Nigeria has approved a long-awaited payment of 185 billion naira (about $128 million) to gas producers, marking a significant step in addressing years of debt that have disrupted fuel supply to power generation companies. The decision, taken by the National Economic Council (NEC) under the chairmanship of the vice president, is aimed at restoring confidence in the country’s gas-to-power market and improving the reliability of electricity supply for homes and businesses.
The move follows a directive from President Bola Tinubu to clear outstanding arrears owed to gas suppliers who have provided fuel to electricity generation companies (GenCos) without being fully paid. These debts, which have accumulated over several years, have discouraged investment in the energy sector, placed severe pressure on the cash flows of gas producers, and contributed to reduced gas supply to power plants.
Nigeria’s Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, described the settlement as a “decisive step” toward reviving the nation’s struggling gas sector. According to him, the government has approved a “royalty-offset arrangement”, a mechanism that allows owed payments to be settled by offsetting them against future royalty obligations that gas producers would normally pay to the government.
“This approach provides immediate relief to gas suppliers while avoiding additional strain on public finances,” Ekpo explained. “It also sends a strong message to investors that Nigeria is serious about fixing historical challenges in its energy market and creating a more predictable environment for business.”
Years of power shortages and an unreliable supply system
Nigeria, Africa’s most populous country, has been battling chronic power shortages for decades, with many businesses and households forced to rely on private generators as their primary source of electricity. Despite having vast reserves of natural gas, the country has struggled to convert that wealth into stable and affordable power for its population.
Limited gas supply to power plants has been a major factor behind poor electricity generation. Many power stations operate far below capacity because they simply do not receive enough gas to run continuously. When gas producers are not paid on time, they reduce supply, creating a vicious cycle of scarcity, reduced power generation, and frequent blackouts.
These power disruptions have had a direct impact on Nigeria’s economic growth. Small and medium-sized businesses, which form the backbone of the economy, often spend a significant portion of their income on fuel for generators. Larger industries either cut production or relocate to countries with more reliable power systems. Investors have also been discouraged, seeing unstable electricity as a major operational risk.
“The debt problem has been one of the main reasons the gas sector has underperformed,” said an energy analyst in Lagos. “If producers cannot recover their money, they will not increase supply, and power plants will continue to operate inefficiently. Paying this debt is essential for restarting confidence.”
Part of a bigger plan to boost gas production
The payment is not an isolated action but part of a broader government strategy to transform Nigeria into a gas-powered economy. The Tinubu administration has announced plans to almost double Nigeria’s daily gas production to 12 billion cubic feet by 2030, a target that would significantly boost energy availability for domestic power generation, manufacturing, and export.
Gas is seen as a cleaner and more reliable alternative to diesel and petrol, and the government hopes that increased production will reduce the country’s dependence on expensive fuel imports while strengthening energy security.
By settling outstanding debts, the government believes gas companies will be more willing to invest in new infrastructure, expand production facilities, and sign long-term contracts without fear of non-payment. This could lead to more consistent gas delivery to power plants, improving electricity generation across the country.
The National Economic Council’s approval of the payment is therefore being viewed as a critical confidence-building measure. Industry stakeholders have welcomed the decision, describing it as “overdue but encouraging.”
What it means for Nigerians
For ordinary Nigerians, this announcement raises cautious hope of a more reliable electricity supply in the future. While the payment itself will not immediately fix the power crisis, experts say it is a necessary step toward long-term improvement.
If gas supplies increase as expected, power plants will be able to operate at higher capacity, potentially reducing the frequency and duration of blackouts. In the long run, this could lower the cost of doing business, create more jobs, and support economic expansion.
However, analysts also warn that more reforms are still needed. Transmission constraints, outdated infrastructure, and inefficiencies in electricity distribution companies must also be addressed if Nigeria is to achieve lasting power stability.
“This is an important piece of the puzzle, but it is not the whole solution,” said an Abuja-based energy consultant. “To truly end the electricity crisis, the government must continue reforms across the entire value chain — from gas production to power generation, transmission, and final distribution.”
A cautious step forward
The 185 billion naira payment represents a clear acknowledgement by the government of past failures in managing the energy sector. By choosing to settle these long-standing debts, Nigeria is taking a step toward rebuilding trust with investors and laying a stronger foundation for a more stable and productive power sector.
Source:Africa Publicity
