YThe Federal Government has announced plans to clear the N2.7 trillion legacy debt owed to gas companies by offsetting it with royalty payments. This strategic move is designed to ease the financial burden on the government while providing long-awaited relief to gas producers who have been at the receiving end of crippling debt overhang.
The disclosure was made by the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, during a virtual meeting hosted by the Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, to mark his second year in office.
Royalty payments are statutory fees paid to the Federal Government by oil and gas companies for extracting resources.
Traditionally, these royalties serve as a vital revenue stream for the government.
However, under the new arrangement, companies owed by the government for gas supplied to Nigeria’s power plants will have the option of reconciling their debts through royalty credits.
Explaining the mechanism, Komolafe, represented by NUPRC official Dennis Anyanwu, said:
“Since most of the companies owed are gas producers who pay royalties on gas, we are exploring how those debts can be extinguished through royalty credits without disrupting government revenue flow.”
He emphasized that the NUPRC is working closely with stakeholders to ensure a seamless implementation, adding that the Commission is providing technical data and guidance to prevent disruptions to national earnings while resolving the debt.
The plan has drawn positive reactions from industry stakeholders. Chairman of Renaissance Africa Energy, Dr. Layi Fatona, hailed the initiative as a “bold and clear” policy direction.
He, however, stressed the need for swift action:
“The timeliness of implementation is very important and key for nimble operators. We urge the regulator to fast-track the process.”
The Independent Petroleum Producers Group (IPPG) had earlier in June 2025 appealed to the Federal Government to settle the debt, warning that continued delay was threatening investment and energy security.
According to its chairman, Abdulrazaq Isa, unresolved debts had already forced some gas suppliers to halt deliveries to power plants, worsening electricity shortages across the country.
As of December 2024, Nigeria’s government and some power generation companies owed gas producers over N2.7 trillion in accumulated debts.
This debt, described as “legacy” because of its buildup over several years, has strained relationships between the government and energy investors.
Earlier in 2024, gas producers suspended supplies to power plants in protest, plunging the nation into prolonged electricity outages.
The suspension highlighted the urgency of finding a sustainable solution to the debt crisis, given that gas fuels around 70% of Nigeria’s electricity generation.
Speaking at the meeting, Minister Ekperikpe Ekpo reiterated the Tinubu administration’s commitment to deepening Nigeria’s gas sector as part of its Decade of Gas initiative.
He described gas as central to the country’s energy security, industrialisation drive, and global energy transition agenda.
“The future will be defined by how boldly we pursue investment, how effectively we implement policies, and how closely we collaborate with private and international partners,” Ekpo said.
He assured investors of an enabling environment, adding that gas will serve as a catalyst for Nigeria’s economic prosperity.
Analysts believe the royalty credit plan could serve as a model for addressing similar debts in Nigeria’s power and energy sectors.
By leveraging existing financial obligations, the government can reduce cash payouts while restoring investor confidence.
However, experts caution that the success of the initiative depends on transparency, timely execution, and clear legal frameworks.
Without these safeguards, the policy could create fresh disputes between gas producers and regulators.
For Nigeria, which has one of the largest proven gas reserves in Africa, the resolution of this debt crisis is critical.
It is not only about stabilizing the power sector but also about positioning the country as a competitive player in the global gas market.