Nigeria Adjusts Natural Gas Prices Amid Ongoing Power Sector Challenges
The Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has announced a modest increase in the price of natural gas sold to power generation companies, raising it by 5 cents. This adjustment comes at a time when the power sector is already contending with billions of dollars in accumulated debt.
Starting April 1, 2026, the new domestic reference price for natural gas will rise from $2.13 to $2.18 per million British thermal units (MMBtu), as directed in a circular released by the NMDPRA on Tuesday. This price serves as the lowest benchmark for natural gas transactions within the domestic market.
The authority emphasized its commitment to considering various factors, including the provisions of the Petroleum Industry Act (PIA), market conditions, and regulations on gas pricing outlined in the Official Gazette. NMDPRA’s circular, signed by CEO Saidu Mohammed, indicates a thorough evaluation of the pricing landscape.
Commercial users will see their costs increase, with prices set to fall between $2.63 and $2.68 per MMBtu under the new pricing schedule. For gas-based industries—such as those producing ammonia, urea, methanol, and low-sulfur diesel—a price band will be established, ranging from a floor of $0.90 to a ceiling of $2.18 per MMBtu.
NMDPRA’s pricing strategy derives from Article 167(1) of the PIA, which seeks to ensure that gas prices are attractive enough to engage upstream producers while remaining competitive with benchmark rates from other emerging gas-producing markets. The framework intends to reflect the lowest cost of supply, facilitated through a three-tier system linked to international benchmarks.
This incremental price adjustment represents a careful balancing act for the Nigerian government. Power generation companies have struggled with unpaid electricity bills, a shortfall of foreign currency, and gas supply constraints, leading to significant inefficiencies in the nation’s power grid, which fails to meet demand adequately.
Increasing gas prices too significantly could exacerbate the existing debt crisis in the sector while also inflating the cost of electricity, an issue that remains sensitive politically. Conversely, setting prices too low undermines the essential commercial incentives necessary to draw new investments into upstream operations and improve domestic gas supply. The PIA aims to address these complex challenges.
Nigeria’s electricity grid has faced persistent difficulties in delivering reliable power to households and businesses, often generating electricity well below its installed capacity. Ongoing gas shortages continue to hamper production, a situation partly attributed to low-cost supply contracts that inhibit producers from prioritizing the domestic market.
The newly implemented pricing framework appears to contradict the broader reform initiatives spearheaded by President Bola Tinubu’s administration, which aim to streamline fuel and energy subsidies while enticing private investment into the power sector.
The impact of this 5-cent adjustment remains uncertain. Industry experts have suggested that lasting reforms will necessitate more comprehensive structural changes, including addressing the sector’s historical debts and fostering better payment compliance across the electricity value chain, as incremental price changes alone may not lead to significant increases in capacity.
