Move expected to revive gas supply to power plants, unlock new investments and strengthen the Decade of Gas agenda
The Federal Government has approved the payment of N185 billion in long-standing debts owed to natural gas producers, in a major policy move aimed at reviving Nigeria’s gas sector and stabilising electricity generation across the country.
The payment authorised by President Bola Tinubu and endorsed on Wednesday by the National Economic Council (NEC) chaired by Vice-President Kashim Shettima, is considered one of the most significant interventions in the energy sector in recent years.
In a statement issued on Thursday, the Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, said clearing the backlog would generate wide-ranging benefits, beginning with the restoration of investor confidence after years of concerns over government indebtedness.
Ekpo explained that the arrears, which accumulated from previous gas-supply obligations, had placed severe pressure on producers’ cash flow, limited operational capacity, and discouraged fresh exploration and production. He noted that the unpaid debts also restricted gas supply to power plants, deepening the electricity shortages experienced nationwide.
To address the situation, the approved N185 billion will be settled through a royalty-offset arrangement, a mechanism designed to assure domestic and international gas suppliers that their long-pending invoices will finally be honoured.
A push to revive power generation
The Minister described the approval as “a decisive step towards revitalising Nigeria’s gas sector and strengthening its power-generation capacity in a sustainable manner.” He added that the intervention aligns with the Federal Government’s Decade of Gas Initiative, which aims to unlock more than 12 billion cubic feet per day (bcf/d) of gas supply by 2030.
“Settling the debts is crucial to rebuilding trust between the government and gas producers, many of whom slowed or halted new investments because of uncertainty over payment,” Ekpo said.
He explained that improved financial stability within the upstream gas industry would accelerate exploration activities, boost production, and ultimately raise gas supply to power plants. According to him, this improved supply is expected to reduce the chronic electricity shortages that continue to constrain businesses and households nationwide.
Ekpo added that the expected gains would translate into broader economic growth, as stable electricity underpins industrialisation, job creation and competitiveness. He also noted that enhanced fiscal discipline and greater transparency in the sector will attract fresh investments from both local and international players.
Industry leaders welcome decision
The Coordinating Director of the Decade of Gas Secretariat, Ed Ubong, welcomed the approval, saying it demonstrated President Tinubu’s commitment to addressing the structural weaknesses across the gas-to-power value chain.
“This decision underlines the Federal Government’s determination to clear legacy liabilities and gives gas producers the confidence that supplies to the power sector will be honoured,” Ubong said. “It could unlock stalled projects, revive investor interest and rebuild momentum behind Nigeria’s transition to a gas-driven economy.”
Background: decades of unpaid obligations
Recently, the Federal Government concluded implementation frameworks for a N4 trillion government-backed bond aimed at clearing verified arrears owed to power Generation Companies (GenCos) and gas suppliers.
In 2024, the Managing Director of the Shell Petroleum Development Company (SPDC), Osagie Okunbor, revealed that gas producers were owed an estimated $1.3 billion in outstanding payments.
Also in December 2024, Nairametrics reported that the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) had instructed gas producers to suspend supplies to indebted GenCos after debts exceeded N2 trillion, involving both the Federal Government and power-generation companies.
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