Peer-To-Peer Enforcement Among Businesses to Assure Electricity Payment in Nigeria: a Lab-In-The-Field Experiment

The authors used the political settlement framework to explain why a national grid-based electricity solution has not been viable in Nigeria in the short to medium term. The study found that the grid’s failures were not only technical but institutional and political, reflecting underlying power asymmetries that had constrained infrastructure investment. These conditions had deterred technically capable private sector investors, particularly those requiring regulatory credibility and predictable enforcement environments. The costs of an unreliable grid had been borne most heavily by SMEs, which had faced sustained productivity losses, rising operating costs, and declining competitiveness. Many firms had turned to precarious and polluting alternatives—including illegal electricity tapping and diesel generators—to compensate for power shortfalls, further increasing costs and worsening local air quality. The first phase of the research identified SMEs as a productive consumer constituency suffering the greatest economic losses from unreliable electricity. The study showed that these firms could have been served through an embedded, disaggregated grid model, organised around SME cluster-level mini-grids. A regulatory and legal architecture for distributed energy solutions now exists. Although not yet fully operationalised at scale, the framework could provide sufficient space for private mini-grid investment, local tariff setting, and decentralised energy provision. The research then applied the Power–Capability–Interest (PCI) framework to assess whether a distributed energy model could have aligned incentives for investors and consumers while strengthening rule-following behaviour. It also found that the SMES who were broadly of similar capability and power had interest to both pay for the electricity they received and monitor their peers to ensure they also complied with payments. To test contract-compliance mechanisms, the study further implemented a lab-in-the-field behavioural experiment among 145 SMEs drawn from the Kugbo furniture manufacturing cluster in Abuja. Firms were randomly assigned to treatment groups that varied by association composition and firm-size symmetry. Some groups included SMEs from the same trade association, while others had mixed associations, enabling the study to test the effects of social networks, information flows, and trust on payment behaviour. Group contracts also varied by firm size to assess whether symmetric or asymmetric group structures affected peer monitoring and bill enforcement under different power asymmetries. The experimental design has drawn on threshold public goods game literature, modelling electricity provision as a threshold-dependent public good delivered only when collective payments were met. Variants incorporated joint liability, peer monitoring, and economic incentives to test how contract features influenced payment behaviour under asymmetric information and low baseline trust. The research delivered two major conclusions. First, it provided quantitative validation for the hypothesis that distributed mini-grid contracts could have strengthened rule-following and reduced corrupt coping incentives among SMEs by lowering costs. Second, it produced credible payment-performance evidence that was later used to inform funders, shaping pilot contract design, collective payment mechanisms, and investor-engagement strategies. The findings demonstrate that behavioural evidence could have strengthened investment confidence and validated SME-centred distributed energy solutions as both economically competitive and governance-enhancing.