April 20, 2024
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Surge in Electricity Tariff Looms as Nigerian Govt Hikes Gas Price

On Monday, the Nigerian Government announced an increase in the price of natural gas for electricity generation, setting the new rate at $2.42 per metric million British thermal units (MMBTU), up from the earlier rate of $2.18/MMBTU.

The price adjustment was disclosed by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), specifying both the new domestic base price and the wholesale prices for natural gas for the year 2024.

Furthermore, the price for commercial gas has been adjusted to $2.92/MMBTU from $2.50/MMBTU. This information was made public in a statement signed by NMDPRA’s Chief Executive, Farouk Ahmed. It’s worth noting that the electricity distribution companies’ Multi-Year Tariff Order issued by NERC in January 2024 was based on the previous gas prices.

The revised gas prices suggest a likely increase in electricity tariffs, as gas plays a crucial role in power generation. Gas producers, including both international and local oil and gas companies, have long advocated for a price increase to encourage higher production levels.

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Over 70% of Nigeria’s electricity is produced by thermal power plants relying on gas, hence, this price hike could potentially lead to increased electricity rates for consumers, pending a tariff review by the Nigerian Electricity Regulatory Commission.

In his statement, Ahmed referenced the Petroleum Industry Act 2021 which establishes a regulatory framework for market-based pricing in the domestic gas market. According to the PIA 2021, the NMDPRA is tasked with determining the Domestic Base Price and the wholesale price of natural gas for strategic sectors, adhering to certain principles aimed at ensuring adequate gas supply at competitive prices compared to major emerging natural gas-producing countries.

The NMDPRA has thus set the 2024 Domestic Base Price at $2.42/MMBTU and adjusted wholesale prices for strategic sectors, after stakeholder consultations and by the PIA and Gas Pricing Regulations.

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