The Federal Government has approved the payment of N185 billion in long-standing debts owed to natural gas producers. This marks a major step toward improving electricity supply. Additionally, it aims to rebuild investor confidence in Nigeria’s energy sector, especially with the N185bn gas debt settlement Nigeria is undertaking.
The approval, granted by President Bola Ahmed Tinubu and endorsed by the National Economic Council (NEC) chaired by Vice-President Kashim Shettima, is a significant intervention. It is one of the biggest in the gas industry in recent years. The N185bn gas debt settlement Nigeria plans is expected to change the energy landscape.
Why the Debt Payment Matters
In a statement quoted by the News Agency of Nigeria (NAN), the Minister of State for Petroleum Resources (Gas), Dr. Ekperikpe Ekpo, explained that the N185bn arrears accumulated from past gas supply obligations. These arrears had severely affected producers with the pending N185bn gas debt settlement Nigeria is determined to address.
According to him, the debts:
- Limited operations and cash flow
- Discouraged new investment
- Reduced gas supply to power plants
- Contributed to nationwide electricity shortages
Ekpo said settling the debts will be done through a royalty-offset arrangement, a mechanism designed to reassure both local and international gas suppliers who have long complained about delayed payments. In summary, the N185bn gas debt settlement Nigeria seeks will improve the energy sector.
Link to Nigeria’s Decade of Gas Initiative
The Minister described the approval as a “decisive step towards revitalising Nigeria’s gas sector and strengthening its power-generation capacity.”
He noted that the move aligns with the Decade of Gas initiative, which aims to unlock over 12 billion cubic feet of gas per day by 2030.
By restoring financial confidence, Ekpo said the sector can now accelerate exploration and enhance production. This will increase gas supply to power plants, all of which are essential to improving Nigeria’s unreliable electricity system.
Expected Impact on Power Supply and Economy
Ekpo highlighted several expected benefits:
- More gas for power plants, helping reduce outages
- Renewed investment in exploration and production
- Better support for industries, leading to job creation
- Improved economic competitiveness, driven by stable electricity
He added that improved fiscal discipline and transparency across the gas value chain will attract new investment from both local and global players.
Experts Say Payment Could Unlock Stalled Projects
The Coordinating Director of the Decade of Gas Secretariat, Ed Ubong, praised the approval. He said it shows the government’s commitment to fixing long-standing issues in the gas-to-power sector.
According to him, the payment “gives gas producers confidence that their supplies to power generation will be honoured,” and could revive stalled projects. It could also stimulate new investments.
Background: Billions in Outstanding Debts
- The FG recently completed the framework for a N4 trillion government-backed bond to settle verified debts owed to power Generation Companies (GenCos) and gas suppliers.
- In 2024, Shell’s Managing Director, Osagie Okunbor, revealed that gas producers were grappling with $1.3 billion in unpaid invoices.
- In December 2024, the NMDPRA instructed producers to suspend gas supply to indebted GenCos after total debts exceeded N2 trillion.