Consumers, marketers groan over price hike of cooking gas in Nigeria

*Analysts, marketers insist the new Liquefied Petroleum Gas prices consumers pay are informed by the Federal Government’s recent imposition of VAT on cooking gas and its related efforts at promoting the use of gas

Gbenga Kayode | ConsumerConnect

Against the backdrop of recent increases in prices of petroleum products in general and Liquefied Petroleum Gas (LPG), commonly known as Cooking Gas in particular, Nigerian consumers and marketers of the products have expressed concerns over the disquieting development in the economy.

ConsumerConnect market research indicated that the retail prices of various sizes of cooking gas cylinders in the market currently average as 2kg cylinder for ₦1,000; 3kg ₦1,500; 5kg ₦2,500; and 6kg ₦3,000 respectively.

In regard to average prices of Cooking Gas as contained in its July 2021 official report, the National Bureau of Statistics (NBS) stated that the average price for the refilling of a 5kg cylinder for Liquefied Petroleum Gas increased by 3.52 percent month-on-month and by 8.64 percent year-on-year to N2,141.59 July 2021 from N2,068.69 June this year.

According to the agency, states with the highest average price for the refilling of a 5kg cylinder for Cooking Gas were Akwa Ibom (N2,600.00), Benue (N2,540.00) and Bauchi (N2,486.86).

Whereas states with the lowest average price for the refilling of a 5kg cylinder for Cooking Gas were Abuja (N1,806.15), Lagos (N1,840.80) and Ondo (N1,842.94), said the NBS.

DOWNLOAD: NBS Liquefied Petroleum Gas (Cooking Gas) Price Watch for July 2021

Likewise, the regulatory agency noted that the average price for the refilling of a 12.5kg cylinder for Liquefied Petroleum Gas increased by 3.11 percent month-on-month and by 7.16 percent year-on-year to N4,422.32 in July 2021 from N4,289.05 June 2021.

States with the highest average price for the refilling of a 12.5kg cylinder for Cooking Gas), it said, were Abuja (N5,050.00), Gombe (N5,000.00) and Kogi (N4,985.00).

On the other hand, states with the lowest average price for the refilling of a 12.5kg cylinder for Liquefied Petroleum Gas were Kaduna (N3,718.09), Zamfara (N3,725.38) and Oyo (N3,859.97).

Marketers, others blame development on VAT imposition on LPG

Analysts say it is certainly a hard time for most consumers of the product as the LPG price rises by average 33 percent month-on-month from N360/kg in July to N480/kg in August 2021.

Energy Vanguard investigations also showed that a 12.5kg cylinder which sold in Lagos for N4,500 in June and July, for instance, is currently selling for N6,000 in different parts of the state.

In Abuja, FCT, a 12.5kg cylinder which sold for N4,800 July 2021 was said to have risen to N6,000.

On specific factors driving the LPG price increase, analysts disclosed the new prices have come up in view of the Federal Government’s recent efforts at promoting more use of gas in Nigeria and its declaration of 2021-2030 as the country’s decade of gas, meaning more demand for the commodity.

The Central Bank of Nigeria (CBN) recently set up a N250 billion fund to expand the usage of gas in the country.

It was gathered 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 November/December 2020.

Meanwhile, 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.

Implications for product consumers

Bassey Essien, Executive Secretary of NALPGAM, in a recent statement explained that Nigerians might have to pay up to N10,000 in the nearest future to refill 12.5kilogram cylinder of cooking gas.

This is because the Nigerian Government 2019 had gazetted the removal of VAT on LPG as a product to increase its domestic utilisation across the West African country.

Essien, nonetheless, disclosed that the reintroduction of the policy has further increased the price of cooking gas across the country in recent times.

NALPGAM Executive Secretary said: “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 also cautioned the authorities that the initial objective of domestic availability of LPG would be defeated if cooking gas becomes unaffordable for ordinary Nigerian consumers due to the current commodity price increases.

Over a million metric tonnes of gas were consumed by Nigerians in 2020, with about 60 per cent of the product imported by marketers, he noted.

Essien also revealed “we import to augment the 350,000MT allocated to the domestic market by the Nigerian LNG Company Limited.”

He further restated that charging VAT on LPG would return consumers to the era of cooking with kerosene stoves and firewood with the attendant health implications on the populace.

The new prices, he also explained, are “based on the price the marketers buy the product from the depots and terminals.

According to him, early 2020, a 20 metric tonne 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 January 2021.

As of now, the truck load of cooking gas sells for N8 million in the country.

“The average cost of a 12.5 kg cylinder of gas sells for about N6,000, and if the situation persists till December 2021, a 12.5kg cylinder of gas may sell for N10,000 or more.

“My association (Nigerian Association of Liquefied Petroleum Gas Marketers) 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,” Essien further stated.

He added: “Rather than do the needful, the government is reimposing 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.”

Mr. Chika Umudu, National Chairman of Liquefied Petroleum Gas Retailers, Branch of NUPENG, also attributed the price hike to the country’s high dependence on imported LPG.

Umudu said: “As the Dollar is appreciating against the Naira, the price of LPG is increasing.

“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.

He, therefore, suggested that the Nigerian LNG Limited, which accounts for more than 40 percent 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.

Experts react to hike in Liquefied Petroleum Gas price

Ambrose Omokordion, Chief Research Officer at Investa, told Vanguard that “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 percent 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.”

In his comment on the LPG price hike, Dayo Adeshina, Programme Manager, National LPG Expansion Implementation Plan, stated that the product, which had sold at $260 per tonne January this year now sells for $650 per tonne  in the international market.

Adeshina noted while the same pricing index used in the international market is used locally, the depreciation of the Naira against the dollar is currently pushing the hike in price.

He, however, explained that the Federal Government is currently working on other domestic sources.

It is imperative to drive a large volume into the market to ensure competition, the Programme Manager stated.

He added: “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.”

Dr. Olufemi Omoyele, an economic analyst, as well 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.”

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