Federal Government Raises Gas Prices, Complicating Matters for GenCos

Electricity Generation Companies (GenCos) are bracing for a rise in gas prices utilized in thermal power generation, following the announcement by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) regarding a hike in the cost of gas supplied domestically.

On Tuesday, the NMDPRA communicated through its official handle on X that the new price for gas provided to the power sector will increase from $2.13 to $2.18 per metric million British thermal units (MMBTU).

For commercial users, the price has been adjusted to $2.68 MMBTU from the previous $2.63 MMBTU, indicating an overall increase of $0.05 MMBTU for both consumer categories. This information was conveyed through a notice signed by NMDPRA Chief Executive, Engr. Saidu A. Mohammed, with the adjustment set to take effect on April 1.

The notice further elaborated that the increase aligns with the Petroleum Industry Act (PIA) 2021, which provides a comprehensive regulatory framework for establishing a market-based pricing model for Nigeria's domestic gas sector. It specifies that the domestic base price (DBP) and the wholesale price of gas supplied to essential sectors must adhere to certain statutory guidelines.

The regulatory framework stipulates that the price must not exceed the average rates of similar natural gas in major emerging nations that are significant gas producers. It also establishes the importance of determining prices based on the lowest cost of supply within a three-tier framework, factoring in market dynamics and international benchmarks.

Consequently, taking into account the PIA provisions, market realities, and the outlined Gas Pricing and Domestic Demand Regulations, the NMDPRA has set the new DBP at $2.18/MMBtu for the strategic sector, effective April 1, 2026.

Implications of the New Pricing on Government Subsidies

According to reports, this price adjustment will likely result in an increase in the federal government’s subsidy commitments. While the Nigerian Electricity Regulatory Commission (NERC) is responsible for regulating electricity tariffs for consumers, it may face pressure to revise the current rates upwards for all consumer categories.

For consumers in Band A, the government has ceased tariff interventions, and any increases by the NERC would mean these consumers will pay more than the current rate of N209 per kilowatt-hour.

For the remaining consumer bands, the government had accrued a substantial debt of N1.92 trillion in 2025, a figure likely to grow amid a halt on tariff increases for other consumer bands. Previously, the government allocated N71.49 billion in subsidies, but the new gas pricing could intensify the financial strain on GenCos, who have been dealing with the government's failure to settle its outstanding N6 trillion debt in the sector.

For many Nigerians connected to the national grid, this development suggests a higher likelihood of power outages if gas providers decide to reduce their supply to GenCos.