Despite a target to increase domestic Liquefied Petroleum Gas (LPG) consumption of five million metric tonnes (MMT) by 2022, Nigeria’s domestic consumption remains dismal at less than one million tonnes of the product.
This development is harmful to the country’s aspiration of transitioning to cleaner fuel, at a time global economies have increasingly encouraged citizens to engage in the climate-friendly use of energy.
According to data from Petroleum Product Pricing Regulatory Agency (PPPRA), Nigeria consumed about 87,199MT in April 2021, a decline compared to 81, 734MT consumed in March 2021.
In 2021, Nigeria’s LPG consumption was hovering on less than one million metric tons as January and February consumption stood at 78,999MT and 92,781 MT respectively.
In 2020, Nigeria consumed one million tonnes of LPG higher than 840,594.37 MT consumed in 2019, and 635,452.061MT in 2018.
The Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM) blamed the international cost of LPG and the interplay of foreign exchange (forex) for the hike in cost and sought full domestication of the product’s market to guard against its volatility like oil prices.
Bassey Essien, Executive Secretary, of NALPGAM, in a statement, said the Central Bank of Nigeria (CBN) has no dedicated window of foreign exchange for LPG importers, thus the sourcing of foreign exchange at a high price which ultimately dictates the price of the product gets to the marketers.
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“This brings to the fore our persistent request for the full domestication of LPG supply in the country to guard against price manipulations by international market and foreign exchange,” Essien noted.
Charles Akinbobola, an energy analyst at Sofidam Capital said the increasing price of LPG is a major obstruction to higher demand.
“LPG is a global commodity and during the winter seasons, prices are usually high, and then, they go down towards the end of the summer, however, because of forex changes in Nigeria, prices are always higher than normal,” Akinbobola said.
According to the National Bureau of Statistics (NBS), the average cost of refilling a 12.5kg cylinder of cooking gas was N4,117.55 in January, and N4,363.51 in February but it fell to N4,359.23 in March.
The average price for refilling a 5kg LPG cylinder increased from N1,949.02 in January to N2,018.91 in February and inched up again, in March, to N2,057.71.
In 2021, the total average price for refilling 12.5kg in Q1, stood at N12,900.28. However, in 2020, the total average price for refilling an LPG cylinder was N12,542.04.
To solve the problem concerning domestic LPG consumption, analysts at CSL Stockbrokers advised the government to actively collaborate with the private sector and provide incentives to elicit investors’ participation in the LPG infrastructure that would enhance local production of gas.
“The government on its part needs to implement policies aimed at removing existing unfriendly tariffs and taxation of the product and its associated equipment so as to attract the much needed private sector investment,” CSL said.
Proshare, a financial information hub, notes that the economics of the gas market could become badly distorted if governments decide to interfere in the market price determination by introducing a battery of taxes, levies, and charges.
The signs of these possibilities have started to appear in countries like Nigeria where the PPPRA has introduced an administrative charge of N1.23k per litre of LPG.
Analysts have noted that the introduction of an administrative charge on local gas supply in Nigeria is an unfortunate imposition of fiscal drunkenness on economic sobriety.
“The major challenge with the charge is that it creates deadweight economic loss as well as discourages the demand and supply of gas, which is an outcome at variance with the federal government’s proposed decade of gas policy set to increase gas use for commercial and private automobiles and domestic cooking,” Proshare report said.
The report noted that the imposition of charges on gas at a time when gas is being encouraged as a friendlier alternative energy source is counterintuitive and does not internalize the economic benefits from using gas rather than dual purpose kerosene (DPK) or local firewood, both of which emit environment damaging carbon.
The World Bank Group’s Oil, Gas, and Mining Unit, Sustainable Energy Department, in its study on The role of Liquefied Petroleum Gas in reducing energy poverty, said increasing household use of liquefied petroleum gas (LPG) is one of several pathways to meet the goal of universal access to clean cooking and heating solutions by 2030, as stated in the United Nations’ Sustainable Energy for All Initiative.
The UN Sustainable Energy for All Initiative, launched in 2011, sets as one of its three objectives universal access to modern energy services—electricity and clean cooking and heating systems—by 2030.
The International Energy Agency (IEA) estimates that more than 40 per cent of households newly gaining access to modern household energy by 2030 in the universal-access scenario will do so by switching to LPG.
On Nigeria’s part, the federal government set up the LPG Penetration Framework to encourage the use of LPG in households, power generation, auto-gas, and industrial applications in order to attain five million Metric Tonnes of local consumption of LPG in 2022, according to the Federal Ministry of Petroleum Resources (FMPR).
The LPG Gas Expansion Plan was introduced to increase the use consumption of LPG, as the domestic energy mix consists of 60percent firewood, 30percent kerosene, 5percent LPG, 5percent charcoal.
Also, the Nigerian National Petroleum Corporation (NNPC) recently commenced LPG production and load-out in its newly commissioned Nigerian Petroleum Development Company Limited (NPDC) Oredo Gas handling facility, which has an estimated production stream of 330MT daily.
