Natural gas prices are rising as a result of tariff increases and energy subsidies

Power generation companies struggling with gas shortages could be embroiled in another crisis as the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) increased natural gas prices.

While the Nigerian Electricity Regulatory Commission (NERC) has set the 2024 Multi-Year Tariff (MYTO) on the price of gas at $2.18, the price has increased to $2.42 for every million British Thermal Units (MMBTU) in the new template issued by NMDPRA.

NMDPRA, which released the official price list for its X, revealed that commercial customers will purchase gas at a price of $2.92/MMBTU. NMDPRA based its decision on the provisions of the Petroleum Industry Act (PIA), which provided the regulatory framework to define a market-based pricing regime for Nigeria’s domestic gas market.

The document signed by the agency’s director general, Farouk Ahmed, states that the regulator is obliged to determine the national base price (DBP) and the wholesale market price of natural gas supplied to strategic sectors.

Stating that the decision was taken after due consultation with key stakeholders and taking into account the provisions of the PIA, Ahmed said the price was based on the domestic base price of $2.42/MMBTU and wholesale prices of natural gas.

Currently, most power plants in the country are operating below capacity given the gas challenges. Although the federal government owes gas companies more than $2 billion, the current increase would increase the debt.

The investment would also raise electricity costs, especially the $1.7 trillion subsidy the government is expected to pay this year.