The government of the Federal Republic of Nigeria announced on Monday an increment in the price of natural gas for electric power generation companies to $2.42 per mmbtu up from its previous rate of $2.18 mmbtu.
As a result, this increase in gas prices can potentially lead to higher electricity tariffs for Nigerian consumers, pending review by the Nigerian Electricity Regulatory Commission.
This announcement of the new domestic base price and annual average wholesale prices of natural gas for 2024 was published by the Nigerian Midstream and Downstream Petroleum Regulatory Authority which is a Federal Government agency.
Another relevant fact is that commercial gas goes at $2.92/mmbtu as compared to the former rate of $2.50/mmbtu.
This was revealed by Farouk Ahmed, the Chief Executive Officer (CEO) of NMDPRA
It’s important to note that Multi-Year Tariff Orders were issued in January 2024 by NERC for all DisCos based on the prevailing Natural Gas Price Index (NGPI).
Taking into account what has just happened with respect to price adjustments, it is likely that we will also see corresponding increases in our electricity rates if we consider role played by this market at point of power supply.
Gas producers from all over the world and domestic oil and gas companies have become vociferous advocates for price hikes claiming that these would stimulate increased output.
In the same announcement, Ahmed referred to the Petroleum Industry Act 2021 assented to by President on August 16, 2021 and officially published in that month which provides a transparent regulatory framework for market based pricing in the domestic gas sector.
He explained that this is consistent with section 167 and schedules three and four of the PIA 2021 which guide NERA to set Domestic Base Price (DBP) for natural gas supplied to key sectors as well as marketable wholesale price.
Ahmed highlighted guidelines from Section 167(1) et al. of PIA including ensuring enough supplies of natural gas from Producer/Upstream for local use; pricing not above average prices of major emerging countries with similar product; minimum cost of supply anchor on third tier; international benchmarking etc. which are being used in setting DBP at the point of delivery of tradeable gases.
As a result, NMDPRA is setting the 2024 Domestic Base Price at **\$2.42**/MMBTU and the wholesale natural gas prices in strategic sectors after consulting stakeholders and following PIA and Gas Pricing Regulations.