Nigeria aims to replace regulated domestic natural gas pricing with a market-driven system within the next one to two years as infrastructure improves and competition deepens, the country's downstream oil and gas regulator said on Monday.

The comments by Rabiu Umar, head of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), are the first time the regulator has given a timeframe for a shift away from government-administered pricing for parts of Nigeria's domestic gas market.

Gas producers have long sought faster price liberalisation but the government has said the market was not yet mature largely due to pipeline shortages, transport bottlenecks and limited market access still constraining competition in the domestic gas market.

Umar told the Nigeria Annual International Conference and Exhibition that the regulator was "guiding an orderly transition" towards a willing buyer, willing seller framework for natural gas pricing, in line with the Petroleum Industry Act.

Competitive pricing

The Petroleum Industry Act, Nigeria's oil law, empowers the regulator to set domestic gas prices for designated strategic sectors, including power generation and certain gas-based industries, while also providing a pathway toward a more competitive market over time.

As pipeline networks expand and more buyers and sellers gain access to the market, gas prices are expected to be increasingly negotiated commercially rather than determined through regulatory mechanisms, Umar said.