The Federal Government has outlined plans to offset its N2.7tn debt to gas producers through royalty credits, according to the Nigerian Upstream Petroleum Regulatory Commission.
NUPRC Chief Executive, Gbenga Komolafe, disclosed this on Thursday during a virtual meeting hosted by the Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, to mark his second year in office.
Royalties, mandatory payments from oil and gas companies for resource extraction, will now serve as a mechanism to clear arrears owed to producers supplying gas to power plants.
Represented by commission official Dennis Anyanwu, Komolafe said the NUPRC, in collaboration with other stakeholders, is working on modalities to apply royalty credits against the outstanding debts.
He noted that since most of the affected companies are active royalty-paying producers, the arrangement offers a practical pathway to extinguish the liabilities.
“On the issue of legacy power debt, I would like to say that the commission is playing a critical role in conjunction with other stakeholders. One of the solutions that has been canvassed is the extinguishment of the legacy debt through royalty credits. You might note that most of the companies that are owed are gas producers; they pay royalties on gas. So, some of the discussions have been, can such debts be extinguished on the basis of royalty credits that they have?” he asked.
Komolafe added that the commission, as the regulator overseeing production and royalty payments, is advising the government on how to execute the plan without jeopardising revenue inflows.
“The commission is providing guidance to the authorities, both to the Decade of Gas and to the minister, on how such a mechanism can be implemented in a manner that is not going to disrupt the industry or even the revenue flow to the government.
“So, being the entity that is charged with the assessment of royalty and the assessment of production, we provide the necessary data and the necessary guidance to address those issues relating to royalty payment and extinguishment of the gas-to-power debt through royalty payment,” Komolafe disclosed.
In his reaction, Chairman of Renaissance Africa Energy, Layi Fatona, praised the government’s plan to use royalty credits to settle legacy gas-to-power debts, describing it as “bold and very clear in its intent.”
However, Fatona urged the commission to ensure swift execution of the plan. “The timeliness of implementation is very important and key for each and every one of the nimble operators. And that’s something that I would like to ask the regulator to help in facilitating its implementation,” Fatona stated.
In June, gas producers under the Independent Petroleum Producers Group had similarly called on the Federal Government to resolve the legacy debt owed to them for supplies to power plants during a meeting with Gas Minister Ekperikpe Ekpo.
The delegation, led by Chairman Abdulrazaq Isa, urged the minister to tackle the challenges confronting Nigeria’s gas producers. As of December 2024, the Federal Government and some power generation companies were reported to owe the producers over N2.7tn in legacy debts.
Earlier in 2024, mounting arrears had forced gas companies to halt supplies to power plants, triggering weeks of nationwide blackouts.
Responding, Gas Minister Ekperikpe Ekpo noted that stakeholders at the webinar had reviewed the opportunities, challenges, and global trends shaping Nigeria’s gas sector.
“What stands out is that gas is central to our energy security, industrialisation, and role in the global energy transition. Under the leadership of President Bola Tinubu, we have laid a strong foundation through reforms, commercialisation, and infrastructure development.
“As today’s conversation shows, the real task lies ahead. The future will be defined by how boldly we pursue investment, how effectively we implement policies, and how closely we work with private and international partners. Let us translate today’s insight into practical commitments,” he said.
