Understanding Nigeria’s gas sector's challenges

Nigeria's gas sector is facing significant challenges that are impacting the country's power generation capacity and industrial development. According to local reports, operations at eight new power stations under the National Integrated Power Project have come to a halt due to inadequate gas supply to fire turbines. This has highlighted the critical need for a robust gas sector to support Nigeria's power and industrialization goals. Meanwhile, the export of liquefied natural gas (LNG) from Nigeria to the international market has increased in the last six months, showcasing the country's potential as a key player in the global energy market. Luqman Agboola, an Oil and Gas Analyst, joined CNBC Africa to discuss the outlook for Nigeria's gas sector. Agboola emphasized that addressing the challenges in the gas sector is crucial for the overall success of the power sector. He underscored the importance of developing the gas sector not just for power generation but also for industrialization, highlighting the diverse applications of gas beyond electricity production. One of the major hurdles facing the gas sector in Nigeria is the lack of adequate infrastructure to support gas production and distribution. Agboola pointed out that while the government has outlined a new gas policy to address pricing issues and attract investment, the key lies in effective implementation. By aligning domestic gas prices with international market rates, Nigeria can enhance its competitiveness and appeal to both investors and end-users. The discussion also touched on the critical link between the gas and power sectors. Agboola stressed the need for a holistic approach to address issues such as transmission infrastructure and gas production to ensure smooth operations for power generation. He highlighted the importance of political will in driving the necessary reforms and decision-making processes to propel the gas sector forward. Moreover, the issue of liquidity within the broader power sector was examined, with Agboola cautioning against simply raising funds without addressing fundamental operational challenges. He emphasized the need to optimize power production and distribution efficiency before seeking additional financial support. Agboola suggested that a focus on improving performance metrics for distribution companies (Discos) and aligning tariffs with current economic realities could yield more sustainable results. In discussing the Discos, Agboola acknowledged that consolidation and recapitalization may be necessary steps to bolster their capabilities and efficiency. However, he emphasized the importance of constructive engagement between regulators and investors to achieve mutually beneficial outcomes. Addressing issues such as currency devaluation and tariff adjustments will be crucial in creating a conducive environment for investment and operational growth in the sector. As Nigeria navigates the complexities of its gas sector challenges, collaboration among stakeholders, strategic policy implementation, and a concerted effort to enhance operational efficiencies will be essential for unlocking the sector's potential. With the right approach and commitment, Nigeria's gas sector could emerge as a key driver of economic growth and energy sustainability in the region.