth doesn’t automatically lead to rapid (or any form) of cash injection or inflows as those require more dedicated effort from the government which is outside what electricity will directly cause. The most important thing is it won’t happen quickly enough for majority of the population to afford electricity. Even at our best times since the advent of democracy in Nigeria in 1999, the best we could muster in terms of our Middle class size was 20% or 23%. And that took us a decade. GDP growth is similar to the cash injection step, and doesn’t automatically mean more cash in the economy and certainly doesn’t mean a majority will afford the electricity.
In short, the slowly but surely we will get there doesn’t work with just electricity but a lot of other factors. And if magically, electricity becomes a thing in Nigeria, most won’t afford it aside from the big business (some of whom have already invested a lot into their own power plants - gas, hydro, solar, etc. and won’t suddenly decommission them because Nigerian has electricity if the cost of operation is lower and is well within their control). But electricity will not suddenly happen, it’s gradual and because of our economic, infrastructural, policy conditions, we might never have electricity for a long time.
Economists are social scientists.
dangbana orisa in his article argued for his point - The impact of 24/7 power on growth is always exaggerated - using the 8 points
Electricity is just another important tool
Competitiveness is the key to growth and development
Only cheap, competitive electricity can have a big productivity boost
Productivity gains from electricity is high when you do not already have electricity
Productivity gains even when electricity is cheap and abundant is not sustainable unless matched with innovation
Industrial/development policies matter to achieving gains
Other soft factors matter: macro stability (low inflation, stable exchange rates), security, the quality of human capital, the work culture, curiosity and innovation, quality of institutions and governance, justice, rule of law etc
Many countries have 24/7 electricity in Africa. In fact, Nigeria is the poster child for unreliable grid power in Africa. Where is the prosperity in these countries?
I agree with his points except number 4 and 8.
He claims that "productivity gains from electricity are high when you do not already have electricity" suggests that once electricity is available, its benefits diminish. However, this perspective overlooks the long-term and compounding advantages of stable and reliable electricity supply. Significant productivity loss stems from uncertainty and inefficiencies that unreliable electricity and individual running of electricity (even for businesses). Predictable electricity drives productivity (little to no outages), reduced transition delays, among other inefficiencies.
More significant, to me, is labour productivity, where electricity brings more extended and efficient working hours where more time spent on actual work causes higher output per worker and better cognitive performance for the average business. Another key thing he fails to mention is downtime are costly. You typically see small scale factories run on and off production and service lines which is largely inefficient. Any engineering person will tell you that starting up a factory line is costly in terms of performance and time wasted to attain necessary levels only for you to shut it down again.
For any factory, machines take time to reach optimal operating conditions - that’s time lost - and frequent shutdowns cause wear and tear (increasing maintenance costs) and in some cases wastage especially in food production companies. Electricity also enhances supply chain reliability and service efficiency. The banking, healthcare, and logistics sectors depend on uninterrupted power for smooth transactions, proper storage, and seamless distribution. Financial systems require constant uptime for transactions, while storage facilities rely on electricity to prevent spoilage. When businesses can count on a consistent power supply, they lower their costs and improve service delivery, benefiting both producers and consumers.
More importantly, reliable electricity is a driver of innovation and long-term economic growth. Nations with stable power infrastructure experience greater technological advancements, increased research and development, and better industrial automation. Businesses can invest in modern equipment and processes, ensuring continuous improvements in productivity rather than a one-time boost. Without reliable electricity, the transition to more sophisticated industries and digital economies remains stunted.
Concerning point 8, the list of countries I have found to have electricity includes Mauritius, Morocco, Algeria, Tunisia, and Egypt. Notably, these nations have stronger economies than Nigeria in terms of GDP per capita, industrial output, and competitiveness. If reliable electricity were truly insignificant for economic growth, we wouldn’t see a pattern where the most industrialized African nations also tend to have the most stable power supply. While I agree that electricity alone is not enough, these nations are typically on the path to prosperity and are at least in a better economic shape than Nigeria.
Stable electricity is not just a short-term advantage—it is the foundation for sustained and exponential growth across all sectors. Sure, it isn’t the only factor so in that regard and to some large extent, I agree with the points he makes.
My opinion
Personally, I believe, whatever will make Nigeria to have 24/7 electricity will require a lot of hard choices, painful investments, industrial policy actions, good regulatory policies, investment into engineering education to support the different plants and grids, better economic conditions for electricity players and their customers, all of which will happen gradually (let’s assume a 15 year period), and I believe at the point we say Nigeria has 24/7 electricity, a good percentage will at that time because of other factors be able to afford the electricity. But the most important part, electricity won’t happen quickly, suddenly or instantaneously.
And probably the most important part of the discussion, the government needs to see electricity has a public good (in some light). They are the biggest enabler of Nigeria having 24/7 electricity and it will come from different investment and policy implementation across different sectors, that cumulatively result to an actual productive nation. These things are statistically weighted. Not one thing solves a problem, but some are more weighted than others. I think electricity is a high weight factor, and will absolutely make people more productive. Absolutely.
Sidenote: More than usual, Nigerians have to understand every aspect of things outside of their lives. They have to know that refineries do so and so and therefore fuel prices are high, they have to know that the Orthopedic Hospital Bed cost $600 so therefore they can’t have access to affordable healthcare. They have to know the intricacies of so many businesses that affect their everyday life which makes no sense. The government is at the root cause of that. The average Nigerian shouldn’t have to know the way their fuel or electricity gets to them, they just need to get it at affordable price. And that to me is the main crux of the matter.