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, warning that delays could deepen liquidity challenges and widen distortions across the power sector.
The Chief Executive Officer of the Association of Power Generation Companies, Joy Ogaji, said operators are not primarily concerned about the increase in gas prices itself, but rather the failure of regulators to promptly adjust tariffs to reflect the new cost realities.
Speaking on Monday, Ogaji described gas as a pass through cost that must be transparently captured in tariff computations, stressing that any increase in input cost should be reflected in what consumers ultimately pay.
“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.
“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.”
Despite the push for tariff adjustments, Ogaji maintained that the sector’s core problem is not pricing but poor payment discipline, noting that even under lower tariffs, operators struggled to recover revenue.
“For us, whether the price is high or low is not the issue. What matters is whether payments are made for what is supplied. Even when the price was low, what percentage of invoices were settled? If you increase the price and payments are still not made, what difference does it make?” she queried.
She further called for the establishment of what she described as bankable demand in the electricity market, arguing that the absence of a reliable and transparent payment structure continues to discourage investment.
“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 added.
Ogaji warned that without structural reforms and stronger political will, the sector risks remaining stagnant, urging decisive government action to address longstanding inefficiencies.
“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 said.
Also reacting, the Executive Director of PowerUp Nigeria, Adetayo Adegbenle, said the increase in gas prices would inevitably lead to 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.
He noted that even if tariffs are not immediately adjusted, the financial implications will still manifest in higher invoices from generation companies, further widening existing market shortfalls.
“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 said.
Adegbenle warned that subsidies or market shortfalls are likely to increase as invoice values rise, raising concerns about the sustainability of government plans to raise bonds to offset debts owed to gas suppliers and generating companies.
“We cannot continue to pretend that the electricity market is optimal. This situation also raises concerns about the sustainability of plans to raise bonds to offset debts owed to gas suppliers and Gencos,” he added, while advocating for full market deregulation and a contract based electricity system.
On his part, 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.
“The new base price is a bit confusing. The Nigerian Midstream and Downstream Petroleum Regulatory Authority had, from July last year, approved $1.13 as transport cost. So how do you now arrive at a figure that does not reflect the full pricing model?” he asked.
Olubiyo noted that when previous base prices are combined with transportation costs, the effective gas price should already be higher than what is currently being presented.
He further explained that Nigeria’s power sector currently benefits from one of the lowest gas pricing regimes globally due to domestic supply obligations, despite rising international prices driven by geopolitical tensions.
“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 increasing tariffs alone would not resolve the sector’s deep rooted inefficiencies, pointing to technical and commercial losses as major drivers of inflated costs.
“There are significant leakages in how electricity is measured and billed. Many meters are obsolete and lack integrity. 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, a benchmark used in pricing gas supplied to power plants under the Domestic Gas Delivery Obligation framework.
The pricing regime was originally designed to ensure affordable and reliable gas supply to the power sector, with prices historically kept below international rates to support electricity generation. However, persistent payment shortfalls, rising debts to gas suppliers, and global price pressures have intensified calls for a cost reflective pricing model.
Industry data indicates that gas accounts for over 70 per cent of Nigeria’s electricity generation mix, making it the single largest cost component in power production. As a result, any increase in gas prices directly affects the cost of generation and is expected to be reflected in electricity tariffs unless absorbed through government subsidies.
While the latest adjustment is intended to incentivise gas producers to prioritise domestic supply, stakeholders warn that without corresponding reforms in tariff setting, payment assurance, and market transparency, the policy could further strain an already fragile electricity market.
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