A Theoretical Framework for Modelling the Long-Run Equilibrium of Natural Gas Markets in Sub-Saharan Africa: Evidence from Nigeria

The theoretical foundations underpinning natural gas market equilibrium in developing economies differ substantially from those governing mature liberalised markets, yet no comprehensive theoretical framework has been developed specifically for sub-Saharan African gas market conditions. This study develops and empirically validates a novel theoretical framework for modelling long-run natural gas market equilibrium in sub-Saharan Africa, using Nigeria as the primary case. The framework integrates institutional economics theory, network industry regulation theory, and resource rent distribution theory to explain price formation, investment dynamics, and supply-demand equilibrium under conditions of state intervention, infrastructure inadequacy, and regulatory immaturity. Empirical validation employs a structural vector autoregression (SVAR) model estimated on a 25-year Nigerian gas market dataset encompassing production volumes, domestic prices, export volumes, pipeline investment data, and regulatory change indicators. Impulse response functions and forecast error variance decompositions are interpreted within the theoretical framework to assess the relative importance of institutional, price, and investment shocks in determining long-run market trajectories. The study's original contribution is the identification of a regulatory capture equilibrium trap characterising many sub-Saharan gas markets, in which politically mediated below-cost pricing and concentrated supply structures mutually reinforce supply stagnation. Policy implications derived from the framework include second-best regulatory designs for gas markets transitioning from state control to commercial operation. The framework is validated against secondary cases from Ghana and Tanzania. Recommendations include a structural reform sequencing model prioritising independent regulation before price liberalisation in African gas markets. Keywords: gas market theory, institutional economics, sub-Saharan Africa, market equilibrium, regulatory framework.