States that paid more for LPG in First Quarter of 2021
The evolution of energy sources began with conventional methods such as the use of animal dungs, charcoal and firewood for household cooking in majorly rural areas. The frequent cutting down of trees to obtain firewood has caused dangerous effects to the environment such as deforestation, soil erosion, flooding and climate change. Kerosene became the next popular energy source, with use in both rural and urban areas for various purposes such as household cooking and lighting. It also served as a better energy source as opposed to animal dung, charcoal and firewood but due to the continuous increase in price and also the dangerous and harmful black carbon it releases, a more economical and efficient source of energy was needed which gave a rise to the use of Liquefied Petroleum GAS(LPG) globally.
Liquefied Petroleum Gas (LPG), also known as cooking gas, is more in use in urban areas and by households that are classified as middle or high-income groups. It has been in use since the early 1860s as a fuel source for domestic and industrial purposes. Ever since then, the widespread use of LPG has been on the increase in major regions, especially in the Asia Pacific region because of its vast population. The United Nations Framework Convention on Climate Change (UNFCCC) of 1994, in collaboration with the Kyoto Protocol of 1997 drafted a National Gas Policy (NGP) which targeted the promotion of Liquefied Petroleum Gas as a sustainable substitute for traditional fuels.
The Federal Government of Nigeria, led by Mohammadu Buhari, stated that 60 percent of Nigerians still use firewood, 30 percent use kerosene, 5 percent use charcoal and 5 percent also use LPG. In his bid to shift most Nigerians from the use of biomass as a source of fuel energy to LPG, two refineries were constructed to aid production and distribution of LPG to all the states. These refineries distribute LPG cooking gas to states closest to them, thereby making it easier to cover the six geopolitical zones.
LPG is locally supplied by Nigeria Liquefied Natural Gas (NNLG) and 2 million tonnes are produced yearly. The country only consumes about 350MT yearly which is a shocking discovery. Although LPG consumption has grown from 130MT in 2011 to 500MT, the rate of demand is still not enough and is at 1.8kg compared to Morocco which consumes 44kg, South Africa which consumes 5.5 kg and Ghana which consumes 3.0kg. The average consumption of the West African region alone is 3.5kg.
More is expected to be consumed because Nigeria is a country rich in natural oil and gases, and is a leading exporter of LPG in Africa. Various obstacles have attributed to the reasons why LPG is unrecognized fully and less consumed in Nigeria.
A major discouragement to the use of LPG in Nigeria is the increase in price. The National Bureau of Statistics (NBS) gave research data for April 2021 showing that to refill a 5kg cylinder gas with LPG in the north-east part of Nigeria cost an average of N2, 306.51, which is the highest out of the six geopolitical zones. States in the south-south region paid an average of N2, 164.61, Southeast paid an average of N2, 076.74, north-central paid an average of N2, 011.67, south-west paid an average of N1, 995.89 while the north-west paid an average of N1, 933.35.
To refill a 12.5kg cylinder gas with LPG in the south-south cost an average of N4, 505.65, cost an average of N4,412.52 in the south-east, cost an average of N4,374.53 in north-central, N4,319.98 in the south-west, N4,307.39 in north-east, and N4,038.13 in the north-west.
The average price for refilling a 5kg cylinder of LPG increased monthly by 3.59% and yearly by 1.18% between January 2021 and February 2021 to N2, 018.91 and N1, 949.02 respectively. The average price for refilling a 12.5kg cylinder of LPG increased monthly by 4.45% and yearly by 4.38% from January 2021 to February 2021 to N4, 363.51 and N4, 177.55 respectively.
The reason for the change in prices is because the pricing of LPG in Nigeria is based on the changes in global price of the product at the international oil and gas market. The pricing is reviewed once in three months, forcing prices to change monthly.
“Nigerian LPG prices reflect the fact that LPG is an internationally traded commodity and influenced by international prices. The international benchmark for the cost of Nigerian LPG is the Nigerian Liquefied Natural
Gas Contract Price (NLNG), also commonly called the NLNG CP.
“The NLNG CP changes on a monthly basis, forcing price reviews at least once to three times per month. All internationally traded commodities are subject to price fluctuations. Agricultural and natural resource products are similar to LPG, in that they are subject to the prevailing price in international commodity markets”, according to information sourced from the website of Kiakia Gas.
The pricing influences the distribution of LPG thereby affecting the consumption at the domestic level because consumers seek other energy sources that are cheaper. Also, the exchange rate of dollar to naira makes it difficult to set a particular price on the commodity because exchange rate changes per day.
In the aftermath, some states paid higher amount for LPG based on the NBS data. This is because of the transport cost in delivering the gas to those states or the distance of the states to the ports. Bauchi State paid an average of N2, 487.46 for the refilling of a 5kg LPG cylinder. Adamawa and Borno also paid an average at N2, 396 each. Ebonyi State paid the lowest average of N1, 756.25; Kogi also paid N1, 775 to refill a 5kg LPG cylinder and Jigawa paid N1,795.
For a refill of 12.5kg LPG cylinder, Sokoto paid N4,884; Cross River paid N4,853.57 and Bauchi paid N4,682. These states paid the highest average for gas refill. States that paid the lowest average were Zamfara, N3, 754.25; Kaduna, N3, 858.33, and Katsina, N3, 988.
If the price of gas is made cheaper, people may consider it as an option and the percentage of the consumption of LPG in Nigeria could move up a lot. Since LPG is quite expensive especially in a high poverty environment, only those that live in well-todo areas have easy access to and can afford it.
LPGs are usually transported in cylinders. Gas needs a certain degree they need to be stored in. If these cylinders are not well stored during transportation and are over-pressurized; they can easily burst at any moment. Gas is highly flammable; the accidents can be very deadly. This has made some people have a rethink their choice of energy source. So, they stick to other energy sources they feel is much safer, instead of trying out LPG.
The infrastructures in Nigeria’s oil refineries are in a poor and inefficient state. They are also badly maintained with no regular checkups to ensure everything is still okay. This problem limits the distribution of LPG to just few states across the country. For LPG to be produced and supplied to various states in the country, it requires certain important infrastructures to aid such activities. Without these infrastructures in place, ensuring every state is provided with the cooking gas becomes unachievable.