FG okays Nigeria’s first gas trading licence to boost liquidity, pricing

The Federal Government on Thursday issued Nigeria’s first Gas Trading Licence as part of a sweeping reform aimed at cleaning up opaque pricing practices, deepening market liquidity, and positioning the country as West Africa’s leading gas trading hub.

The licence, approved to JEX Markets Limited by the Nigerian Midstream and Downstream Petroleum Regulatory Authority, includes approval to operate a Clearing House and Settlement system, a core financial-market infrastructure that guarantees payment and standardises transactions among gas buyers and sellers.

The event, held at the Transcorp Hilton, Abuja, drew top government officials, regulators, security chiefs, investors, and gas producers, to improve Nigeria’s domestic gas market, which has remained largely underdeveloped, hobbled by opaque pricing systems, high transaction costs, limited contract flexibility, and market illiquidity.

Nigeria sits on over 209 trillion cubic feet of proven gas and an estimated 600 TCF of potential reserves, the largest reserves on the continent.

Yet, despite this endowment, the domestic gas market has suffered pricing opacity, contract breaches, poor liquidity, high transaction costs, and under-investment, constraints repeatedly blamed for erratic gas-to-power supply, stalled industrial projects, and slow progress in energy transition.

The new licensing regime is an attempt to overhaul those structural problems.

Speaking at the ceremony, the Authority Chief Executive of NMDPRA, Farouk Ahmed, said the licence marked the beginning of a transparent, technology-enabled marketplace where gas will be traded on standardised 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 by producers, transporters, and industrial off-takers, and enhanced investment confidence.

Ahmed noted that the licence is being implemented in line with Section 159 of the Petroleum Industry Act 2021, which mandates the establishment of a regulated gas trading framework for wholesale transactions.

He said, “Today we shall be presenting a Gas Trading License and a Clearing House and Settlement Authorization to JEX Markets Limited in compliance with the provisions of section 159 of the PIA for the trading and settlement of wholesale gas in Nigeria.

“The implementation and full operationalisation of this provision of the PIA will further unlock the extensive opportunity and investment potentials of the gas industry through the improved supply and utilisation of the country’s vast gas resource in our strategic economic sectors of power, industry, and transportation.

“Nigeria holds over 209 trillion cubic feet of proven gas reserves, the largest in Africa, and an estimated 600 TCF of potential reserves. Yet, despite this wealth, our domestic gas market has remained underdeveloped and constrained by pricing opacity, high transaction costs, limited flexibility, market illiquidity, poor sanctity of gas contracts, restricted access to gas, and low investments in the sector.

“This licence will unlock new opportunities and finally address pricing opacity, transaction bottlenecks, weak contract sanctity, and low investments.”

The Authority Chief Executive said the regulator would “actively deploy its licensing and regulatory instruments to drive participation in gas trading by producers, transporters, aggregators, and large-scale buyers.”

He explained that the goal is to deepen liquidity in the market and ensure that transparent price discovery becomes the foundation of Nigeria’s domestic gas trading ecosystem.

“As the regulator of Nigeria’s midstream and downstream petroleum sector, the Authority recognises that the true test of licensing JEX Markets is not in the ceremony of today, but in the transformation it must deliver tomorrow. To ensure that JEX succeeds as Nigeria’s pioneering gas trading, clearing, and settlement platform, we will provide a firm, transparent, and technology‑enabled regulatory framework under the PIA, giving investors the certainty and confidence required to commit long‑term capital to the gas value chain.

“We will actively deploy our licensing and regulatory instruments to drive participation in gas trading by producers, transporters, aggregators, and large‑scale buyers, ensuring that liquidity is built and that transparent price discovery becomes the foundation of Nigeria’s domestic gas market,” he added.

The Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, said the launch aligned with President Bola Tinubu’s Renewed Hope Agenda, which identifies natural gas as the backbone of Nigeria’s future energy security, industrialisation, and economic diversification.

According to him, the new framework will trigger three immediate changes in the domestic gas market. First is access, as only “fit-and-proper” players will now be admitted into the trading ecosystem to ensure credibility and protect market integrity.

The second is dependability, with standardised reporting and regulated settlement processes expected to reduce contract failures and strengthen confidence among buyers and sellers.

The third is affordability, as transparent and competitive trading is projected to help drive down gas prices for the power sector, industries, and the transportation market, ultimately improving productivity and easing cost pressures across the economy.

“The Gas Trading Licence introduced today is decisive on this front, paving the way for a new, regulated market where reliable traders will feel safe doing business, where businesses can plan, and where investors can invest, knowing that it will safeguard both their capital and the public interest.

“The licence itself is founded upon sound regulations and guidelines governing technical competence, commercial capability, financial soundness, and responsible operations. Among the responsibilities of the licence holders is the adherence to the various rules on gas measurement, tariffs, pricing, and assignments.

“What does this licence mean for the market? There are three things that happen right away.

“First, access. We make gas sale and procurement agreements more trustworthy for the generation, industry, commercial, and large-scale sectors by only letting trusted counterparties into the trading environment. This is because being open about the entry process helps people trust the market.

“Second, dependability. When there is reliable, standardised reporting, enforcement of settlements, and regulated trading, there is less risk of counterparty risk. This makes the supply chain more predictable.

“Third, it is the issue of affordability. An open, competitive, and properly structured trading environment promotes efficiency, reduces entry barriers, and allows trading entities to offer reduced costs. This fits the administration’s goal of fostering a contestable and open market that will serve the interests of consumers, industry, and transport sectors.

“These are critical for the success of the Decade of Gas initiative. This trading environment and the benefits that come with it will strengthen the level of industrialisation and ensure the injection of private investments into the gas processing and transport sectors. This will ensure that the country derives economic growth that is driven by its natural resource endowment.”

He added that the licence would support the government’s Decade of Gas Initiative, the Presidential CNG Initiative, and the drive to expand gas use in power generation, manufacturing, and transportation.

In his remarks, 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 said 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.

“With this platform, gas will no longer be just a commodity,” he said.

“It becomes a tradable financial asset that attracts capital, spurs infrastructure investments, and diversifies our economy.”

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.

Representing the National Security Adviser, the special adviser on oil and gas, Goodluck Ebelo, said a stable gas trading market cannot exist without secure pipelines and terminals.

He noted that Nigeria has made unprecedented progress in fighting pipeline vandalism, oil theft, and illegal refining through the NSA-led Joint Coordination Platform involving the military, police, regulatory agencies, and state governments.

He said the improvements have already yielded measurable results, such as “fewer pipeline breaches, dismantling of illegal refining camps, arrest of major theft syndicates, reduced disruptions to gas transmission, [and] improved investor confidence.”

The NSA’s office, he added, will now extend the same security framework to protect new pipeline systems needed to support the emerging gas trading environment.

“Nigeria’s gas future is secure, and we will continue to defend it with every necessary resource,” Ebelo said.

Nigeria’s domestic gas market has struggled for decades with scarcity, unreliable supply, and unstable prices.

Previous reforms, including the Gas Transportation Network Code, Gas Aggregation programme, and several ministerial orders, recorded partial success but failed to eliminate non-transparent pricing, contract failures, delayed payments, gas supply curtailments to power plants, and high cost of financing gas infrastructure.

Under the new trading system, gas contracts will be standardised, prices will be market-driven and publicly reported, settlement will be guaranteed, off-takers will have multiple suppliers, and pipeline investors will have clearer price signals.