Edward Esene runs a co-working space and incubation hub in Alausa, the administrative heart of Lagos State, and is planning to relocate in the coming weeks. However, he’s not doing it because he wants a larger space or proximity to customers. His decision to relocate is driven by electricity costs.
“My light bill in Alausa is over ₦200,000 a month, and that’s modest,” he says. “If all the air conditioners are on, it can exceed ₦400,000. That’s too high.”
Nigeria’s power problem is not new. What has changed, though, is how it is priced. In 2020, the Nigeria Electricity Regulatory Commission introduced a service-based tariff system, sorting consumers into bands A to E. Those in Band A receive the most hours of electricity — up to 20 hours a day — and pay the highest tariffs. Lower bands get less power but also pay less for it.
On paper, Esene is among the fortunate. His co-working space sits in a Band A zone, theoretically guaranteeing near-continuous supply. In practice, that reliability comes at a premium. For ₦20,000, he receives roughly 88 units of electricity at his office; at home, in a Band B area, the same amount buys him about 148 units.
The math is unforgiving, especially for a small business. Reliable grid power reduces the need for diesel generators, but not enough to offset the higher tariff. After months of calculation, Esene is preparing to move his business to a Band B area, where he expects to cut his energy bill by as much as half.
“My bill could fall to ₦250,000 monthly,” he says. “In a year, that’s more than ₦2.5 million saved.”
His predicament reflects a broader trend in Nigeria’s co-working sector. As remote work has spread and the country’s technology industry has expanded, shared workspaces have proliferated in major cities such as Lagos, Abuja, and Port Harcourt. They promise stable electricity, fast internet, and professional environments — amenities that are far from guaranteed in a country that generates less than 6,000 megawatts of electricity for more than 200 million people.
For many users, the appeal is in their ability to escape the chaos and unpredictability for a fee, but for operators, the equation is far less forgiving. Electricity, whether from the grid or generators, can account for 20% to 40% of operating costs. When tariffs rise or supply falters, margins quickly evaporate.
Just three kilometres from Esene’s hub, another co-working space tells a similar story. Rehdalia, founded by Florence Chikezie in Ikeja, also sits in a Band A area. Yet recent outages have rendered that classification almost meaningless.
Victoria Fakiya – Senior Writer
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“We get about three hours of light between 8am and 11am,” Chikezie says. “Running a co-working space means stable electricity is not optional. Our members rely on power to work, to run meetings and [to] operate their businesses.”
The shortfall has forced Rehdalia to lean heavily on diesel generators. The cost of doing so has surged. Within the span of four days, Ms Chikezie says, diesel prices rose from around ₦990 per litre to ₦1,690.
The consequences have been severe. She estimates that operating costs at her hub have risen by at least 60% in the past two months. Still, raising prices is not on the table yet. Co-working customers, often freelancers, startups, and small businesses, are highly price-sensitive, and any price increase could force them out.
“People have options,” she says. “They can work from home. They can switch to virtual training instead of renting a space.”
This reality constrains operators. Even at full occupancy, Chikezie suggests, the fees charged to members are often insufficient to cover costs, let alone generate a profit. The result is a business model under strain.
Esene is blunt about the outlook. “The co-working space is no longer profitable,” he says.
To cope, operators are improvising. Esene runs a dual pricing model: one tier for freelancers and small businesses, and another for entrepreneurship programmes funded by governments or development organisations. The latter, backed by deeper pockets, effectively subsidises the former. But such programmes are episodic, lasting only a few months at a time. When they end, the underlying economics reassert themselves.
Others are experimenting with new uses for their spaces. Weekends, once quiet, are being repurposed for events, trainings, and short-term rentals. Every additional revenue stream helps offset the rising cost of power.
Many business owners are also exploring alternative power sources as a potential escape from diesel and petrol dependence. Yet the upfront costs remain prohibitive. Esene is pursuing incremental approaches by installing systems piece by piece as cash flow allows.
“We need to cut down energy costs,” he says. “That Band A cost doesn’t mean I don’t still have fuel expenses.”
By linking tariffs more closely to supply, the government has created incentives for improved service. But for businesses like co-working spaces, where electricity is not just a key input but the product itself, higher tariffs can be as damaging as unreliable supply.
In theory, better power should enable better business. In practice, it is forcing some to close their doors. For Esene, the decision is already made. His next location will offer less reliable grid power, but at a lower price. It is a trade-off that would puzzle operators in more stable markets. In Nigeria, it is perfectly logical.
