Anticipates Electricity Tariff Hike as Government Increases Gas Prices by 11%
The Federal Government, on Monday, announced that the new price of natural gas for power generation companies is now $2.42 per metric million British thermal unit, higher than the previous rate of $2.18.
Nigeria generates over 70 per cent of its electricity from thermal power plants that are fired by gas. Therefore, the rise in the cost of the commodity may lead to a hike in the tariff payable by power consumers once the Nigerian Electricity Regulatory Commission carries out another tariff review.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority, an agency of the Federal Government, unveiled the new domestic base price and wholesale prices of natural gas for 2024 in an announcement on Monday.
The NMDPRA also pegged the cost of commercial gas at $2.92mmbtu, up from the previous cost of $2.5mmbtu. The announcement was signed by the Chief Executive, NMDPRA, Farouk Ahmed.
Recall that the Multi-Year Tariff Order released by NERC in January 2024 for the electricity distribution companies was calculated based on the previous price of natural gas.
Therefore, going by the latest cost of the commodity, there is a high tendency for an upward review of power tariffs, as gas is a major component used in power production.
Gas producers including international and domestic oil and gas companies, have repeatedly called for the upward review in the price of the product, stressing that this would be an incentive to ramp up production.
