By IROYIN YORUBA TELEVISION
Nigeria is moving toward a major change in the way natural gas is priced in the domestic market, with the Nigerian Midstream and Downstream Petroleum Regulatory Authority setting September 24, 2028, as the target date for a transition to a more commercially driven “willing-buyer, willing-seller” framework.
The plan was announced by the Chief Executive of the authority, Rabiu Umar, during a Gas Market Maturity Workshop held in Abuja on Thursday, September 24, under the Decade of Gas initiative.
The proposed change would gradually reduce the role of direct price regulation and place greater emphasis on commercial agreements between gas producers and consumers.
However, the regulator has stressed that the transition will not simply happen because a date has been announced.
It will depend on whether the domestic gas market reaches specific conditions that demonstrate sufficient supply, infrastructure, competition, reliable contracts and credible price information.
The proposed September 2028 deadline therefore represents a target for market development rather than an immediate removal of every existing regulatory mechanism.
WHAT A WILLING-BUYER, WILLING-SELLER MARKET MEANS
Under a more commercially driven system, gas prices would increasingly be determined through agreements between buyers and sellers rather than through administered prices.
In practical terms, producers would negotiate with power companies, manufacturers, industrial users and other consumers based on supply availability, demand, transportation costs, contract conditions and other commercial factors.
The government and regulator would still have responsibilities, but those responsibilities would increasingly focus on establishing the rules under which companies operate, protecting competition and ensuring that market participants have fair access to infrastructure.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority has said the transition is consistent with provisions of the Petroleum Industry Act, which provides for the development of a more commercial domestic gas market.
The objective is to create a system in which investors can make long-term decisions with greater confidence because prices, contracts and market rules are more predictable.
WHY THE GOVERNMENT IS MOVING TOWARD THE CHANGE
Nigeria has some of the world's largest natural-gas reserves, yet the country continues to face challenges in converting those resources into reliable domestic supply.
Gas is used for electricity generation, industrial production, cooking, transportation and several other economic activities.
Power-generation companies are particularly dependent on reliable gas supplies because gas-fired plants account for a substantial part of Nigeria's electricity generation capacity.
Manufacturers also rely on gas for industrial processes, while households increasingly use liquefied petroleum gas and other gas products as alternatives to traditional cooking fuels.
The regulator therefore faces a balancing challenge.
Gas prices must provide enough incentive for producers and investors to develop new supply, while consumers need prices that allow power plants and businesses to remain commercially viable.
If prices are too low to support investment, producers may have limited incentive to develop expensive gas projects.
If prices rise sharply without corresponding improvements in supply and infrastructure, power producers, manufacturers and households could face higher operating costs.
The proposed transition is intended to create a market structure capable of balancing those competing interests through stronger commercial arrangements.
SUPPLY REMAINS A MAJOR CHALLENGE
One of the most important issues identified by the regulator is gas availability.
Nigeria has large reserves, but having gas underground does not automatically mean that sufficient volumes are available to consumers.
Gas has to be produced, processed, transported and delivered through infrastructure before it can be used by power stations or industrial customers.
Umar has therefore warned that infrastructure projects must be matched with adequate gas supply.
This is particularly relevant to major pipeline projects.
A pipeline can provide a route for transporting gas, but it cannot solve a supply shortage by itself.
The Ajaokuta-Kaduna-Kano pipeline, for example, is intended to connect gas-producing areas with parts of northern Nigeria where additional gas supply could support power generation and industrial development.
For such infrastructure to deliver its expected economic benefits, there must be sufficient gas available to flow through it and customers capable of purchasing the gas under commercially sustainable contracts.
INFRASTRUCTURE AND INVESTMENT
The planned transition also places greater importance on investment in the infrastructure needed to move gas around the country.
The industry has identified several major projects intended to improve connectivity between gas-producing areas and consumers.
The Obiafu-Obrikom-Oben pipeline, commonly known as OB3, is one of the major infrastructure projects associated with efforts to strengthen Nigeria's domestic gas network.
Other projects include the Ajaokuta-Kaduna-Kano pipeline and connections linking gas-producing assets with processing and distribution facilities.
The Decade of Gas Secretariat has identified 16 major infrastructure projects as important to the development of the domestic gas market.
The projects are expected to improve the ability of producers to supply customers in different parts of the country.
However, infrastructure investment requires significant capital.
Investors and lenders generally need confidence that projects will generate sufficient revenue over many years before committing large amounts of money.
This is why long-term contracts are particularly important in the gas industry.
A producer developing a major gas project needs to know that there will be reliable customers for the gas. At the same time, buyers need confidence that the producer can supply the contracted volumes.
The success of the proposed market transition will therefore depend partly on strengthening those commercial relationships.
THE POWER SECTOR IS CLOSELY CONNECTED
Nigeria's electricity industry is one of the sectors most directly affected by gas-market conditions.
Gas-fired power stations require steady supplies of fuel. Interruptions in gas availability can affect electricity generation, while higher gas prices can increase the cost of producing power.
This creates a connection between gas-market reform and electricity prices.
A more commercially sustainable gas market could encourage investment in production and infrastructure if investors believe they can recover their costs.
But the benefits will depend on whether power companies can pay for the gas they receive.
Payment challenges have historically affected relationships across Nigeria's electricity value chain.
The regulator has therefore identified payment reliability as one of the indicators that will be considered when assessing the maturity of the gas market.
A market with adequate supply but weak payment discipline would still struggle to attract the level of investment required for long-term expansion.
THE REGULATOR'S ROLE WILL CHANGE
The planned transition does not mean the government will withdraw completely from the gas sector.
Instead, the role of regulation is expected to evolve.
As the market becomes more commercially driven, the regulator would focus more heavily on setting market rules, ensuring fair access to infrastructure, protecting competition and monitoring the behaviour of participants.
This is particularly important because liberalisation can create new risks if a small number of companies control critical infrastructure or supplies.
The NMDPRA has already begun consultations on proposed regulations dealing with anti-competitive practices.
The objective is to establish rules capable of preventing practices such as market manipulation, collusion, abuse of dominance and unfair restrictions on access.
A commercial market therefore still requires strong regulation.
The difference is that regulation would increasingly concentrate on ensuring that the market operates fairly rather than directly determining every commercial price.
GAS DISTRIBUTION LICENCES
Another development that could support the transition is the planned issuance of gas distribution licences.
The NMDPRA says it is nearing completion of the licensing process and expects qualified companies to receive licences during the fourth quarter of 2026.
The development could increase the number of companies involved in distributing gas to consumers and expand the infrastructure available for domestic supply.
Greater participation could improve competition, although the effect will depend on the number and quality of companies that eventually enter the market.
The regulator has indicated that market participation itself will be one of the indicators used to assess whether different segments are ready for greater commercial freedom.
THE DEMAND SIDE IS ALSO GROWING
A functioning gas market requires not only producers and infrastructure but also customers capable of absorbing the available supply.
The Decade of Gas Secretariat has identified more than 60 projects that could create significant additional gas demand by 2030.
Potential demand is expected to come from power generation, manufacturing, gas processing, liquefied petroleum gas, liquefied natural gas and other industrial applications.
This creates an opportunity for Nigeria to use more of its gas domestically instead of relying primarily on exports.
However, demand must be supported by economically viable projects.
A company may express interest in using gas, but long-term consumption only becomes meaningful when the project has financing, infrastructure and customers capable of supporting commercial operations.
WHAT THE CHANGE COULD MEAN FOR BUSINESSES
For manufacturers, the proposed reform could eventually provide greater clarity around gas supply contracts and pricing.
For power producers, reliable gas availability could help improve planning and operational stability.
For investors, a more transparent commercial market could make it easier to assess potential projects.
For gas producers, the transition could create stronger incentives to invest if commercial prices provide adequate returns.
But consumers could also face greater exposure to market conditions.
If supply becomes tight or production costs increase, commercial prices could rise.
That is why the regulator has emphasised that affordability must remain part of the transition.
The challenge will be to develop a market that attracts investment without making gas unaffordable for businesses and households.
THE SEPTEMBER 2028 TARGET
The September 24, 2028 target gives the industry approximately two years to establish the conditions required for a mature commercial gas market.
During that period, authorities and industry participants will have to work on supply, infrastructure, contracts, payment systems, market information and competition.
The regulator has indicated that different parts of the gas market may not mature at the same speed.
Some segments could therefore move toward commercial pricing earlier than others if they meet the required conditions.
That approach recognises the differences between sectors such as power generation, industrial manufacturing and household gas consumption.
The transition will therefore need to be carefully sequenced rather than applied uniformly without considering the condition of each market segment.
A TEST FOR NIGERIA'S GAS AMBITIONS
The proposed reform is closely connected to Nigeria's wider ambition to make greater use of natural gas as an economic resource.
The country has promoted the Decade of Gas initiative as part of efforts to expand gas production, infrastructure and domestic consumption by 2030.
Achieving those objectives will require more than announcing new projects.
Gas must be produced reliably, transported efficiently, purchased under credible contracts and paid for on time.
The September 2028 target places those requirements at the centre of the reform process.
If the necessary conditions are achieved, the domestic gas market could become increasingly driven by commercial transactions while regulators focus on competition and market integrity.
If the conditions are not achieved, the transition could face delays or require adjustments.
For now, the government and regulator have established a clear target and identified the areas that must improve before the market can move fully toward the new framework.
The next two years will therefore be important for Nigeria's gas industry as producers, consumers, investors and regulators work to determine whether the market can support a commercially sustainable system.
The proposed change is not simply about removing price regulation. It is about building the supply, infrastructure, contracts, competition and payment systems needed for a functioning market.
Nigeria's success in reaching the September 2028 target will ultimately depend on whether those foundations are strong enough to support a gas market in which buyers and sellers can negotiate with greater confidence while consumers continue to have access to affordable energy.