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FG Ban on Cooking Gas Export and the Aftermath

By Gideon Osaka
The Federal Government recently announced the ban on exportation of liquefied petroleum gas (LPG), commonly known as cooking gas, in a bid to combat the surging prices of the product. This policy direction of the government which is to bolster domestic supply and subsequently drive down cooking gas prices across the nation was announced by the Minister of Petroleum (Gas), Ekperikpe Ekpo, during a crucial gathering of internal stakeholders in Abuja on Thursday, February 22, 2024.
Natural and liquefied gas was the second-highest export of the country, according to a 2021 National Bureau of Statistics (NBS) report. Data from Volza, which tracks export import figures, showed that LPG export shipments from Nigeria in 2023 stood at 118, and the exports were made by 20 Nigeria exporters to 18 buyers. Most of Nigeria’s LPG exports go to Turkey, Philippines and Kenya. Nigeria reportedly exported 700,000 tonnes of LPG in 2022. However, the irony is that Nigeria is a net exporter of LPG; however, it is dependent on imported LPG as the import of LPG increases the cost burden on the Nigerian end-user.
Valuechain reports that prior to the announcement of the import ban by the government, the cost of cooking gas had seen a notable escalation, burdening households across major cities. Reports indicate that prices soared to unprecedented levels, reaching between N17,000 and N18,000 to refill a 12.5kg cylinder, a significant surge from the N9,000 the product was sold few months earlier. This alarming spike in prices had raised concerns among consumers and stakeholders alike, prompting urgent action from the government.
By halting exports, the government aims to redirect the entirety of production towards meeting local demand, thereby increasing supply within the country. This influx of supply is anticipated to exert downward pressure on prices, providing relief to consumers grappling with the financial strain of high cooking gas costs.
By this action, Nigeria joins countries like Kazakhstan and Niger which recently halted exports of LPG in a bid to bolster prices. To prevent shortages in the domestic market, the government of Kazakhstan in March extended the ban on export of liquefied petroleum gas (LPG) for six months. Niger, five months ago, banned all exports of LPG until further notice. According to the government, national production should be used to supply the domestic market, and in case of surplus, a special authorization can be requested to export it. Niger normally exports its surplus LPG to neighbouring Nigeria.
The latest initiative by the Nigerian government adds to some recent effort and commitment by the government to crash the price of the product and drive the growth of the sector. The government had in November 2023 announced the withdrawal of value-added tax (VAT) and customs duty on the importation of LPG and its associated equipment. The decision to withdraw VAT on LPG was in line with President Bola Tinubu’s commitment to improving the investment climate in Nigeria, increasing the supply of LPG to meet local demand, reducing market prices and promoting clean cooking practices. Other items exempted from VAT and duty payment are LPG cylinders, LPG cascades, gas leak detectors, steel pipes, steel valves and fittings, LPG dispensers, gas generators, and LPG trucks, among others.
Interventions have also been made by operators in the LPG market like the Nigeria Liquefied Natural Gas (NLNG) company, which supplies around 40% of the domestic LPG consumption. NLNG recently reiterated its commitment to supply 100 per cent of its LPG production (Propane and Butane) to the Nigerian market in keeping with a January 2023 announcement to begin 100 percent supply of its LPG to the Nigerian market. The company had in 2021, announced it was reducing LPG exports and increasing supplies to domestic market as part of the measures to support the Federal Government’s efforts to deepen domestic gas supply and economic growth. It increased domestic supply to 450,000mt per annum, from 250,000mt/year with the balance of its output exported to Western markets.

Market impact one month after
Although it is still early days as the export ban was announced barely one month ago, the intended impact may take some time to be felt in the market. However, Valuechain market survey showed that the price of LPG has been oscillating in the last one month, even though some locations in Nigeria have reported marginal drop in price. Findings showed that in February, LPG depot prices per 20mt in naira at PPMC Apapa depot, NIPCO, Navgas, Matrix, Stockgap, Prudent, Rain Oil, Dozzy, Techno Oil, 11plc, AA Rano and Shafa Energy depots ranged between N23 million and N22 million. However, in March, average depot prices per 20mt ranged between N21 million and N22 million.
In the retail market, the prices of cooking gas vary significantly across different states. States like Imo, Abia, and Abuja recorded the highest prices, likely due to factors such as transportation costs, local demand-supply dynamics, and distribution inefficiencies. Prices still hovered around N1200 and N1400 per kg.
According to LPG in Nigeria, a social enterprise, championing the use of LPG in Nigeria through advocacy and LPG-related information, the Federal Government’s decision to curtail the exportation of LPG signals a proactive response to address these burgeoning issues. By prioritizing domestic supply and channeling production towards meeting local demand, the government aims to alleviate the strain on consumers and stabilize prices across the country. According to the group, the strategic move not only fosters energy security but also underscores a commitment to fostering economic growth and development through the harnessing of Nigeria’s abundant gas reserves.
“While the ban on exportation offers a promising avenue for mitigating the challenges facing the LPG sector, its effectiveness hinges on seamless implementation and sustained efforts. Collaborative engagement with stakeholders, including industry players and regulatory bodies, remains paramount to navigate potential hurdles and ensure the smooth execution of the government’s directives”, the group said in a blog post.
As LPG stakeholders navigate this evolving landscape, there is cautious optimism for a more favorable future. By extension, what we can do at this point is wait and hope that this initiative proves productive for the general Nigerian populace. The ban on exportation represents a crucial step towards reinvigorating the domestic market and revitalizing the industry, offering renewed hope for businesses and consumers alike. With concerted action and strategic initiatives, Nigeria’s LPG sector stands poised to overcome present obstacles and emerge stronger, contributing to a cleaner, more sustainable energy future for the nation.