-By Gideon Osaka
Cooking gas, otherwise known as the liquefied petroleum gas (LPG), usually consists of some liquid mixtures of the volatile hydrocarbons propene, propane, butene, and butane. Its consumption for both domestic and industrial use has expanded ever since.
In Nigeria, it serves as one of the major cooking means, especially in homes that are occupied by medium income earners in the country.
According to the World Gas Statistics Meter, Nigeria ranks number 38th in the world for natural gas consumption, accounting for about 0.5 per cent of the world’s total consumption of 132,290,211 LPG. The statistics body also said that Nigeria consumes 3,192 cubic feet of natural gas per capita every year.
However, one of the major challenges that is currently bedeviling the country, is the rising prices of LPG which is posing a threat to its affordability in Nigeria. The situation is worsened as regulatory agencies are helpless.
Recently, the Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM) affirmed that the Federal Government alone cannot stop the hike in the price of liquefied petroleum gas (LPG) across Nigeria.
The Executive Secretary of NALPGAM, Mr. Bassey Essien, who made the affirmation, stated that the increment in the price of LPG was worrisome over the few months.
He said the only solution to the problem is putting structures to domesticate gas production.
“The major issue we have with gas prices is that the majority of what we are consuming is imported. Over one million metric tonnes of gas was consumed by Nigerians in 2020, and about 65 per cent of the product was imported by marketers.
“So, the price of gas is affected by what is happening in the global market, because though Nigeria produces about four million metric tonnes of gas annually, only 350,000MT is allocated to the domestic market. Unfortunately, the government cannot increase the allocation to meet our full domestic demand without the buy-in of other partners of NLNG,” Essien said.
Consequently, the hike in the price of cooking gas was affecting the Federal Government’s National Gas Expansion Programme (NGEP), which was aimed at deepening gas utilisation in Nigeria. Also, with the way the sector works, the Federal Government cannot unanimously direct the Nigerian Liquefied Natural Gas Company Limited (NLNG) to increase its domestic LPG allocation without the support of other stakeholders. As such, the only way out is to expand the production of domestic gas in the country.
Factors that determine prices of LPG in Nigeria
Several factors contribute to the determination of prices of LPG in the country. They include: world LPG benchmark pricing, exchange rates, shortage of discharge terminals, LPG transportation and logistics costs,
World LPG benchmark pricing: Nigerian LPG prices reflect the fact that LPG is an internationally traded commodity and influenced by international prices. The international benchmark for the cost of Nigerian LPG is the Nigerian Liquefied Natural Gas Contract Price (NLNG), also commonly called the NLNG CP.
The NLNG CP changes on a monthly basis, forcing price reviews, at least, once to three times per month. All internationally traded commodities are subject to price fluctuations. Agricultural and natural resource products are similar to LPG, in that they are subject to the prevailing price in international commodity markets.
Exchange rates: The NLNG CP is traded in US dollars per tonne. As the international price for LPG is in US dollars, the Nigerian Naira exchange rate also affects the Nigerian price of LPG.
The Central Bank of Nigeria (CBN) has already deleted the exchange rate of N371 to $1, which suggests that there will be an adjustment to the naira to reflect current reality. NLNG hinges the price on the international market fundamentals. It means that although the product is produced locally, it has to be bought with the US dollar, which has increased the price of gas because of the rising cost of the dollar.
Shortage of discharge terminals: This is all about the storage and distribution infrastructure.
The biggest challenge facing the LPG sector is not supply as the Nigeria LNG has stabilised supply. The major challenge, however, is in the area of logistics.
The Nigerian National Petroleum Corporation (NNPC) has three jetties in Lagos State that constitute the Apapa Jetty, namely: Petroleum Wharf (PWA), BOP and NOJ – all used by vessels to discharge petroleum products.
But sometimes, only NOJ has the facilities to discharge LPG, and is thus dedicated for the discharge of LPG, base oil and other similar products from vessels. However, NOJ is also used to discharge petrol and other petroleum products from vessels.
So, whenever NLNG brings LPG vessel to Lagos, and another vessel is discharging petrol at NOJ, the LPG vessel will either wait and incur huge demurrage or go to NAVGAS terminal – a private jetty and the only alternative jetty for LPG vessels to discharge in Lagos.
Though the country has not experienced acute scarcity of cooking gas since NLNG intervened in 2007, persistent hike in price occurs whenever NLNG vessel experiences delays in loading at the Bonny Island Plant, or when the vessel is diverted to a private facility in Apapa as a result of lack of berthing space in PPMC jetty.
LPG transportation and logistics costs: About three inland bulk terminals are currently located in Lagos, the commercial nerve centre of Nigeria. There are 35 other states, plus the Federal Capital Territory (FCT) that all get their domestic supply from Lagos with Bridger and Bobtail trucks.
The states are different distances from the delivery depots, which, in turn, differentiate the prices from their counterparts in the different parts of the country. If for instance, LPG 20 tonnes plant is located in Lagos, the cost of a Bridger truck to deliver LPG from the terminal at Apapa (in Lagos) to a gas plant is N200,000 ($655) or N95,000 ($311) for a Bobtail truck, if a business owner operates a mini skid plant of 2.5 to 10 tonnes. Also, the cost to deliver that same quantity of LPG from Lagos to Port-Harcourt is 450,000 ($1475) for a Bridger truck and N350, 000 ($1147) for a Bobtail truck.
These logistics costs can vary across the different geographical locations of Nigeria, LPG pricing also varies by location and distance from the source. A survey of prices of gas at the Vinee Gas branch, Masaka area of Nasarawa State showed that a 5kg gas refill has moved from N1,800 to about N2,000. A 6kg refill has also moved from N1,900 to about 2,100. Also, an N8kg gas now goes for N2,500, while 10kg of gas refill costs an average consumer about N3,200. In the same vein, the 12.5kg gas has skyrocketed from about N4,500 to N5,000.
The cause of the increase, according to the operators at the gas plant, who would not want to be mentioned, is due to the high cost of importation. The resultant impact, they said, is on the consumers who may have to pay through their nose to purchase the product, or rather find alternative ways of cooking.
