The announcement saw an increase in the price of natural gas for the strategic domestic sectors including power generation companies by 11 per cent. The move is in line with the provisions of the Petroleum Industry Act, 2021, assented to by former President Muhammadu Buhari on the 16th of August 2021 and gazetted on the 27th of August 2021.
The adjustment in price has been generating a lot of interest from the public. While some commentators had questioned the justification for the increase despite complaints of shortages and undersupply of gas by the power generation companies , others have said that with the new price increase, the subsidy to be paid by the Federal Government in 2024, which was pegged at N1.67 trillion in January this year, would increase markedly.
It should be noted that the DBP is to guide gas pricing and supply especially to the strategic sectors of the economy mainly power, Gas Based Industries and Gas to Commercial. The Authority in line with the provisions of the law and objectives of the government for the gas sector, strives to ensure that it puts in place a pricing regime that assume gas supply to those critical sectors at most affordable rates.
It is a well-known fact that in recent times, the Nigerian economy has been battling with issues of galloping inflation. Figures obtained from the National Bureau of Statistics showed that inflation had risen from 21.91 per cent as of February 2023 to 31.71 per cent in February 2024. It is for this reason that the PIA also allows, subject to certain limitations, for upward price adjustment on a yearly basis to account for inflation on a yearly amount or percentage.
However, it must be stated that the impact of the gas price increase on the cost of electricity tariffs is just a conservative increase of about N4/kWh passed on to electricity customers. This is because not all electricity generation is gas-based. Additionally, electricity tariffs are impacted more significantly by inflation, devaluation, and Aggregate, Technical, Commercial, and Collection losses.
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