Lagos is seeking to turn its electricity demand into a bankable market, targeting about 3.5 gigawatts (GW) of supply to close a shortfall that has left the state’s fast-growing data centre and telecom sector relying heavily on diesel generators to keep operating.

The state currently draws less than 1GW from a national grid capable of transmitting considerably more, a gap officials examined at Thursday’s Lagos State High-Level Strategic Power Town Hall.

Government officials, regulators, electricity operators and investors discussed why Lagos continues to underdraw from a grid with far greater transmission capacity, and what would be required for electricity delivery to become more predictable in a state that hosts much of Nigeria’s digital infrastructure.

The shortfall extends beyond households. Lagos hosts the bulk of Nigeria’s data centre and telecom infrastructure, an industry that depends on uninterrupted power and has increasingly relied on diesel generators to compensate for grid unreliability, with energy accounting for a significant share of operating costs across the sector. A functioning, contracted electricity market would directly affect what it costs digital infrastructure operators to keep servers running, while also testing whether the state can translate large demand into reliable supply under its emerging electricity framework.

The Special Adviser to the President on Power and Chairman of the Presidential Taskforce on Power Sector Reset and Restoration, Rilwan Babalola, said Lagos now had an opportunity to demonstrate what a commercially viable electricity market could look like under Nigeria’s emerging decentralised power regime.

He said the proposed Clean Lagos Electricity Market would initially test a 500 megawatts (MW) model built around aggregating demand, contracting directly with power suppliers, guaranteeing payment and allowing electricity to move through an open-access network.

“We are no longer just talking about generating more electricity. We are talking about creating a market that works,” Babalola said.

He added that the first phase should not be scaled prematurely, arguing that Lagos must first establish that customers could be identified, electricity delivered and metered, and generators and other participants paid transparently.

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The scale of the deficit was highlighted by the Commissioner for Energy and Mineral Resources, Biodun Ogunleye, who said Lagos currently receives less than 1GW from the grid despite the Transmission Company of Nigeria having the capacity to transmit about 3.5GW. He said the state was seeking an additional 2GW as an immediate step toward its target, which would enable more distribution feeders to operate and help move the market closer to the level of supply the state says it needs.

Chief Executive Officer of the Lagos State Electricity Regulatory Commission, Temitope George, said the state was also examining embedded generation and restructuring existing Independent Power Projects to make them financially viable, citing weak generation, vandalism, electricity theft and unpaid bills as ongoing problems.

Ogunleye said consumers should not be expected to shoulder higher tariffs without corresponding improvements in metering and infrastructure. “Consumers must not be made to pay for darkness,” he said.

Stakeholders at the town hall agreed to develop measurable action points and establish baselines to track progress in the sector.