Nigeria’s electricity and gas sector is shrinking even as the wider economy grows, highlighting the persistent weakness of one of the country’s most critical infrastructure industries.
The electricity, gas, steam and air-conditioning supply sector contracted by 10.63% year-on-year in real terms in the second quarter of 2026, according to the latest Gross Domestic Product (GDP) report from the National Bureau of Statistics (NBS).
It was the sector’s second consecutive quarterly contraction, although the decline was less severe than the 15.30% contraction recorded in Q1.
The performance stands in sharp contrast to the broader Nigerian economy, which expanded by 4.43% in real terms in Q2 2026, compared with 4.23% in the same quarter of 2025.
Real Output Falls Despite Higher Nominal Value
The latest figures reveal an important distinction between the sector’s nominal value and its actual output.
In nominal terms, the sector grew 0.87% year-on-year in Q2, down from 4.98% in Q1.
Its nominal value also increased substantially, from ₦324.83 billion in Q1 to ₦1.26 trillion in Q2.
But nominal growth can reflect changes in prices and other monetary factors. The real-term contraction provides a clearer indication of the sector’s underlying volume of economic activity.
And on that measure, the industry remained firmly in decline.
Why the Power Sector Matters
Electricity remains one of the biggest constraints on Nigeria’s productive economy.
Manufacturers, businesses and households continue to combine electricity from the national grid with privately generated power, including diesel- and petrol-powered generators.
Persistent problems across the electricity value chain can therefore have effects far beyond the sector itself.
Key challenges include:
- Insufficient generation and transmission capacity
- Gas supply constraints
- Ageing power infrastructure
- Liquidity problems across the electricity market
- Unreliable supply to businesses and households
When electricity becomes unreliable or expensive, businesses face higher production costs, manufacturers may reduce output and productivity suffers.
That creates a drag on economic growth even when other sectors are expanding.
Earlier Generation Gains Have Not Translated Into Sustained Growth
The latest GDP figures also contrast with improvements recorded in electricity generation during 2025.
Earlier data showed that power generation increased by 10.92% in Q1 2025, supported by better operating performance and availability across thermal and hydropower facilities.
Thermal plants accounted for much of the improvement, with 16 of the 23 thermal power plants connected to the national grid recording higher average hourly output than in the preceding quarter.
The subsequent contraction in the electricity and gas sector suggests that those gains have not yet developed into sustained real growth across the broader industry.
Improving generation at individual points in the system is not enough if problems with transmission, distribution, gas supply and market liquidity continue to constrain the wider value chain.
The Sector Still Has a Large Economic Footprint
Despite its weak recent performance, the sector remains economically significant.
It generated ₦62.12 billion in Company Income Tax in 2025, underscoring the scale of activity associated with electricity and gas supply.
That makes the latest contraction particularly important.
A stronger power sector could lower operating costs for businesses, support industrial production and improve household productivity. Conversely, prolonged weakness can continue to impose an indirect tax on economic activity through expensive alternative power sources and unreliable supply.
Nigeria’s Growth Story Has a Power Problem
The broader economy is expanding, but the electricity and gas sector is moving in the opposite direction.
That divergence matters.
Nigeria can record respectable headline GDP growth while businesses continue to struggle with the cost and reliability of electricity. But sustained economic expansion will become harder to achieve if one of the foundations of productive activity remains under pressure.
The 10.63% Q2 contraction, following the 15.30% decline in Q1, therefore points to more than a weak quarter for the power industry.
It highlights a structural challenge that remains unresolved:
Nigeria’s economy is growing, but its electricity system is still struggling to provide the reliable and affordable energy needed to sustain that growth.