Will the prices of cooking gas ever come down in Nigeria?

Various attempts have been made in recent times to reduce the inflationary pressures on Nigerian households who battle against price pressures across all household goods and services. From housing to feeding, schooling, and other essential services, many households feel the pains of the persistent increase in the general average price level in the country.

For instance, in just a decade, Nigeria’s total consumption expenditure on fuel/light, the superset of cooking expenditure, rose by 88 percent from N1.07 trillion in 2009/2010 to N2.02 trillion by 2019. During that period, inflation was relatively stable. But in the last two years, the effects of exchange rate volatility coupled with reduced agricultural production due to insurgency mounted so much pressure on general prices of goods and services so much so that essential goods became unaffordable to most Nigerians. This implies the expenditure on fuel/light and by extension, cooking, would have risen much more.

The rising inflationary trend affected cooking gas which caused much dissatisfaction among many households in the country. While rural households may seek refuge in alternative cooking materials, those in the urban areas are in neighbourhoods where those alternative cooking materials such as firewood and coal, cannot be conveniently used, unless they will subject their neighbours to externalities.

Apart from that, using firewood and coal as alternatives to cooking gas comes with a high price for the environment. In the last few years, the Nigerian economy has suffered from low crop yield, reduced livestock production, unstable hydropower supply and food insecurity due to the impact of climate change, according to FutureLean.

Corroborating that, the Department for International Development (DFID) suggested that Nigeria might lose between 6 to 30 percent of its GDP worth about $100 billion to $460 billion by 2050 as a result of the impact of climate change. In other words, addressing the rising costs of cooking gas is germane in the quest to solve the effect of climate change.

Cooking gas, an essential part of urban households has witnessed spiral price increase in the last few months. Between December 2020 and December 2021, the average price of cooking gas, 5kg cylinder nationwide rose by 84.4 percent from N1,949.75 to N3,594.81. Also, the average price of 12.5kg cylinder rose by 76.1 percent during the same period from N4,157.68 to N7,319.76.
LPG distributors and price discrimination

Businessmen improvise to surmount the myriad of challenges confronting them within the Nigerian business landscape. A critical look at the prices LPG was sold across the 36 states and FCT in Nigeria suggests the possibility of price discrimination by cooking gas dealers.
Price discrimination connotes the selling of identical goods at different prices in different markets provided there is no possibility of buyers reselling the goods in markets where the prices are higher.

In December 2021, the states that recorded the most increase in the prices of 5kg cylinder year on year were Enugu, Imo, Ebonyi, Osun and Lagos. Whereas the 5kg cylinder cost N1,563.75; N1,678.89; N1,707.12; N1,713.50, and N1,768.00 as of December 2020 in those aforementioned states, by December 2021, the prices of 5kg LPG had risen to N3,792.86; N3,775; N3,812.50; N3,820.83, and N3,909.52 respectively. Other states with triple digits’ growth were Oyo, Kaduna, Kogi, Ondo, Ekiti, Kwara, Abia, Abuja and Edo.

On the other hand, three states recorded single digit growth which were Taraba, 8.9 percent; Yobe, 3.9 percent, and Adamawa, 0.2 percent.
On the average, it cost more to get the 5kg LPG in the southern part of the country than in the northern part. For instance, whereas the national average price for this product was N3,594.81 as of December 2021, it was N4,083.33 in Benue State; N3,975 in Cross River; N3,966.67 in Borno; N3,935.71 in Rivers; N3,919.44 in Akwa Ibom; N3,909.52 in Lagos and N3,909.38 in Ekiti State.

The 5kg LPG was least expensive in Bauchi, Yobe and Adamawa at N2,586.43; N2,543.14, and N2,398.40 respectively.
For the 12.5kg cylinder, it was most expensive in Osun, Oyo, Abuja, Gombe and Plateau states as of December 2021, at N8,491.67; N8,303.33; N8,058; N7,870, and N7,860.42 respectively in those states as against the national average price of N7,332.04.

The product was cheaper than the national average price in twenty states. The cheapest prices of the product could be found in Borno, N5,852.13; Bayelsa, 6,678.57; Nassarawa, N6,679.57; Yobe, N6,694.58, and Akwa Ibom, N6,708.33 respectively.
From another perspective, stakeholders in the midstream sub sector have lamented that the continuous rise in the price of cooking gas to price manipulations. According to some stakeholders who expressed their displeasure mid-January, the cost of a truck of a cooking gas was said to have suddenly risen from N9.5 million to N10.10 million within days.

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Current prices of cooking gas
According to Beta Prices, a website providing current market prices of the different kilograms of cooking gas, as of the end of January 2022, a kilogram of cooking gas cost N700. It was N1,400 for 2kg, N4,200 for 6kg; N8,400 for 12kg; N8,850 for 12.5kg while the 50kg was sold for N35,000.
Need to reduce prices of cooking gas

The Nigeria Liquefied Natural Gas Limited(NLNG), early this year promised to supply 100 percent of its product to the Nigerian market in order to cushion the price effect. Before the promise was made, about 65 percent of cooking gas used domestically was imported while 35 percent was sourced locally.

“The Board of Directors of Nigeria LNG Limited (NLNG) has approved the supply of 100% of the company’s LPG production (Propane & Butane) to the Nigerian market. Consequently, NLNG will prioritize the domestic market for 100% of its Butane production, otherwise known as cooking gas.
“The milestone is coming just three months after the company supplied its first propane cargo into the domestic market and has developed a scheme to sustainably supply Propane for usage in cooking gas blending as well as in agro-allied, autogas, power and petrochemical sectors of the Nigerian economy to further deepen gas utilisation in Nigeria.

“These initiatives are designed to increase LPG availability in Nigeria, diversifying its uses and support the Federal Government’s Decade of Gas initiative. NLNG is currently the highest single supplier of LPG into the domestic market, with an estimated 400,000 metric tonnes supplied in 2021”, the NLNG said in a statement made available by Andy Odeh, the firm’s general manager, external relations and sustainable development.

“Committing 100% of our LPG supply 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 tonnes to over 1 Million tonnes market size annually by the end of 2020.

“In 2021, we increased our LPG supply commitment from 350,000 metric tonnes (or 28 million 12.5kg cylinders) to actual delivery of 400,000 metric tonnes (or 32 million 12.5kg cylinders) thereby directing most of our production into the domestic market. But this was not enough for NLNG, hence this commitment to do all that we possibly can and supply 100% of our LPG production to the domestic market,” Philip Mshelbila, MD/CEO NLNG added.

When the next data on retail prices of cooking gas are published for the first quarter of 2022, Nigerian households will ascertain if the overt and covert steps being taken by the government and other stakeholders have really made impact cooking gas prices.