Nigeria’s gas market could be heading for a major transformation as the country moves towards exchange-based trading, a model expected to improve price discovery, strengthen market confidence and provide more reliable gas price references. JEX Markets Limited, licensed by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and approved by the Securities and Exchange Commission (SEC) as a commodity exchange, is developing the infrastructure needed to support the new trading system.
The push comes as demand for natural gas continues to grow across power generation, manufacturing, liquefied natural gas (LNG), compressed natural gas (CNG) and other industries. Despite Nigeria’s huge gas reserves, much of the domestic market has traditionally relied on private negotiations between individual buyers and sellers. While bilateral deals offer flexibility, they can make it harder for businesses to compare prices, assess market conditions and determine a transparent benchmark for gas.
Speaking at a side event of the West Africa Oil and Gas Regulators Forum, JEX Markets Chairman Oscar Onyema said a successful gas market required more than physical supplies and infrastructure. He stressed the importance of transparent pricing, credible counterparties, standardised trading, effective clearing and settlement, dependable delivery systems and trustworthy market data. Under the exchange model, buyers and sellers would trade under defined rules, allowing prices to emerge from actual market demand and supply rather than being determined solely through individual negotiations.
JEX said it has partnered with FMDQ Clear, the Central Securities Clearing System (CSCS) and Trayport to build the trading infrastructure. FMDQ Clear is expected to provide central counterparty clearing, while CSCS will serve as the central securities depository and Trayport will provide trading, risk management and market-data technology. However, the bigger challenge may be attracting enough participants and trading volumes to create meaningful liquidity. JEX Chief Executive Blessing Ahymere said the company plans to use maker-taker rebates, volume incentives and trade discounts to encourage producers, shippers, traders and major consumers to participate.
The exchange plans to begin with spot and forward gas markets before introducing futures products as liquidity grows. JEX expects the first three months to focus on onboarding and registration, with spot and forward trading targeted within four to six months. If the platform succeeds in attracting diverse participants and sufficient trading volumes, it could give Nigeria a more credible gas price benchmark, help businesses make better investment and procurement decisions, and eventually support the development of a wider West African gas trading hub.
source: The Guardian
