Nigeria Proposes Naira Payment for Local Gas Sales


In response to ongoing challenges stemming from dollar shortages and currency devaluation, Nigeria is considering a significant policy shift. The proposal suggests that gas producers should sell gas to local power plants in naira, aiming to mitigate the impact of currency fluctuations on operational costs.

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Nigeria currently operates 24 gas power plants with a total capacity of 11,434 megawatts. However, due to issues with gas supply, only approximately one-third of this capacity is effectively delivered to the grid.

“Proposing domestic gas payment in naira is a key step toward stability, aligning with our economy’s needs and promoting sustainable energy production,” stated Power Minister Adebayo Adelabu. He further outlined plans to introduce legislative measures mandating naira payments for domestic gas supply.

Traditionally, natural gas has been sold in dollars to power plants, reflecting the currency in which investments for building gas infrastructure are priced and paid. However, local operators have faced challenges in making dollar payments amid currency crises and significant devaluation of the naira. This currency weakness is expected to drive up the price of gas in the domestic market.

Despite Nigeria’s vast proven gas reserves of 206 trillion cubic feet, tapping into this potential has been hindered by capital constraints. The government aims to address these challenges by transitioning to naira payments and implementing measures to control dollar prices.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the local gas regulator, has urged producers to maintain gas prices at $2.18 per million British Thermal Units (MMBtu), in accordance with agreements made with unions three years ago.

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