High energy costs and a rigid domestic pricing system are keeping investors away from Nigeria’s natural gas sector, despite the nation holding vast reserves. Industry leaders warn that the current regulatory environment discourages development, causing billions of dollars in potential capital to remain on the sidelines. This static environment directly impacts the country’s ability to generate electricity and support industrial growth.
Nigeria possesses 215.19 trillion cubic feet (tcf) of proven gas reserves and ranks among the world’s largest gas holders. Despite this abundance, the country generates only between 4,000 megawatts (MW) and 5,000MW of electricity for a population exceeding 220 million people. This stark gap between resource availability and actual power output highlights the inefficiency within the local energy market.
Executives discussed these issues during a panel session at BusinessDay’s CEO Forum, which focused on building the nation’s energy future. They pointed out that the core problem lies not in a lack of resources but in the commercial framework surrounding domestic gas supply. Regulated prices, payment uncertainties, and policy distortions have combined to create a difficult environment for business.
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“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,” said Adegbite Falade, MD/CEO of Aradel Holdings. “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 argued that the country has reached a stage where domestic gas pricing should be driven by a willing buyer, willing seller framework rather than administrative controls. “Government still wants to protect certain interests through legislation, but what it does is punish a part of the value chain and disincentivise investment,” Falade said.
The investment challenge is compounded by payment insecurity and infrastructure deficits, particularly in gas transportation networks. Falade noted that the ability to securitise future payments is a primary incentive for building infrastructure, whether for power plants, gas plants, or transmission pipelines. Without stable creditworthiness projected into the future, confidence to raise capital is difficult to secure.
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The consequences are increasingly visible across the economy. Manufacturers continue to grapple with some of the highest energy costs in Africa, while power plants operate below installed capacity due to inadequate gas supply and transportation infrastructure. As a result, producers increasingly favour export markets where commercial terms are clearer, payments are more secure, and returns better reflect investment risks.
“The chain is broken,” said Effiong Okon, chief executive officer designate of Seplat Energy. He noted that pricing distortions have contributed to dysfunction across the electricity value chain. “Every part of that value chain must work, from upstream gas production to transportation, generation, transmission and distribution.”
Industry executives believed that reforms allowing market-driven pricing and improving payment security could unlock the investments needed to deepen domestic gas utilisation. For Africa’s largest gas market, they argued that attracting capital will depend less on discovering new reserves and more on creating commercial conditions that make investment worthwhile.