By Ediri Ejoh
Consumers are facing a difficult time as the price of Liquefied Petroleum Gas, LPG, otherwise known as cooking gas, has risen by over 33 percent month-on-month from N360/kg in July to N480/kg in August.
Investigations by Energy Vanguard showed that a 12.5kg cylinder which sold in Lagos for N4,500 in June and July, is now selling for N6,000 at different parts of the state.
In Abuja, the nation’s capital, a 12.5kg cylinder which sold for N4,800 in July has risen to N6,000.
The new prices come at the backdrop of the recent Federal Government’s efforts aimed at promoting more use of gas in Nigeria and its declaration of 2021-2030 as Nigeria’s decade of gas, meaning more demand for the commodity.
The Central Bank of Nigeria, CBN, had recently set up a N250 billion fund to expand the usage of gas.
The Gas Expansion Programme, particularly targets increased use of cooking gas as a cleaner source of cooking energy for Nigerians.Gas prices had recorded steady rise in recent months with market price at N4,400 in June and N3,200 in November/December 2020.
A resident of Agbado, Ogun State, Mr. Obatomi Ajewole, said the increase in the price of cooking gas has affected measure of plate of food sold to customers by food vendors.
Reasons for price hike
The Nigerian Association of Liquefied Petroleum Gas Marketers, NALPGAM, has attributed the latest rise in the price of cooking gas to Federal Government’s re-imposition of Value Added Tax, VAT, on imported LPG.
NALPGAM’s Executive Secretary, Bassey Essien, in a press statement obtained by Energy Vanguard explained that Nigerians may have to pay up to N10,000 in the nearest future to refill 12.5kilogram cylinder of cooking gas.
The government had in 2019 gazetted the removal of VAT on LPG as a product to increase its domestic utilisation.
However, Essien said that the reintroduction of the policy has further increased the price of cooking gas across the country.
He stated: “It is unfortunate that the Federal Inland Revenue Service and the Federal Ministry of Finance have gone to resuscitate a product that has been exempted and gazetted from VAT.
“This was gazetted in 2019 and has encouraged domestic gas utilisation. Nigerians are already complaining about the prices of cooking gas across the country, and this would further worsen the situation”.
He cautioned that the initial objective of domestic availability will be defeated if cooking gas goes out of the reach of ordinary Nigerians due to the current increment in prices of the commodity.
He also noted that more than one million metric tonnes of gas were consumed by Nigerians in 2020, with about 60 per cent of the product imported by marketers.
“We import to augment the 350,000MT allocated to the domestic market by the Nigerian LNG Company Limited”, he added.
NALPGAM boss, insisted that charging VAT on LPG would return Nigerians to era of cooking with kerosene stoves and firewood with the attendant health implications.
According to him, the new prices are “based on the price the marketers buy the product from the depots and terminals.
Early in 2020, a 20 metric ton truck of LPG was sold for N3.4 million, but by December 2020, it had gone up to N5.4 million, and up again to N5.6 million in January 2021. As at today the truck sells for N8 million.
“The average cost of a 12.5 kg cylinder of gas sells for about N6,000 and if the situation persist till Dec 2021, a 12.5kg cylinder of gas may sell for N10,000 or more.
“My association has made so many advocacies to draw the attention of the government to address the factors that are responsible for the price surge particularly in line with the declaration of the decade of gas, but we are yet to see any move made by government.
“Rather than do the needful, the government is re-imposing VAT on imported LPG, which has been on exemption and gazetted since 2018. So if importers are made to pay for the VAT element, the associated cost will be passed to consumers”, he added.
On his part, the National Chairman of Liquefied Petroleum Gas Retailers Branch of NUPENG, Mr Chika Umudu, attributed the price hike to the country’s high dependence on imported LPG.
“As the dollar is appreciating against the naira, the price of LPG is increasing,” he said.
He suggested that the Nigerian LNG Limited, which accounts for more than 40 per cent of the LPG supply volumes in the country, should be supplying the domestic market in accordance with the demand, rather than having a fixed quantity per annum.
“People in rural areas and semi-urban areas, who are even the major target of LPG expansion, are beginning to dump their cylinders. It is not a good development.
Reacting to the hike, Chief Research Officer at Investa, Ambrose Omokordion, said, “there is a compelling case of economic law at play as in short supply trumping demand, and don’t forget the recent devaluation of the naira.
“Now the price of cooking gas has risen by more than 60 per cent since early December last year on the back of the recent devaluation of the naira and lingering inadequate domestic supply of the fuel.
“Going forward what we need is complete deregulation, and not knee-jerk response.
On his part, the Programme Manager, National LPG Expansion Implementation Plan, Dayo Adeshina, stated that the product, which had sold at $260 per ton in January, now sells for $650 per ton at the international market.
He argued that while the same pricing index used at the international market is used locally, the depreciation of the naira against the dollar is currently fueling the hike in price.
Adeshina explained that the Federal Government is currently working on other domestic sources, noting that it was imperative to drive a large volume into the market to ensure competition.
“When a large volume comes into the market, then we can start to see a decrease in price. One of the things we don’t have control over is the pricing index.”
When this reporter visited some restaurants in Lagos, it was discovered that some canteens and restaurants are now turning to charcoal and firewood because they cannot factor the hike in cooking gas appropriately into their costs.
Also speaking on the development, an economic analyst, Dr. Olufemi Omoyele, said “Government should work out a framework with NLNG to meet up with local demand and equally encourage other multinational companies to supply the domestic market so that we stop talking about importation of LPG.”