Pascal Oparada
Households in Nigeria are reeling from an astronomical hike in prices of cooking gas, which has choked household and disposable income.
Consumers were taken unaware, as they noticed that the price of cooking gas skyrocketed to as much as 60 per cent in some states almost without prior notice.
This has eaten deeper into their household income, many laments.
The Nigerian government, which experts say has done more to drive up inflation rather than reduce it, announced in June that households might need to pay more for cooking gas.
The reason, gas association in the country, the Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM) said, is due to the imposition of VAT on cooking gas.
The association said the price hike may go higher and consumers may pay as much as N10, 000 for 12.5kg soon.
As the Buhari government scrambles for more revenue to service loans, it adds further hardship to households whose incomes have been eroded by inflation and unemployment.
Experts see the hike as thoughtless and unfeeling for a population that is ravaged by unemployment, inflation and insecurity.
The recent Federal Government efforts aimed at encouraging the use of gas in Nigeria and its declaration of 2021-2030 as Nigeria’s decade of gas, may have to wait, as Nigerians battle food inflation.
The price hike has thrown a wedge into the scheme due to the price hike, as more households may revert to Kerosene stove and charcoal, experts predict.
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 a knee-jerk response.”
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.
He 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.”
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.”
They say this may also pile pressure on the climate, as demands for charcoal increase.
Deforestation will increase as the hunt for firewood also increase, analysts predict.
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 the increased use of cooking gas, as a cleaner source of cooking energy for Nigerians. Gas prices had recorded a steady rise in recent months with the market price at N4,400 in June and N3,200 in November/December 2020.
In July, the Liquefied Petroleum Gas (LPG) rose 33 per cent month on month in most of the states.
It rose from N360/kg in July to N480/kg in August.
NALPGAM’s Executive Secretary, Bassey Essien, in a press statement explained that Nigerians may have to pay up to N10,000 in the nearest future to refill a 12.5kg cylinder of cooking gas.
The government had in 2019 gazetted the removal of VAT on LPG, as a product to increase its domestic utilisation.
Essien said that the reintroduction of the policy has further increased the price of cooking gas across the country.
“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,” Essien said.
He warned 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 price hike.
He also noted that Nigerians consumed more than one million metric tonnes of gas 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.
He 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 depots and terminals.
Investigations show that the cost of refilling a 12.5kg of cooking gas cylinder that was about N3,500 in December 2020 has risen to N6,800 in Abuja.
A resident along the Lagos-Ibadan Expressway said she refilled her 12.5 kg cylinder at N7,200 in Lagos on August 29. Dealers project it will cost N10,000 by December.
Operators said the price hike has made small businesses and homes in rural and semi-urban areas to revert to firewood and charcoal, as the cooking gas sale has plunged.
Liquefied Petroleum Gas Retailers Association of Nigeria (LPGRAN) National Chairman, Michael Umudu, listed three main reasons for the surge in price.
“First,” he explained, “about 70 per cent of the gas we consume in Nigeria is imported and importers have to contend with the high cost of foreign exchange [forex].
“Second, there is a rise in the price of petroleum products in the international market and because of that, the cost of LPG has equally gone up. So, importers now pay more on imports.
“Third, the government added VAT on imported LPG about three weeks ago. It [VAT] is 7.5 per cent of the cost of the commodity and this [has] exacerbated the price hike of cooking gas in the past three weeks.”
Umudu told said that before the introduction of VAT in July, forex and the cost of petroleum products on the international market had been the only two reasons for cooking gas price rise.
His words: “Around November/December last year, 12.5kg was sold at about N3,500, but in July [2021] it went up to around N5,500 and when VAT was introduced about three weeks ago, it now escalated to about N6,500 and above.”
“The price hike seems to be happening on a daily basis and nobody can tell when it will stop. There has been a lot of appeal to the government to find a way of persuading NLNG to increase its domestic supply so that the product can be affordable.
“As the dollar is appreciating against the naira, the price of LPG is increasing,” Umudu 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.”
