FG allows gas producers to offset unpaid debts from royalty payments, aiming to boost domestic gas supply and power generation in Nigeria

The Federal Government has approved a framework allowing upstream gas producers to offset outstanding debts against royalty payments, a move designed to improve gas supply and support Nigeria’s electricity generation.

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The announcement was made during the ongoing 9th Nigerian International Energy Summit in Abuja by Mr. Ed Ubong, Decade of Gas Coordinator.

He said President Bola Ahmed Tinubu approved the measure to ensure gas producers continue operations without financial strain while the government settles owed payments.

“It really doesn’t make sense for a gas producer to continue to give government royalties when the government is doing that. So there’s been a conversation there, finally approved by the governors and the president,” Ubong said.

He added that the Nigerian National Petroleum Company Limited (NNPCL), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and gas producers have agreed on a practical method for the offset.

The policy comes amid longstanding challenges in Nigeria’s power sector.

Engr. Saidu Mohammed, Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), lamented that electricity generation has increased only marginally from 4,500MW to 5,000MW in two decades, despite available generating capacity of 13,000MW.

Mohammed described gas as not just an energy commodity but an economic enabler essential for sustainable power supply. He called for transparent pricing and improved gas availability to unlock Nigeria’s energy potential.

Under the Petroleum Industry Act (PIA), NMDPRA is empowered to determine gas pricing and enforce domestic supply obligations, while transitioning from a control-based to a performance-driven regulatory framework.

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The royalty offset policy aims to prevent cash-flow bottlenecks for producers while simultaneously boosting domestic gas availability, which has remained constrained despite Nigeria’s over 200 trillion cubic feet of reserves.