Nigeria Raises Gas Prices For Power Generation: What It Means For Electricity And Subsidies

By Oluwabukola Jimoh ــ Last Update 06 April 2026

Nigeria’s energy landscape is once again in focus as the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) announces a fresh increase in the price of natural gas for power generation companies. While the adjustment may appear modest on the surface, its ripple effects could be significant for electricity costs, government subsidies, and the broader power sector.

A New Gas Price Takes Effect

Effective April 1, 2026, the NMDPRA raised the domestic base price of natural gas for electricity generation to $2.18 per million British thermal units (MMBtu). This marks a slight increase from the 2025 rate of $2.13/MMBtu, just a five-cent rise, or about 2.35%. The announcement, signed by the authority’s Chief Executive, reflects an ongoing effort to align Nigeria’s gas pricing with market realities, as well as provisions of the Petroleum Industry Act (PIA). But even a marginal increase like this carries weight in a sector already grappling with deep structural challenges.

Why This Matters for Nigeria’s Power Sector

Nigeria depends heavily on gas-fired power plants, with over 75% of electricity generation fueled by natural gas. This means any adjustment in gas pricing directly impacts the cost of generating electricity, and by extension, the financial burden on the government. Currently, electricity tariffs in Nigeria remain below cost-reflective levels for many consumers. To bridge this gap, the Federal Government subsidizes power generation costs. However, the numbers reveal a growing strain:

In 2025, the government owed ₦1.92 trillion in electricity subsidies

Only ₦71.49 billion (3.7%) of that amount was paid

With gas prices now rising, subsidy obligations are expected to increase further—unless there is a significant policy shift.

A Delicate Balancing Act

According to the NMDPRA, the revised pricing structure aims to achieve two key goals:

Ensure sufficient gas supply to the domestic market

Maintain investor confidence in Nigeria’s energy sector

Beyond power generation, the new pricing framework also affects other sectors:

Commercial users will pay $2.68/MMBtu

Gas-based industries (like fertilizer and petrochemicals) will operate within a flexible pricing system, with a floor price of $0.90/MMBtu. The regulator insists that this structure is designed to promote competitiveness while guaranteeing supply. However, industry stakeholders are cautious.

The Bigger Problem: Liquidity and Supply Constraints

The price increase comes at a time when Nigeria’s power sector is already under pressure from:

Mounting debts

Poor payment discipline

Gas supply shortages

The Minister of Power, Adebayo Adelabu, has previously highlighted a key issue: gas suppliers prefer exporting gas rather than selling domestically. Why? Because export markets offer significantly higher returns.

He also noted that:

Power plants receive only 35–40% of payments owed

The sector carries a legacy debt of about ₦4 trillion

Only 2 out of 32 power plants have firm gas supply contracts

The rest operate on uncertain, “best-effort” supply arrangements—making electricity generation unstable.

Pricing vs. Structural Reform

The Petroleum Industry Act was designed to introduce a market-driven pricing system that would attract investment and correct longstanding distortions. While the recent adjustment aligns with that goal, implementation remains complex.

Challenges persist, including:

Weak infrastructure

Pipeline constraints and maintenance issues

Competing incentives between domestic supply and exports

Without addressing these structural issues, price adjustments alone may not solve the problem.

What Lies Ahead?

The latest gas price increase highlights a difficult reality: Nigeria is trying to balance fiscal sustainability, energy security, and investor confidence—all at once.

However, the risks are clear:

Rising subsidy costs could strain public finances further

Power generation companies may face deeper liquidity challenges

Electricity supply stability could remain uncertain

Ultimately, while pricing reforms are necessary, they must be matched with broader sector reforms, including improved payment systems, stronger infrastructure, and policies that make domestic gas supply more attractive. Until then, Nigeria’s power sector may continue to operate under pressure, with consumers, investors, and the government all feeling the impact.

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Oluwabukola Jimoh

Oluwabukola Jimoh is a dynamic academic writer and captivating energy blogger. She is able to delve into intricate subjects with an insatiable thirst for knowledge, crafting thought-provoking essays that engage and enlighten her readers.