Gas supply crisis in Nigeria: causes and impact

Nigeria has a strange way of importing what it has in abundance and exporting what it lacks. This complexity is at the basis of the crisis in the gas sector.

Nigeria exports gas and starves domestic consumers. Nigeria burned associated gas worth 800 billion naira in 2025.

Ironically, the same country imported 1.3 million tonnes of cooking gas during the period under review.

Industry observers blame Nigeria’s catastrophic gas supply problems on inadequate processing and transportation infrastructure.

They also blame poor pricing, payment insecurity and vandalism on pipelines. Oil companies operating in Nigeria would rather burn the associated gas and pollute the environment than process it to sell to households as cooking gas.

Oil companies cite poor pricing and payment insecurity as the cause of their reluctance to invest in gas processing and transportation infrastructure.

Payment uncertainty is a major problem across the industry. Debt contagion in Nigeria’s energy sector has crippled many gas transactions.

The 11 electricity distribution companies (DisCos) that emerged from the ruins of the distribution arm of the defunct Power Holding Company of Nigeria (PHCN) are heavily indebted to power generation companies (GenCos).

As a result, GenCos can no longer service their debts to the oil companies that supply them with gas for use in energy production. GenCos are heavily indebted to oil companies.

Oil companies in turn cannot meet their debt obligations to creditors. Oil companies are therefore reluctant to invest in gas processing infrastructure.

This resulted in a severe gas shortage across the country.

Nigeria’s energy supply crisis can be traced to the gas supply crisis plaguing the country. Oil companies cannot supply GenCos with enough gas to generate enough power for the national grid.

The persistent collapse of the national grid is more the problem of inadequate gas supply to GenCos than that of overloaded supply lines and archaic transformers.

Fertilizer and cement producers depend on gas for their production. However, the gas supply has been so inadequate that cement and fertilizer producers are now forced to switch to diesel and other alternative energy sources.

Gas costs 70% less than diesel. Because they could not rely on oil companies for gas supply, cement and fertilizer producers and other industrial gas users turned to expensive diesel and other alternative sources of energy.

Consumers pay for manufacturers to switch to diesel and other expensive power sources. Producers cannot absorb the high cost of energy, so they pass it on to consumers by increasing product prices.

This is why inadequate gas supply causes inflation. This once again explains the complaints of oil companies about the insecurity of payments. They sell gas to GenCos and expect them to pay promptly. But because DisCos cannot pay GenCos, oil company money is inadvertently tied up by GenCos. Oil companies also complain about the vandalization of gas pipelines.

This exacerbates the sector’s lack of transport infrastructure. Aside from minor complaints in Mexico, Nigeria is probably the only country in the world plagued by seemingly incurable acts of pipeline vandalism.

The problem is so complex that even the federal government considers it unsolvable. There are complaints that pipeline vandalism is a matter of mistaken identity by the vandals.

They earn nothing by vandalizing pipelines because the gas is liquid in the pipeline, but suddenly evaporates into the air when it reaches the surface.

Industry observers conclude that natural gas pipelines are often mistakenly vandalized by vandals who mistake them for gasoline or crude oil pipelines.

Whatever the cause of the vandalism, the truth is that the vandals threatened the safety of the pipelines enough to scare the oil companies into abandoning them. This mistaken identity is partially responsible for the inadequacy of transportation infrastructure in the gas sector.

The issue of low prices has been partially addressed by the federal government, but oil companies continue to complain. They called for gas to be priced in dollars due to the high foreign currency content of the cost of gas processing and transportation infrastructure. The government partially accepted the request.

The strange development in Nigeria’s gas supply is that even though oil companies cannot supply domestic consumers, they still manage to meet the demand of their foreign customers.

Nigeria exports more gas than it consumes at home. For example, in the five years between 2022 and 2026, Nigeria exported a total of 4.56 tcf of gas while 3.21 tcf of gas was sold domestically.

Over the period under review, gas exports exceeded domestic supplies by around 42%. The marginalization of domestic gas consumers persists despite 18 years of well-intentioned gas consumption policies such as the National Gas Policy, the Domestic Gas Delivery Obligation (DGDO), the Petroleum Industry Act (PIA), the Decade of Gas Initiative and the Gas Swap Framework.

Nigeria has one of the lowest cooking gas consumption rates in Africa. While small and impoverished Senegal consumes 9 million tons of cooking gas per year, Nigeria, with a population of 220 million, consumes only 2.3 million tons of cooking gas per year.

The deficit in cooking gas consumption is caused by a combination of factors. Cooking gas is more expensive in Nigeria than in neighboring countries. This is because Nigeria imports cooking gas with a weak naira that once traded at N1,700 to a dollar.

In addition to the high cost of cooking gas, cooking gas appliances are very expensive. An empty 12.5kg gas cylinder now sells for something close to N90,000. Quality gas stove is equally expensive. With Nigeria now the global headquarters of poverty, very few of the 37% of the population living above the poverty line can afford to switch from expensive and messy kerosene to cooking gas. The Federal Government must fight hard to make gas consumption attractive to Nigerians.