The gas supply controversy

Nigeria has a strange way of importing what it has in abundance and exporting what it lacks. That complexity is at the root of the crisis in the gas industry. 

Nigeria exports gas and starves domestic consumers. Nigeria flared associated gas worth N800 billion in 2025. 

Ironically, the same country imported 1.3 million metric tonnes of cooking gas during the period under review.

Industry watchers blame Nigeria’s catastrophic gas supply problems on inadequate processing and transportation infrastructures. 

They also blame it on poor pricing, payment insecurity and pipelines vandalisation. The oil companies operating in Nigeria would rather flare associated gas and pollute the environment than process it for sale to households as cooking gas. 

The oil companies cite poor pricing and payment insecurity for their reluctance to invest in gas processing and transportation infrastructure.

The payment insecurity is a major problem in the whole industry. The debt contagion in the power sector of Nigeria has crippled a lot of transactions in the gas industry. 

The 11 electricity distribution companies (DisCos) that rose from the ruins of the distribution arm of the defunct Power Holding Company of Nigeria (PHCN) are heavily indebted to the power generation companies (GenCos). 

Consequently, the GenCos can no longer meet their debt obligations to the oil companies that supply them gas for use in power generation. The GenCos are heavily indebted to the oil companies. 

The oil companies in turn cannot meet their debt commitments to their creditors. The oil companies are therefore reluctant to invest in gas processing infrastructures. 

That has resulted in an acute shortage of gas all over the country.

Nigeria’s power supply crisis can be traced to the gas supply crisis plaguing the country. The oil companies cannot supply the GenCos enough gas for the generation of sufficient power to the national grid.

The persistent collapse of the national grid is more the problem of inadequate gas supply to the GenCos than that of overstretched supply lines and archaic transformers.

The fertiliser and cement manufacturers depend on gas for their production. However, the gas supply has been so inadequate that the cement and fertilizer manufacturers are now compelled to switch to diesel and other alternative sources of power.

Gas is 70 per cent cheaper that diesel. Because they could not rely on the oil companies for gas supply the cement and fertiliser manufacturers and other industrial users of gas have switched to expensive diesel and other alternative sources of power. 

Consumers are the ones paying for the manufacturers’ switch to diesel and other expensive sources of power supply. The manufacturers cannot absorb the high cost of energy so they pass it on to consumers by way of product price hikes.

That is how inadequate gas supply causes inflation. That again explains the oil companies’ complaints about payment insecurity. They sell gas to GenCos and expect them to pay promptly. But because the DisCos cannot pay the GenCos, the oil companies’ money is inadvertently tied down by the GenCos. The oil companies also complain about gas pipeline vandilisation. 

That compounds the industry’s transportation infrastructure deficiency. Aside from minor complaints in Mexico, Nigeria is probably the only country in the whole globe plagued with seemingly incurable pipelines vandalisation.

The problem is so complex that even the federal government is finding it rather irresolvable. There are complaints that gas pipelines vandalisation is an issue of mistaken identity by the vandals.

They gain nothing by vandalising gas pipelines because gas is liquid in the pipeline, but it suddenly evaporates into the air when it reaches the surface.

Industry watchers conclude that gas pipelines are often vandalised in error by vandals mistaking them for petrol or crude oil pipelines.

Whatever is the cause of the vandalisation, the truth is that the vandals have sufficiently threatened the security of the pipelines to frighten the oil companies into abandoning them. That mistaken identity is partially responsible for the transportation infrastructure inadequacy in the gas industry.

The issue of poor pricing has been partially addressed by the federal government, but the oil companies are still grumbling over it. They demanded that gas be priced in dollars because of the high foreign exchange content of the cost of gas processing and transportation infrastructure facilities. Government partially granted the demand.

The strange development in Nigeria’s gas supply is that even as the oil companies cannot supply domestic consumers, they still meet the demand of their foreign clients.

Nigeria exports more gas than what is consumed at home. For instance, in the five years between 2022 and 2026, Nigeria exported a total of 4.56tcf of gas while 3.21tcf of gas was sold domestically.

For the period under review, gas exports exceeded domestic supplies by about 42 per cent. The sidelining of domestic gas consumers has persisted despite 18 years of well-intentioned gas consumption policies like the National Gas Policy, Domestic Gas Delivery Obligation (DGDO), Petroleum Industry Act (PIA), Decade of Gas Initiative and Gas Swap Framework.

Nigeria has one of the lowest cooking gas consumption rates in Africa. While tiny and impoverished Senegal consumes 9 million metric tonnes of cooking gas annually, Nigeria with a population of 220 million consumes just 2.3 million metric tonnes of cooking gas annually.

The deficiency in cooking gas consumption is caused by a combination of factors. Cooking gas is more expensive in Nigeria than in its neighbouring countries. That is because Nigeria imports cooking gas with a weak naira that once traded as low as N1, 700 to the dollar. 

Besides the high cost of cooking gas, cooking gas appliances are very expensive. An empty 12.5kg gas cylinder now sells for something close to N90, 000. Quality gas cooker is equally expensive. With Nigeria now the world headquarters of poverty, very few of the 37 per cent of the population now living above poverty line can afford to switch from expensive and messy kerosene to cooking gas. The federal government has to do a hard, fine fight to make gas consumption attractive to Nigerians.