The Federal Government of Nigeria has announced an increase in the price of natural gas for electricity generation, setting the new rate at $2.42 per metric million British thermal unit (MMBTU), up from the previous $2.18 MMBTU.
This adjustment could potentially lead to higher electricity tariffs, as thermal power plants, which contribute over 70% of Nigeria’s electricity and rely on gas, may face increased operating costs.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) disclosed the updated domestic base price and wholesale prices for natural gas for the year 2024.
The price for commercial gas has also been raised to $2.92 MMBTU from $2.50 MMBTU.
Given that the Multi-Year Tariff Order issued by the Nigerian Electricity Regulatory Commission (NERC) in January 2024 was based on the former gas prices, the new rates suggest a likely revision of electricity tariffs, considering the significant role of gas in power generation.
Gas producers have been advocating for a price increase, arguing that it would incentivize production enhancement.
The NMDPRA’s decision aligns with the Petroleum Industry Act 2021, which provides a framework for establishing market-based pricing for domestic gas.
The Act stipulates that the Domestic Base Price (DBP) should encourage adequate gas supply, be competitive with prices in other major gas-producing emerging countries, and reflect the lowest supply cost tied to international benchmarks.
Consequently, the NMDPRA has set the 2024 Domestic Base Price at $2.42/MMBTU and adjusted wholesale prices for natural gas in strategic sectors, following stakeholder consultations and adherence to the PIA and Gas Pricing Regulations.
This move underscores the government’s commitment to a regulated and market-responsive pricing structure for the energy sector.
