The Federal Government of Nigeria has announced an increase in the price of natural gas for power generation companies, setting it at $2.42 per metric million British thermal unit (mmbtu). This new rate marks an uptick from the previous price of $2.18mmbtu.
As Nigeria heavily relies on thermal power plants fueled by gas for over 70 percent of its electricity generation, the rise in gas costs is anticipated to potentially result in a hike in tariffs for power consumers once the Nigerian Electricity Regulatory Commission (NERC) conducts another tariff review.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), a federal agency, unveiled the adjusted domestic base price and wholesale prices of natural gas for 2024 in a statement released on Monday. Signed by the Chief Executive, Farouk Ahmed, the announcement also indicated an increase in the commercial gas price to $2.92mmbtu from the previous rate of $2.5mmbtu.
This adjustment follows the enactment of the Petroleum Industry Act 2021, which provides a regulatory framework for determining a market-based pricing regime for the domestic gas market. Ahmed emphasized that the latest action aligns with the provisions of the Act, particularly section 167 and the third and fourth schedules.
According to Ahmed, the pricing principles include ensuring sufficient natural gas supplies for the domestic market on a voluntary basis by upstream producers, maintaining prices within the average range of similar natural gas prices in major emerging countries, and adopting a three-tier cost of supply framework.
In light of these considerations, the NMDPRA set the 2024 Domestic Base Price at $2.42/mmbtu and wholesale prices for natural gas in strategic sectors, following consultations with stakeholders and in compliance with the PIA and Gas Pricing Regulations.
The adjustment in natural gas prices is expected to impact the cost of electricity production, potentially leading to tariff revisions by electricity distribution companies. Gas producers, both international and domestic, have advocated for higher gas prices as an incentive for increased production.
