Electricity Tariff Hike Likely as FG Increase Gas Price

Destiny Michael
By Destiny Michael 3 Min Read

Electricity Tariff Hike Likely as FG Increase Gas Price

Electricity Tariff Hike Likely as FG Increase Gas Price, The Nigerian government has announced a new, higher price for natural gas supplied to electricity generating companies, paving the way for potential increases in electricity tariffs for consumers.

In an announcement on Monday, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) set the new domestic base price of natural gas at $2.42 per million British thermal units (mmBtu). This represents an increase from the previous rate of $2.18/mmBtu.

Natural gas is a crucial fuel source for Nigeria’s power plants, with over 70% of the country’s electricity generated from gas-fired thermal plants. As a major cost component, the rise in gas prices may necessitate an upward revision of electricity tariffs by the Nigerian Electricity Regulatory Commission (NERC) during its next tariff review.

In addition to the base price increase for power firms, the NMDPRA also hiked the commercial gas price to $2.92/mmBtu, up from $2.5/mmBtu previously.

The latest gas pricing move follows the provisions of the Petroleum Industry Act 2021, which mandates the NMDPRA to determine market-based pricing for the domestic gas market. According to the NMDPRA’s chief executive, Farouk Ahmed, the new prices aim to incentivize increased gas production by ensuring sufficient returns for upstream producers.

However, the new gas costs could pose challenges for power consumers already grappling with economic hardships. The current electricity tariffs for distribution companies were calculated based on the previous, lower gas prices outlined in NERC’s Multi-Year Tariff Order released in January 2024.

Gas producers, including international and domestic oil and gas companies, have long advocated for price increases, arguing that higher returns would spur greater investment and boost production levels.

As Nigeria seeks to balance the needs of its energy sector and the economic realities facing consumers, the stage appears set for further discussions and potential reforms surrounding electricity pricing and gas supply economics.

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