Blackout: More Troubles for Power Plants as FG Increases Gas Price by 11%

In a move that adds further strain to Nigeria’s already beleaguered power sector, the Federal Government has announced an 11% increase in the wholesale price of gas supplied to power plants. The price hike, which sees gas rates surge from $2.18 per MMBTU to $2.42 per MMBTU (Million British Thermal Unit), imposes additional financial burdens on power generation companies grappling with mounting costs.

Since January, gas suppliers have curtailed their supply to power plants, citing unpaid invoices totaling over $1.2 billion. The government intervened last month by disbursing $120 million to alleviate the crisis, as electricity supply across the nation dwindled.

The announcement, issued by Engr Farouk Ahmed, Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), also sees the commercial wholesale gas price escalating from $2.42 per MMBTU to $2.92 per MMBTU.

The move, outlined in a notice titled “Announcement on establishment of the 2024 domestic base price and applicable wholesale price of natural gas for strategic sector,” is framed within the framework of the Petroleum Industry Act, 2021, granting regulatory powers to set domestic base prices for the local market.

Reacting to the gas price hike, Mr. Adetayo Adegbemle, Executive Director of PowerUp Nigeria, expressed concerns over its impact on electricity generation costs. He emphasized the pivotal role of gas as a primary fuel for power plants and warned that the escalation in gas prices would inevitably translate to higher production costs for electricity.

Adegbemle underscored the challenges faced by the Federal Government in subsidizing electricity tariffs amidst escalating gas prices and urged a reassessment of subsidy policies to reflect the true cost of production.

The decision to raise gas prices comes amid ongoing efforts to stabilize Nigeria’s power sector and address systemic challenges hindering efficient electricity generation and distribution.