Nigeria's massive natural gas reserves aren't translating into electricity generation, industrial growth or export strength because a broken domestic pricing system is scaring away investors, industry leaders warned this week.
The country holds 215.19 trillion cubic feet of proven gas reserves and ranks among the world's largest gas holders. Yet it generates just 4,000 to 5,000 megawatts of electricity for over 220 million people, making it one of the globe's most energy-starved nations.
Executives discussed the problem during a panel at BusinessDay's CEO Forum, held under the theme "From Stability to Shared Prosperity." They pinpointed the issue: it isn't resource scarcity but a hostile commercial environment for domestic gas supply.
Regulated prices, unpredictable payments and policy distortions have combined to sideline billions of dollars in potential investment, they noted. "The biggest off-taker of the gas resources that we produce in Nigeria today is the power sector and there has historically been a very poor commercial framework around pricing," Adegbite Falade, MD/CEO of Aradel Holdings, told the forum.
"We have tended to legislate pricing and those prices do not reflect the development exposure. So there's a strong disincentive for upstream suppliers to invest in gas," he added.
Falade argued that Nigeria has matured beyond administrative price controls. What's needed is a willing buyer, willing seller model.
"Government still wants to protect certain interests through legislation, but what it does is punish a part of the value chain and disincentivise investment," he said.
Payment insecurity and weak infrastructure compound the investment challenge. Gas transportation networks remain inadequate across the country.
"One of the biggest incentives in investing in infrastructure, whether power plants, gas plants or transmission pipelines, is the issue of securitising payments," Falade explained. "You need stable creditworthiness projected into the future that gives confidence to raise capital."
The damage ripples through the economy. Manufacturers battle some of Africa's highest energy costs while power plants operate well below capacity due to insufficient gas and weak pipelines.
Producers increasingly turn to export markets where commercial terms are clearer, payment flows are secure and investment returns better match the risks they're taking.
Effiong Okon, CEO designate of Seplat Energy, said pricing distortions have fractured the entire electricity value chain. "The chain is broken," he said.
"Every part of that value chain must work, from upstream gas production to transportation, generation, transmission and distribution."
Industry leaders believe that market-driven pricing reforms and stronger payment security could unlock the capital needed to boost domestic gas use and spark industrial expansion. For Africa's largest gas market, they argued, such changes are now urgent.
