Nigeria's Power Crisis Worsens as Generation Firms Demand Urgent Tariff Review Amid Gas Price Surge
Electricity generation companies in Nigeria, known as GenCos, are urgently calling on regulators to implement immediate tariff adjustments following the Federal Government's recent increase in domestic gas prices. Industry leaders warn that any delay in this process could deepen the financial strain across the already fragile power sector, potentially worsening the ongoing electricity supply crisis.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority announced a hike in the price of natural gas supplied to power generation companies, a move that has sparked concerns about operational costs and market sustainability. GenCos argue that this increase must be quickly reflected in electricity tariffs to prevent further liquidity issues.
GenCos Emphasize Gas as a Pass-Through Cost
Joy Ogaji, Chief Executive Officer of the Association of Power Generation Companies, explained in an interview that operators are not opposed to the gas price hike itself. Instead, their primary concern is the slow response from the Nigerian Electricity Regulatory Commission in updating tariffs to align with the new cost structure.
Ogaji stated: "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 described gas as a "pass-through cost," meaning any increase should be transparently incorporated into tariff calculations to avoid creating a mismatch between production costs and approved rates.
Rising Gas Costs Likely to Drive Tariff Increases or Subsidy Burdens
Other energy sector stakeholders have echoed these concerns, warning that the ripple effects of higher gas prices are almost inevitable. Adetayo Adegbenle, Executive Director of PowerUp Nigeria, pointed out that since gas is the primary fuel for power generation, increased costs will ultimately lead to higher electricity tariffs or larger subsidy burdens for the government.
Adegbenle said: "Since the price of gas, which is the major fuel for GenCos, has increased, it is expected that electricity tariffs will also increase." He added that even if tariffs are not immediately revised, generation companies will still issue higher invoices, which could exacerbate existing market shortfalls and financial gaps.
Concerns Over Subsidies and Market Sustainability
Beyond immediate pricing issues, experts highlight deeper structural problems in Nigeria's electricity market. Adegbenle emphasized uncertainties around the government's ability to absorb financial shocks through subsidies, warning that rising costs could undermine plans to settle debts owed to gas suppliers and power producers.
He stressed the need for a fully deregulated, contract-based electricity market, arguing that the current system remains inefficient and unsustainable. Without decisive reforms and timely tariff adjustments, stakeholders fear the sector's liquidity crisis could escalate, further hampering electricity supply and reliability.
Government Efforts to Address Power Sector Debts
In related developments, the federal government has taken steps to address historic debts in the electricity sector. President Bola Tinubu approved a repayment plan to settle long-standing obligations, and the government raised N501 billion through bonds to clear electricity debts. These measures aim to restore confidence and unlock investments in the troubled power market, potentially improving service delivery for millions of customers.
However, industry observers caution that without concurrent tariff reforms to reflect rising gas costs, these financial interventions may not fully resolve the underlying liquidity challenges. The situation underscores the complex interplay between energy pricing, regulatory frameworks, and market stability in Nigeria's power sector.
