The Federal Government has recently raised the price of gas for power generation from $2.18 per Metric Million British Thermal Units (MMBtu) to $2.42 MMBtu. Engr. Farouk Ahmed, the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), announced this adjustment in a notice circulated on Monday in Abuja. According to HEADLINENEWS Nigeria, the notice is titled: “Announcement of the Year 2024 Domestic Based Price (DBR) and Applicable Wholesale of Natural Gas for Strategic Sectors.” In addition, Ahmed mentioned that the commercial wholesale gas price has also been increased from $2.42/MMBtu to $2.92/MMBtu.
This price revision is in accordance with the Petroleum Industry Act, which empowers regulatory bodies to establish local market prices based on international standards and cost considerations to ensure an ample gas supply for domestic requirements. The NDMPRA leader emphasized that the governing Petroleum Industry Act of 2021 grants the Authority the mandate to determine domestic base prices for the local market. Following consultations with major stakeholders and adhering to the PIA’s regulations and the gazetted Gas Pricing and Domestic Demand Regulations, the NMDPRA has set the Year 2024 Domestic Base Price at USD 2.42/MMBTU and the wholesale prices for natural gas in strategic sectors.
This adjustment is expected to impact power generation costs significantly since gas serves as a primary fuel source for power plants in the country, with thermal power plants currently contributing to 80 percent of electricity generation. Additionally, the price increase is likely to result in higher subsidies that the federal government must allocate to electricity consumers, unless the market is allowed to implement a fully cost-reflective tariff.
