Energy: Marketers explain ‘critical factors’ for imminent gas price hikes for Nigerians

*Olatunbosun Oladapo, President of the Nigerian Association of Liquefied Petroleum Gas (LPG) Marketers, announces gas consumers should expect price hikes from next week because of international price increases and high taxes, among other factors

Isola Moses | ConsumerConnect

The recent fuel subsidy removal, exchange rate unification, and their attendant inflationary trend, especially in the energy sector, have continued to cause socio-economic dislocations for millions of consumers in the Nigerian economy.

Olatunbosun Oladapo, President of the Nigerian Association of Liquefied Petroleum Gas (LPG) Marketers has stated that gas consumers should brace themselves for price hikes effective from next week.

By implication, some analysts also said tougher times may be ahead of gas consumers, as the new gas price hike regime begins soon.

Oladapo attributed the proposed gas price increase to rising international prices, high tax rates and prices of vessels, Forex scarcity, and Naira devaluation as some of the reasons for the intended price review.

Nigerian LPG prices are internationally benchmarked, based on Nigerian Liquefied Natural Gas Contract prices, and are always influenced by international prices, a report said.

The President of the Nigerian Association stated: “It is starting next week because international prices have gone up.

“The prices of vessels have gone up and taxes are high, but consumers are not earning more.

“Their purchasing power has gone down. Everybody is crying. Consumers, middlemen, and retailers are feeling the impact because business is now on the low side,” he said.

Proposed price hikes ‘very unfortunate,’ says President

In view of the far-reaching impacts of the imminent product price increase, Olatunbosun described the situation as unfortunate.

He noted: “The situation is very unfortunate because prices are going higher. Nigerian consumers are passing through very difficult times because they can no longer afford gas.”

According to him, consumers are now returning to firewood, charcoal, and sawdust for cooking.

Oladapo also said: “The government should come in and alleviate the suffering of the masses by providing palliatives, reducing taxes and levies.

“You can imagine that for every 1kg of gas priced at N700, tax would take way N3.50. How much is left in such a business?”

Local cooking gas prices

Hitherto, Nigerian consumers of cooking gas, for some months in some areas, reportedly enjoyed low prices due to a drop in international prices.

The price of LPG dropped from an average of N730 per kilogram June 2023 to around N600/kg July, and thereafter increased to N750/kg August due to the Naira devaluation.

However, as of June this year, the price dropped by 76.1 percent to 2.10 per one million British Thermal Units May 31 from 8.78 per one million BTU, according to U.S. Energy Information Administration.

Likewise, the National Bureau of Statistics (NBS) report on retail gas prices indicated the “average retail price” for refilling a 5kg cylinder of cooking gas decreased by 6.71 per cent month-on-month from N4,360.69 recorded May to N4,068.26 June 2023.

On a year-on-year basis, the price also decreased by 3.56 percent from N4,218.38 June 2022.

Appeal to government to adjust local taxes, others

Meanwhile, the President of the Nigerian Association of Liquefied Petroleum Gas Marketers has urged the Federal Government to tax profit and not products because consumers are not buying gas anymore.

He further complained that “local taxes are worsening the problem.”

Oladapo as well urged  marketers who have had the opportunity to buy products locally to fix prices with “consumers’ sympathy” in mind.

As regards the situation in the international market, it was learnt the vessel scarcity in the gas market would push up local prices of Liquefied Natural Gas (LNG), also known as cooking gas in the coming months.

Vessel scarcity in the international market has led to charter rate hikes, ahead of the 2023 winter, when demand for heating fuel peaks, according to report.

Subsequently, as of August 1, 2023, charter rates increased to $284,750 per day for November and $206,750/day for October, quadrupling the current price of $70,500/day, according to data from Spark Commodities quoted by Bloomberg.

Report stated: “Tanker supplies are increasingly tight because traders are using the ships as floating storage in a bet that LNG prices will rise as the weather turns colder.

“Volatile shipping rates can eat up margin for an LNG trader looking to cash in on higher winter prices, and rising transportation costs ultimately can mean higher prices for buyers in Europe and Asia.”

The Punch also noted that the number of LNG vessels floating on the water for at least 20 days also rose in late July, with 42 vessels tracked, which is about 27 percent higher than the same time a year earlier.

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