Higher Electricity Cost Looms as NMDPRA Raises Gas Price for GenCos

Millions of Nigerian households and businesses are bracing for a potential spike in electricity tariffs as the Federal Government officially increased the price of natural gas supplied to power generation companies (GenCos).

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) disclosed on Tuesday, in a public announcement, that the Domestic Base Price (DBP) for natural gas has been adjusted to $2.18 per million British thermal units (MMBtu), up from the 2025 rate of $2.13/MMBtu.

The adjustment, which takes effect today, April 1, 2026, represents a 2.35 per cent increase.

Under the new directive signed by NMDPRA Chief Executive Saidu Mohammed, the pricing for various strategic sectors has been recalibrated. Power Sector base price is now $2.18/MMBtu, commercial users at $2.68/MMBtu, up from $2.63, and Gas-Based Industries has a price band with a floor of $0.90 and a ceiling of $2.18/MMBtu.

The downstream regulator stated that the review was conducted in line with the Petroleum Industry Act (PIA) 2021, aimed at ensuring a “market-based pricing regime” that encourages upstream producers to supply gas to the domestic market voluntarily rather than prioritizing exports.

“Taking into account the Petroleum Industry Act (PIA) provisions, current market conditions, and the official Gas Pricing and Domestic Demand Regulations, the NMDPRA sets the new Domestic Base Price at USD 2.18/MMBtu, along with wholesale prices for the strategic sector, starting April 1, 2026,” NMDPRA stated.

Its circular further stated that the domestic base price at the marketable gas delivery point under section 167(1) of the PIA—shall be determined based on regulations which incorporate some key principles.

These principles, according to the Authority, include:
“The price must be at a level to bring forward sufficient natural gas supplies for the domestic market on a voluntary basis by the upstream producers

“The price shall not be higher than the average of similar natural gas prices in major emerging countries that are significant producers of natural gas.

“Lowest cost of gas supply based on three tier cost of supply framework.

“Market-related prices tied to International Benchmarks.”

The Domestic Base Price determines the minimum price at which gas can be sold in Nigeria, serving as a standard for pricing throughout the domestic market.

 

Impact on Electricity Bills

Thermal power plants account for about 25 per cent of power plants supplying power to Nigeria’s national grid.

Industry analysts note that gas is the primary raw material used by the GenCos to power the plants, warning that even a marginal increase in feedstock costs creates a ripple effect throughout the value chain.

Talking about the impact of rising energy costs on the economy and livelihood generally, energy analyst and co-founder of Truva Intelligence, Basil Abia, stated that any increment in the retail price of gas and PMS, from 10 per cent up, has a consequential effect on the inflation environment and reduction in the GDP growth outlook.

While the price hike appears marginal, it lands on a power sector already burdened by significant structural and financial challenges.

There are concerns that it could lead to an increase in electricity tariff, especially for Band A customers already grappling with high tariff and also create more burden for the government, currently paying subsidies for consumers in other bands below Band A. In 2025, the government reportedly paid only N71.49 billion out of a total N1.92 trillion owed to GenCos, covering just 3.7 per cent of the total subsidy debt. With the higher gas price, this subsidy obligation is expected to climb further, widening the liquidity gap.

Analysts also warn that it poses a risk of supply disruption as GenCos are already grappling with massive debts.  Recently, the Association of Power Generation Companies announced that the Federal Government owes GenCos approximately N6.5 trillion, while gas suppliers are threatening to cut off feedstock over N3.3 trillion in unpaid invoices.  A higher gas price could exacerbate these tensions, potentially leading to reduced gas supply and, consequently, more blackouts.

Manufacturer Concerns

The Manufacturers Association of Nigeria (MAN) has raised the alarm about the impact of soaring energy costs, mainly due to supply disruptions caused by the ongoing conflict in the Middle East.

In a statement signed by the Director General of MAN, Segun Ajayi-Kadir, the group noted that the combined rise in gas and diesel prices is “wiping out operating margins.” With petrol prices already hovering around N1,500 per liter in some regions due to global crude volatility, a hike in power costs could further drive up the price of basic goods and services.

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Govt Justification for price increase

The government’s decision reflects a long-term strategy to create a market-driven gas sector, but it is clashing with the operational realities of the power sector. The new pricing is intended to make the domestic market more attractive.

While the domestic price remains regulated, global gas benchmarks like the JKM (Asian Spot) have surged to over $19/MMBtu due to ongoing Middle East tensions, putting immense pressure on local producers to seek higher returns.

Minister of Power Adebayo Adelabu recently stated that gas suppliers often prefer to export gas for better returns, leaving domestic power plants on a “best endeavour” basis for supply.

Unresolved Liquidity Crisis

The core issue has remained the power sector’s liquidity. GenCos lament that they are not paid fully for the electricity they generate, preventing them from paying gas suppliers. This creates a cycle of debt that a small price increase alone cannot solve.

Experts note that sustainable reform requires resolving legacy debts and improving payment discipline across the value chain.

As the new pricing template takes effect, the focus now shifts to NERC to see if a tariff hike for “Band A” and other consumer categories will be announced in the coming weeks.