Analysis of Natural Gas Pricing Mechanisms and Their Effect on Domestic Gas Supply in Nigeria

Natural gas pricing in Nigeria has historically been a contentious policy domain, with below-cost regulated domestic prices widely cited as a key disincentive for investment in gas supply infrastructure. This study analyses the current domestic gas pricing mechanisms in Nigeria and their effect on gas supply availability for power generation and industrial consumers. The research employs a policy analysis methodology, combining document review of current Domestic Gas Supply Obligations (DGSO), interviews with gas producers and consumers, and economic analysis of the cost structure of gas supply against prevailing regulated prices. The study traces the evolution of Nigerian gas pricing policy from the 1970s to the current period, examining recent interventions including the 2022 upward price review and the proposed transition to a fully commercial pricing framework. Key findings from the producer side reveal that the current regulated domestic gas price remains below the full cost of supply for most producers when royalties, operating costs, and transport tariffs are aggregated, discouraging prioritisation of domestic supply. Consumer interviews indicate that industrial buyers are increasingly willing to pay market-reflective prices provided supply reliability improves. The study recommends a phased transition to cost-reflective pricing, supported by targeted subsidies for vulnerable household consumers and power sector transition support funding. These findings contribute to the ongoing policy debate on gas sector reform and domestic market development. Keywords: gas pricing, domestic supply, DGSO, policy analysis, gas sector reform.