Cooking gas prices fall 10% on improved supply, VAT waiver

In the last two weeks, the price of refilling a 12.5kg cylinder of Liquefied Petroleum Gas (cooking gas) has reduced by 10.4 percent to N7,700 from N8,500, due to improved local supply and the Value Added Tax (VAT) exemption on local gas production, BusinessDay enquiries show.

In a survey around major cities in Nigeria, the price of cooking gas is trending downwards; development experts say it bodes well for Nigeria as it helps to ease the burden of cash-strapped households who have been dealing with a hike in price since the beginning of last year.

“Based on the amendments introduced by the 2021 Finance Act, only natural gas and imported LPG will now attract VAT,” Temitope Kolade, the senior manager at Oil, Gas and Power Practice, Andersen Nigeria, says in a note published in BusinessDay.

After a shortage in the local market sent prices up last year, supply has gradually increased since the beginning of the year. Two weeks ago, the Board of Directors of Nigeria LNG Limited (NLNG) approved the supply of 100 percent of the company’s LPG production (propane & butane) to the Nigerian market.

“This initiative is a major milestone in our journey of domestic gas supply. We supplied our first butane (LPG) cargo into the domestic market in 2007, which helped to develop over the years the LPG industry in Nigeria from less than 50,000 tons to over 1 million tons market size annually by the end of 2020,” Philip Mshelbila, managing director at NLNG, said in a press statement.

In 2021, NLNG increased its LPG supply commitment from 350,000 metric tons (or 28m 12.5kg cylinders) to actual delivery of 400,000 metric tons (or 32m 12.5kg cylinders) thereby directing most of their production into the domestic market.

Read also: Nigerians spend 24% of minimum wage on cooking gas

“But this was not enough for NLNG, hence this commitment to supply 100 percent of our LPG production to the domestic market,” Mshelbila said.

Before the fall in price, experts blame the price hike on the dearth of infrastructure, the global shortfall in gas supply, inadequate local production, shortage of foreign exchange, devaluation of the naira, and logistic hitches.

The consistent price hike made some low-income consumers resort to unhealthy alternatives like charcoal, firewood, kerosene, etc.

“I alternate between cooking gas and firewood because I have to factor my children’s school fees into the business. The current rising price of cooking gas won’t allow me to consider it as an option, “Eunice Okon, a fruit seller, and resident of Lagos State said.

The fall in price is expected to make them return to the use of gas, which is a good development and a clean source of energy, said Muda Yusuf, a former director-general of Lagos Chamber of Commerce and Industry (LCCI).