Nigeria is proposing that gas producers sell gas to local power plants in naira to ease dollar shortages following a second currency devaluation in less than a year, which is projected to raise expenses and make it difficult for businesses to pay.
Nigeria has 24 gas power plants with a total production capacity of 11,434 megawatts, but only about one-third of that capacity is delivered to the grid due to gas supply concerns.
“Proposing domestic gas payment in naira is a key step toward stability, aligning with our economy’s needs and promoting sustainable energy production,” Power Minister Adebayo Adelabu said in a post on X.
Adelabu added that he plans to create legislative measures that will mandate naira payments for domestic gas supply.
Natural gas is sold in dollars to power plants because investments tied to building gas plants and pipelines are priced and paid for in dollars.
However, local operators have had difficulties making dollar payments since a currency crisis which has seen the naira lose significant value. The currency weakness is expected to force the price of gas in the domestic market sharply higher.
Nigeria has proven gas reserves of 206 trillion cubic feet which it has struggled to tap due to capital constraints. The government hopes it can fix the challenges by switching to naira payments and capping dollar prices.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the local gas regulator, has asked producers to keep gas prices at $2.18 per million British Thermal Units (MMBtu) as per an agreement with unions three years ago.
