By Rotimi Asher, Lagos
Lagos State electricity deficit has continued to place an enormous financial burden on residents and businesses, a newly released report estimated that the energy shortfall adds additional N5.3 trillion annually to their costs.
The Lagos Economic Development Update ,LEDU, 2025, published by the Lagos State Government, reveals that while the state requires approximately 9,000 megawatts ,MW, of electricity, it receives a meagre 1,000 MW from the national grid just 11% of demand.
As a result, more than 80% of Lagos population and businesses rely on off-grid power solutions, predominantly petrol, diesel, or fuel oil generators.
This dependency contributes to high energy costs, inefficiencies, and severe environmental pollution.
The report highlights that off-grid generators in Lagos produce around 15,000 MW daily but at a significantly higher price.
Power generated from these sources costs approximately N130 per kilowatt-hour ,kWh, compared to N50/kWh from the national grid. This cost disparity translates to an additional financial burden of N5.3 trillion per year on Lagosians, further reducing disposable incomes, limiting business investments, and slowing overall economic productivity.
“Off-grid generators in Lagos produce about 15,000 MW daily but at exorbitant costs, with power generated at N130 per kilowatt-hour ,kWh, compared to the national grid’s N50/kWh. This disparity imposes an additional financial burden of approximately N5.3 trillion annually on residents and businesses, reducing disposable incomes, limiting investments, and weakening economic productivity”, the report stated.
The excessive reliance on fuel-powered generators also exacerbates Lagos’ environmental concerns, contributing to high levels of carbon emissions, noise pollution, and health hazards associated with fossil fuel consumption. Experts warn that unless urgent action is taken to diversify and expand the state’s energy mix, Lagos risks enduring prolonged economic and environmental setbacks.
According to projections in the LEDU 2025 report, Lagos electricity demand is expected to surge to 29,212 MW by 2030, driven by rapid urbanization and economic expansion.
However, the current trajectory of the national grid and state energy policies indicate that supply will remain significantly inadequate, leaving the state unprepared for its future energy needs.
The report further highlights the state’s overburdened infrastructure as a huge challenge. It states “Energy infrastructure in Lagos is outdated and highly susceptible to climate impacts, including floods and extreme weather events”.
Energy analysts argue that addressing Lagos’ power crisis requires massive investment in renewable energy, expansion of independent power projects ,IPPs, and improved grid infrastructure to enhance reliability and affordability. Additionally, regulatory reforms and incentives to attract private sector participation in the power sector are seen as critical to bridging the widening electricity gap.
To mitigate this crisis, the Lagos State Government has emphasized the need for strategic partnerships with private investors and international organizations to scale up alternative energy solutions, particularly in solar, wind, and gas-powered electricity generation.
The push for renewable energy adoption and improved transmission infrastructure is seen as a vital step toward achieving energy security for Africa’s largest megacity.
Meanwhile, Lagos state has cemented its position as one of Africa’s economic powerhouses, with its Gross Domestic Product ,GDP, reaching an impressive $259 billion based on purchasing power parity ,PPP.
This milestone places Lagos as the second-largest economy on the continent, trailing only Cairo, Egypt.
This was made known during the official launch of the Lagos Economic Development Update ,LEDU, 2025 on Wednesday.
According to the report, the state ranks as Africa’s second-largest city economy by Purchasing Power Parity ,PPP, following Cairo.
The report revealed that the state’s Gross Domestic Product ,GDP, stood at US$259.75 billion in 2023.
The Lagos economy recorded significant growth in the first half of 2024, expanding to N27.38 trillion, a substantial increase from N19.65 trillion in 2023.
This growth highlights the resilience of Nigeria’s commercial capital amid economic reforms and ongoing infrastructural investments.
Despite this growth, the tax-to-GDP ratio remains low at 2.3%, reflecting the need for enhanced revenue mobilization efforts.
Looking ahead, the Lagos State government has set ambitious projections for the 2025 fiscal year, with expectations for further economic expansion and stability. The key assumptions include:
The state’s GDP is projected to grow from N54.77 trillion in 2024 to N66.47 trillion in 2025. Real GDP growth is expected to range between 5.02% and 6.49%.
The service sector will continue its expansion, complemented by improvements in agriculture and industrial production. Economic stability is expected to be aided by a decline in PMS ,petrol, prices and a stable naira/dollar exchange rate.
Headline inflation is projected to be 34.2%, with food inflation slightly higher at 34.9%.
The State Government anticipates generating N2.79 trillion in revenue for 2025, emphasizing the need for increased fiscal discipline and diversification of revenue sources.
Lagos remains a key destination for investors looking to tap into Nigeria’s vibrant economic landscape.
The state’s continued economic expansion, coupled with strategic policy interventions, presents opportunities in infrastructure development, technology, real estate, and manufacturing.
However, observers note that while Lagos enjoys a large economy, challenges such as high inflation, foreign exchange volatility, and infrastructure deficits must be addressed to sustain long-term growth.
The National Bureau of Statistics ,NBS, is set to rebase Nigeria’s Gross Domestic Product ,GDP, this year, using 2019 as the new base year instead of 2010.
The base year for GDP calculations is being updated from 2010, which has been in use for the past 15 years, to 2019.
The rebasing process includes extensive updates in the scope of economic activities captured, with particular focus on:
Digital Economic Activities: Inclusion of e-commerce, fintech, and other online services.
Emerging Sectors: Data from modular refineries, pension fund administrators, and quarrying industries.
Social Programs: Activities from the National Health Insurance Scheme ,NHIS, and the Nigerian Social Insurance Trust Fund ,NSITF.
