FG Approves Nigeria's First Gas Trading License to Enhance Liquidity and Pricing
Introduction to Nigeria’s Gas Trading Reform
The Nigerian Federal Government has taken a significant step forward by issuing the country's first Gas Trading Licence. This move is part of a broader initiative aimed at transforming the domestic gas market, addressing long-standing issues such as opaque pricing, limited liquidity, and high transaction costs. The licence was granted to JEX Markets Limited by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), marking a pivotal moment in the nation's energy sector.
Key Features of the New Licensing Regime
The newly issued Gas Trading Licence includes the approval for JEX Markets Limited to operate a Clearing House and Settlement system. This infrastructure is essential for guaranteeing payments and standardizing transactions between gas buyers and sellers. The event took place at the Transcorp Hilton in Abuja and attracted key stakeholders, including government officials, regulators, security chiefs, investors, and gas producers.
Nigeria possesses vast natural gas reserves, with over 209 trillion cubic feet of proven gas and an estimated 600 TCF of potential reserves—making it the largest gas reserve on the continent. Despite this wealth, the domestic gas market has remained underdeveloped due to various challenges, including pricing opacity, contract breaches, poor liquidity, and under-investment. These constraints have hindered the reliable supply of gas for power generation, industrial projects, and energy transition efforts.
Vision for a Transparent and Efficient Market
At the ceremony, NMDPRA's Chief Executive, Farouk Ahmed, emphasized that the new licensing regime aims to create a transparent, technology-enabled marketplace where gas will be traded through standardized contracts with real-time reporting. According to him, the JEX platform will support:
- Transparent price discovery
- Automated real-time trading
- Improved market liquidity
- Reliable clearing and settlement
- Wider participation from producers, transporters, and industrial off-takers
- Enhanced investment confidence
Ahmed also highlighted that the licence aligns with Section 159 of the Petroleum Industry Act 2021, which mandates the establishment of a regulated gas trading framework for wholesale transactions. He stressed that the implementation of this provision will unlock the extensive opportunities and investment potentials of the gas industry by improving the supply and utilization of Nigeria's vast gas resources in strategic economic sectors like power, industry, and transportation.
Impact on the Domestic Gas Market
The Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, described the launch as aligned with President Bola Tinubu’s Renewed Hope Agenda, which emphasizes natural gas as the backbone of Nigeria’s future energy security, industrialization, and economic diversification. He outlined three immediate changes expected from the new framework:
- Access: Only "fit-and-proper" players will be admitted into the trading ecosystem to ensure credibility and protect market integrity.
- Dependability: Standardized reporting and regulated settlement processes are expected to reduce contract failures and strengthen confidence among buyers and sellers.
- Affordability: Transparent and competitive trading is projected to drive down gas prices for the power sector, industries, and the transportation market, ultimately improving productivity and easing cost pressures across the economy.
Broader Economic Implications
The Director-General of the Securities and Exchange Commission, Emomotimi Agama, described the licence as the beginning of Nigeria’s evolution from a crude-oil-dependent economy to a financialised gas economy. He emphasized that the Clearing House Authorisation issued to JEX Markets is “arguably the most important layer” of the new system, ensuring guaranteed settlement, collateral and risk management, finality of transactions, and market integrity and investor protection.
Agama urged banks, asset managers, and insurers to develop financial products, hedging tools, structured notes, and investment funds linked to the emerging Nigerian Gas Price Index. This would further enhance the attractiveness of gas as a tradable financial asset.
Security and Stability
Representing the National Security Adviser, Goodluck Ebelo, noted that a stable gas trading market cannot exist without secure pipelines and terminals. He highlighted Nigeria's progress in combating pipeline vandalism, oil theft, and illegal refining through the NSA-led Joint Coordination Platform. The improvements have already yielded measurable results, such as fewer pipeline breaches and improved investor confidence. Ebelo added that the NSA’s office will extend the same security framework to protect new pipeline systems needed to support the emerging gas trading environment.
Future Prospects
Under the new trading system, gas contracts will be standardized, prices will be market-driven and publicly reported, settlements will be guaranteed, off-takers will have multiple suppliers, and pipeline investors will have clearer price signals. These changes are expected to address decades of challenges in the domestic gas market, including scarcity, unreliable supply, and unstable prices. Previous reforms, while partially successful, failed to eliminate non-transparent pricing, contract failures, delayed payments, and high financing costs.
The introduction of this new regulatory framework marks a critical milestone in Nigeria's journey toward a more efficient, transparent, and sustainable gas market. It lays the foundation for a robust energy sector that can drive economic growth and support the nation's long-term development goals.
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