Nigeria's commercial capital Lagos bets on local power as grid falters

Nigeria's grid delivers about 3,000 MW on a good day, far short of estimated demand of more than 30,000 MW, ⁠according ​to government power plans, forcing businesses ⁠and households to rely on diesel generators. Lagos activated its electricity regulatory regime in June 2025 and transferred oversight of intrastate electricity matters from the Nigerian ⁠Electricity Regulatory Commission (NERC) to the Lagos State Electricity Regulatory Commission.

Lagos is betting that Nigeria's chronic electricity shortages can be addressed outside the national grid, scaling up ‌state-backed power generation and distribution after securing 400 megawatts of new supply, the state's energy commissioner said. Africa’s largest city is pressing ahead under reforms that allow sub-national governments to regulate power as Nigeria’s grid struggles. At least 22 other states are also ‌setting up electricity markets to reduce reliance on the centralised system in Abuja, according to data from the power ‌regulator.

"We are seeking to move beyond a single point of failure," Lagos Commissioner for Energy and Mineral Resources Biodun Ogunleye said at a conference organised by BusinessDay newspaper on Tuesday. Nigeria's grid delivers about 3,000 MW on a good day, far short of estimated demand of more than 30,000 MW, ⁠according ​to government power plans, forcing businesses ⁠and households to rely on diesel generators.

Lagos activated its electricity regulatory regime in June 2025 and transferred oversight of intrastate electricity matters from the Nigerian ⁠Electricity Regulatory Commission (NERC) to the Lagos State Electricity Regulatory Commission. By the end of the year, it had assumed full regulatory control ​of its electricity market, becoming the first Nigerian state to do so, officials said. In a circular last year, NERC ⁠said state regulators would oversee intrastate electricity matters, while it would retain responsibility for interstate electricity transactions, national grid operations and industry standards.

Lagos has signed power ⁠purchase ​agreements with Fenchurch Power, Mainland Power and Viathan Engineering Limited to supply up to 400 MW to public facilities over three years. "These are not business-as-usual PPAs," Ogunleye said. "They represent a fundamental shift in how Lagos procures and pays ⁠for power."

Lagos has scrapped "take-or-pay" and "deemed energy" provisions, which required payments even when power was not delivered, and will instead pay only ⁠for metered electricity supplied, officials said. Analysts ⁠said state-level power markets could improve reliability but would not remove constraints including gas supply, foreign exchange exposure, affordability, transmission bottlenecks and weak technical capacity.

"Capital is available, but revenue assurance ‌is a problem," said ‌Bola Adigun, a partner at Deloitte Nigeria.