FG raises natural gas price, sparks concerns over electricity tariff hikes

The decision by the Federal Government to raise the price of natural gas for power generation has sparked concerns about potential hikes in electricity tariffs.

The new rate of $2.42 per metric million British thermal unit (mmbtu), up from $2.18mmbtu, could significantly impact power consumers, considering Nigeria’s heavy reliance on gas-fired thermal power plants.

This adjustment, announced by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), includes an increase in commercial gas prices to $2.92mmbtu from $2.5mmbtu.

The move may prompt revisions in power tariffs pending a review by the Nigerian Electricity Regulatory Commission, as previous tariff calculations were based on the former gas price.

Gas producers, advocating for price hikes to boost production, have welcomed the decision.

The Petroleum Industry Act 2021 provides the regulatory framework for market-based pricing in the domestic gas sector, aligning with the government’s action.

According to Farouk Ahmed, Chief Executive of NMDPRA, the establishment of the 2024 Domestic Base Price at $2.42/mmbtu and wholesale prices for natural gas follows consultations with stakeholders, aiming to ensure market competitiveness and supply sustainability.