Nigerians to expect further rise in cost of cooking gas as problem persists

Nigerians who are already feeling the burden of increasing cost of cooking gas may brace up for more pain as foreign exchange scarcity, high taxes and levies to gas marketers, among others are expected to cause further price increase in the remaining months of 2021.

From an average of N300 per kilogramme to an average of N650 or more, depending on the location, the price of Liquified Petroleum Gas (LPG) popularly called cooking gas is now beyond the reach of average Nigerians, forcing many households and eateries, especially in urban centres to seek alternative means of cooking.

Major players in the sector alleged that importers, depot owners and the Federal Government were complicit in the continuous rise of LPG price through price-fixing, reintroduction of Value Added Tax, exorbitant landing cost, levies and dollar scarcity; developments that may persist till 2022.

Some of the sellers interviewed attributed the increase in price to the increase in the wholesale cost, which has gone up due to the cost of importation.

A dealer, Abdullahi Dauda, said “though the authorities have debunked that claim, the people we buy from said they are also buying at a high cost.”

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According to the National Chairman of the Liquefied Petroleum Gas Retailers Branch of the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), Chika Umudu, the recent 70 percent hike is as a result of Nigeria’s high dependence on importation of LPG.

He noted that as long as the dollar was appreciating against the naira, the price of cooking gas would keep increasing.

Other experts stated that the reintroduction of Value Added Tax (VAT) on locally produced LPG, which was removed in August 2018, has contributed to the sharp increase in the price of the product.

The Executive Secretary, Nigerian Association of Liquefied Petroleum Gas Marketers, Bassey Essien said the re-introduction of VAT means most businesses had no option than to increase their prices in order not to run at losses.

He warned that Nigerians might soon end up paying more than N10, 000 for a 12.5kg of cooking gas.

“Presently, 7.5 percent VAT is charged on imported gas. We import to augment the 350,000MT allocated to the domestic market by the NLNG. This, including other payments like landing cost, demurrage, among other things, keeps pushing up the cost of LPG to N8m. The government should rethink the imposition of VAT on LPG importation,” Essien said.

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, has said poor supply of gas is still a major challenge in Nigeria’s domestic market.

“Today, this country is under-supplied with gas. I can tell you that we are having difficulty feeding our network across the country with gas. Every day, it is troublesome to deliver gas. Once your supply is weak, it will affect pricing,” Kyari said during a recent visit to the management of the Department of Petroleum Resources (DPR).

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 leading 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.