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UGO AMADI
As Nigerians continue to deliberate on the impact of the recently increased new domestic base price and wholesale prices of natural gas for 2024, Industry sources believe that the change to the domestic base price of gas is +11 percent
It would be recalled that recently the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), an agency of the federal government unveiled increased new domestic base price and wholesale prices of natural gas for 2024 which was jacked up to $2.42 per metric million British thermal units, from the previous rate of $2.18mmbtu
Those knowledgeable in the matter noted that the actual impact of the gas price increase on the cost of electricity tariffs could be a conservative increase of 3 percent or circa NGN 4/kWh pass through to electricity customers. This is because not all electricity generation is gas-based. Additionally, electricity tariffs are impacted more significantly by inflation, devaluation, and ATC&C losses.
It is possible for this increase to be fully absorbed by the high-income bands. Final increase to grid tariffs will be communicated by NERC.
Also, the impact to gas-based industries such as fertilizer plants is potentially positive or zero as the floor price remains unchanged but the contractual price is determined by Schedule 4 of the PIA.
However, In the commercial sector, the resultant price from the new DBP could see fast-moving consumer goods (FMCG) companies using gas for self-generated power would potentially see reduced operating costs in the region of 0.2%.
Similarly, for other manufacturers (e.g. cement) that use gas for fuel (process heat), the new domestic base price of gas could reduce operating costs by up to ~7%.
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