In a move that could reverberate across Nigeria’s energy landscape, the Federal Government unveiled a significant hike in the price of natural gas for power generation, setting the new rate at $2.42 per metric million British thermal unit (mmbtu), up from the previous $2.18mmbtu.
The announcement, made on Monday by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), signals a pivotal shift in the domestic gas market, with implications extending to electricity tariffs and energy production.
Nigeria, heavily reliant on thermal power plants fueled by gas, faces the prospect of escalating power costs as the increased gas prices are expected to cascade down to consumers once the Nigerian Electricity Regulatory Commission (NERC) conducts its tariff review.
Against the backdrop of mounting pressure from gas producers, both international and domestic, for a price revision, the move underscores the complexities of balancing energy affordability with incentivizing production.
Farouk Ahmed, Chief Executive of NMDPRA, highlighted the regulatory framework provided by the Petroleum Industry Act 2021, emphasizing the imperative of market-based pricing in the domestic gas sector.
Under the provisions of the Act, Ahmed noted, the authority is mandated to determine the Domestic Base Price and wholesale rates of natural gas, guided by principles such as incentivizing supply, benchmarking with international standards, and ensuring cost efficiency.
“The setting of the 2024 Domestic Base Price at $2.42/MMBTU and wholesale prices for natural gas in strategic sectors reflects meticulous consultations with stakeholders and strict adherence to regulatory guidelines,” Ahmed affirmed.
As Nigeria grapples with the ramifications of the gas price adjustment, stakeholders brace for potential tariff revisions, navigating a delicate balance between economic viability and energy accessibility in the nation’s pursuit of sustainable development.
