CLARA NWACHUKWU
DISTRIBUTORS and marketers of liquefied petroleum gas, LPG or cooking gas have attributed the scarcity and high cost of the product to supply issues with the Nigerian LNG Limited, the major supplier of the product in the country.

Cooking Gas

Some of the marketers and offtakers, registered with the NLNG under the Federal Government/NLNG Domestic LPG Supply Programme, who spoke with Vanguard, cited high supply cost and the expiration of the programme tenure, among other issues as being responsible for the high price in the market.

As the Yuletide season broke in, the price of the commodity in the market, shot up almost twice the previous price, to the extent that a 12.5kg cylinder, now sold for between N3,000 and N3,500 depending on the place of purchase, against previous N2,000 and N2,500. Some bolting plants even sold for N1,800.

But the NLNG absolved itself of any guilt and alleged that the marketers were hoarding the product in order to maximize profit.
A spokesperson for company, Mr. Ifeanyi Mbanefo, told Vanguard, “”They are hoarding the product, but the price increase is temporary because they are only cashing in on the inefficiencies in the system, occasioned by the Yuletide Season.”

A former President of the Nigerian Association of Liquefied Petroleum Gas Marketers, NALPGAM, Alhaji Alwalu Ilu, however insisted that government shared the larger blame for not creating the enabling environment for investments to thrive.

He argued that government’s indifference to the plight of operators in the sector, accounted for the low per capita consumption of cooking gas in the country, as evident in the low volume supplied in the market.

Domestic consumption

Official statistics from the Department of Petroleum Resources exclusively obtained by Vanguard showed that only about 47,388 metric tonnes, MT of cooking gas was supplied the market between January and the end of November, 2010.

The bulk of the product, some 39,821MT came from the NLNG, which has a dedicated 150,000MT under the domestic supply programme, while the balance of 7, 567MT came from the local refineries owned by the Nigerian National Petroleum Corporation, NNPC.

Although estimated national demand for cooking gas is put at 70,000MT, but prevailing consumption show that the country is not even able to utilize up to one-third of the available dedicated gas.

Reacting to the development, Ilu stated that investors’ efforts in the LPG sector are being frustrated by the introduction of 20 percent duty on imported LPG components, against previous request for zero duty to encourage domestic consumption.

According to him, “There are infrastructure issues relating to storage facilities including gas cylinders, so all this duty are added costs which are passed on to the consumers. A lot of investors as a result, cannot clear what they imported. “You cannot say you have devoted a certain volume of gas for the local market and the inputs that will make this gas available in the homes are not there.

So the economics is wrong because it is only the urban people that are still using gas, while the rural dwellers depend on firewood and charcoal, which is a lot cheaper than gas. An average family needs at least N25,000 to be able to use gas. “Right now, only the private sector is investing in the LPG sector in terms of depot, storage, transportation among others and government is not helping in any way, rather they are compounding issues by increasing duty.”

As much as these factors may have contributed to the current situation, some other marketers, insisted that the there is no justification for the NLNG benchmark the product with international oil price, now hovering close to $100 per barrel, when the product is sourced and sold locally.

In particular, the offtakers, who are the middlemen between the NLNG and the marketers, decried that while the NLNG sold at N3million per tonne, the NNPC sold at a little above N2m/T

The Chief Executive Officer, Le Glabal Gas, one of the offtakers, Mr Bode Makanjuola, revealed that with the fixed price from the refineries, offtakers were reluctant to take the NLNG gas to curtail losses.

He, however noted that while the NLNG gas is stable, that from the NNPC remained unstable because of the epileptic nature of the refineries, and such hiccups created a gap in supply, as more offtakers preferred to wait for the NNPC gas than to take from the NLNG, to the effect that many depots did not have gas during the holidays.

But dismissing the claims of high prices, Mbanefo noted, “If our prices are not competitive, why are we registering more offtakers, which have increased from six to 12. Our promise to government is that we will make the product available to the local market and we are doing that.

“Since we have created the market, let investors come in and queue into the different segments of the market to make the product available to the people.”

Furthermore, respondents cited the expiration of the FGN/NLNG Domestic Supply Programme, which contributed to the supply hiccups, especially towards the second half of the year, where the NNPC refineries are unable to meet current demand in the market.