Scarcity, price hike slow Nigeria’s 300,000 MT LPG market

Market operators have warned that unless scarcity and price volatility is addressed, Nigeria’s 300,000 metric tons domestic LPG market may be in jeopardy, and efforts at deepening LPG penetration could be scuttled.

Already, intense scarcity of LPG has set in, as private dealers have no product and those who have are charging a 100 percent price hike on consumers.

Last week, Bassey Essien, executive secretary of Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM), at a press briefing, warned of imminent scarcity as a result of alleged connivance between officials of NNPC and NAVGAS, a private jetty terminal owner, to create artificial scarcity.

Essien told BusinessDay that while gas is supposed to be readily available in all the major terminals in Lagos, today, only one company has gas because some people have hijacked the NLNG domestic supply scheme.

“Marketers bought 20 metric tons of LPG from terminal owners for N2.4million; the price rose to N2.6million on Thursday; N3milliion on Friday; and N3.5million. Based on this, marketers have agreed to increase the price, at which they are selling LPG to both the individual and industrial users. This is the only way marketers can recoup their investments and grow,” Essien said.

BusinessDay gathered that people would now be filling a 12.7 kilogram gas cylinder for between N3, 500 or N4, 000, as against N2, 800.

Representatives of both NAVGAS and PPMC have denied the charge, insisting that recent price volatility was a result of current issues in the sector, including production outages.

BusinessDay inquiries from major operators attribute the scarcity to Federal Government’s policy of prioritising PMS delivery to every other jetty, except the one belonging to NAVGAS.

“The issue is that Government is prioritising the distribution for PMS over gas, and the jetties used to service other marketers, is used solely for PMS. Only NAVGAS is allowed to receive LPG in their jetty,” said a market operator who pleaded anonymity.

The source further added, “We are expecting vessels to come in this week, and as soon as they come, the prices will crash. The policy of the government is creating monopoly for NAVGAS as they are the only one with product.”

Meanwhile, retailers of LPG are having a hard time sourcing the product.

“I just secured delivery of the product after one week and the price at which I got it. I am not sure I will sell anything less than 100 percent of the last price,” said Emeka Umana, a local LPG operator based in Lagos.

Two other operators contacted said they have not received orders for two weeks.

This portends grave consequences for LPG use in Nigeria, which is currently fighting a losing battle with substitutes like kerosene and firewood.

Between 200 -2015, NLNG delivered over 700,000 metric tons of LPG into the domestic market.

Annual allocation increased by 150,000MT to 250,000MT on the back of growing demand, improved jetty capacity and increased participation through growth of new engrafts and plants with number of off-takers increasing from 6 to over 20.

An expectation that the removal of subsidy on kerosene will improve LPG usage, which is cleaner and safer, is being stymied by recent developments in the domestic LPG market.

Abdul-Kadir Ahmed, director of marketing NLNG in a paper, said barriers to LPG penetration include accessibility, affordability and acceptability.

According to Ahmed, the LPG supply chain is hindered by inadequate and unevenly spread terminals, transportation and storage infrastructure.

“While consumers decry the cost of gas cylinders, producers are wary due to small margins which threaten economic viability,” Ahmed said.

“LPG or cooking gas users find it extremely difficult to refill their cylinders. Sometimes, they travel as far as 200km before they can access facilities to refill their cylinders,” said Nkechi Obi, managing director of Techno Oil.

She added, “Our desire is for government to provide incentives for investors to build refilling plants and terminals and DPR to incorporate LPG plants in all mega stations within reach of communities, so that people can refill their cylinders with ease and at an affordable cost,” she said.

Nigeria is ranked lowest in sub-Saharan Africa in per capita usage of LPG, consuming 1.1kg compared with Ghana at 3.0kg; South Africa 5.5kg; and Morocco 44kg per capita.

ISAAC ANYAOGU