Electricity generation companies have called on the Nigerian Electricity Regulatory Commission to urgently review electricity tariffs following the Federal Government’s recent increase in the domestic base price of gas.
Industry operators warned that delays in adjusting tariffs to reflect the new cost of gas could worsen liquidity challenges and distortions across Nigeria’s already fragile power sector.
The Chief Executive Officer of the Association of Power Generation Companies, Joy Ogaji, said the increase in gas prices itself was not the primary concern for power generation companies, as gas is considered a pass-through cost in electricity generation.
Speaking in an interview on Monday, Ogaji said the key issue is ensuring that the new gas price is properly captured in tariff calculations.
“Gas price, whether it is raised to $10, is not really our problem. Gas is a feedstock and a pass-through cost. So if the regulator in the power sector is comfortable with the increase, it is not a problem for us because whatever we are charged, we pass it down to consumers,” she said.
She added that regulators must formally recognise the new base price in tariff modelling to avoid a widening cost gap in the sector.
“All we want is for NERC to acknowledge the new base price and input it into tariff calculations. There is now a clear difference between what we used to pay and the new price, and that gap must be recognised,” she stated.
Despite the call for tariff adjustments, Ogaji said the deeper challenge in Nigeria’s electricity market remains poor payment discipline.
“For us, whether the price is high or low is not the issue. What matters is whether payments are made for what is supplied,” she said.
She noted that even when electricity tariffs were lower, a significant percentage of invoices issued by generation companies remained unpaid.
Ogaji also called for the establishment of what she described as “bankable demand” within the electricity market, stressing that a reliable payment structure is essential for attracting investors.
“Nigeria has over 200 million people, but how many are actually paying for electricity? And even among those who are paying, do we have transparency to verify those payments? There is no transparency anywhere,” she said.
She warned that without structural reforms and stronger political will, the sector risks stagnation.
“If we are not careful and do not change the dynamics, we will still be discussing the same issues in two years. The President needs to take decisive action, possibly declare a state of emergency in the sector and give clear marching orders on what must be achieved,” she added.
Also commenting on the development, Executive Director of PowerUp Nigeria, Adetayo Adegbenle, said the increase in gas prices would inevitably translate into higher electricity tariffs and rising subsidy obligations.
“Since the price of gas, which is the major fuel for Gencos, has increased, it is expected that electricity tariffs will also increase,” he said.
Adegbenle noted that even if tariffs are not immediately adjusted, the financial implications will still reflect in the invoices issued by generation companies.
“Whether electricity tariffs are reviewed or not, it is bound to affect invoices from Gencos. What we need to understand, however, is what the government’s plan is to absorb the shock of these expected changes,” he explained.
He added that subsidies or market shortfalls could rise as invoice values increase, stressing the need for a fully deregulated and contract-based electricity market.
Meanwhile, the President of the Nigeria Consumer Protection Network, Kunle Olubiyo, criticised the methodology behind the new gas pricing framework, describing it as inconsistent and lacking transparency.
Olubiyo questioned how the new base price was derived, noting that previous approvals by the Nigerian Midstream and Downstream Petroleum Regulatory Authority had already included transportation costs that should reflect in the overall pricing structure.
He also pointed out that Nigeria currently operates one of the lowest domestic gas pricing regimes due to the Domestic Gas Delivery Obligation policy.
“Gas is a commodity, just like petrol. In the international market, buyers are willing to pay up to $12 due to geopolitical tensions, especially in the Middle East. So why would any producer prefer to sell to Gencos locally, where they are often asked to be patriotic and even sell on credit?” he queried.
However, Olubiyo argued that raising tariffs alone would not fix the structural inefficiencies affecting the power sector.
He cited widespread technical and commercial losses, especially in metering and electricity accounting, as major factors inflating costs across the value chain.
“If we fix these issues and ensure accurate measurement, most of the claims by Gencos could drop by 40 to 50 per cent. What consumers are paying for today includes inefficiency and systemic leakages,” he said.
The Federal Government, through the Nigerian Midstream and Downstream Petroleum Regulatory Authority, recently reviewed the domestic base price of natural gas used for electricity generation under the Domestic Gas Delivery Obligation framework.
Gas currently accounts for more than 70 per cent of Nigeria’s electricity generation mix, making it the single largest cost component in power production.
Industry experts warn that without corresponding reforms in tariff setting, payment assurance, and market transparency, the new gas pricing policy could further strain Nigeria’s already fragile electricity market.
