WEEK 106: LPG Insider Report

Prices on the international market for LPG rose continuously throughout the previous week while the domestic markets for LPG were decreasing in the immediately preceding week  

By Teslim Waheed

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WEEK 106: LPG Insider Report


Prices on the international market for LPG rose continuously throughout the previous week while the domestic markets for LPG were decreasing in the immediately preceding week
 

  • The international prices of LPG reached their apex point at the end of the previous week despite increases from the beginning of the week.

  • Depot prices were on the fallen note in the preceding week with a minimum of N477.94 per kg in the previous week.

  • The market gaps between prices at the depot and those at the international level continued to narrow as more depots gained their strength to load LPG from the depot

  • In the week under review and the previous two weeks, price variations in LPG per kg remained within a narrow range.

  • Within the Nigeria region, regional variations in LPG retail prices continue to exist.

     

     

     

     

     

    The regional variation in LPG prices across Nigeria has been a recurring feature of the Nigerian LPG industry. The South West area has the lowest rates due to its closeness to the coastal region.

     

     

     

     

    • Inflation Rate and the LPG: Inflation has consistently fallen over the last eight months. It fell from 15.99% in October to 15.40% in November 2021, (See Illustration D). Coupled with the high prices of goods and services in the month of December 2021, the expected inflation rate is 17.01%. This is due to Xmas and New Year festive that are fast approaching. In April 2021, it fell from 18.12% to 17.93%. in May 2021 The composite food index reduced to 18.34% in October from 19.57% in September 2021, 20.57 per cent in January 2021, 20.30% in August 2021, and 15.48 per cent in July 2020, compared to 15.18 per cent in June 2020. For the month of May, a 15.4 per cent inflation rate is expected. The relaxation of the Covid-19 rule may have influenced the inflation rate trend.

     

    • Exchange Rate and the LPG: In line with widening discrepancies in the parallel market, the Central Bank of Nigeria's (CBN) adjusted the exchange rate to fine-tune the forex market. (Figure E). Movement in the exchange rate along the same line was increasing and ranged from 414.26 to 414.89/US$1 in the previous week. One of the factors that influence the price of LPG on the international market is the exchange rate. Since more LPG is imported, a lower exchange rate has little impact on the selling price of LPG on the local market.

     

    • Crude oil price and the LPG: The price of LPG is positively related to the price of crude oil since it is sometimes a by-product of crude oil. The Prices of crude oil in the international market reached their highest point before the end of the week, however, they ended on a fallen note (Figure F). The cost of LPG increases as the price of crude oil falls on the international market. This suggests a low LPG market price.

     

    • Foreign Reserves: The Nigerian Gross Foreign Reserve dropped from $40.52 billion to $40.49 billion last week. Despite a rise in the reserves, the exchange rate was ranged from 411.63 to 410.64 in the previous week. This is positively correlated to the crude oil prices that experienced a sharp fall at the end of the week. A decrease in the reserve might be a result of the reduction in the prices of crude oil over the preceding week.

     

    • PMI: The CBN Purchasing Managers Index (PMI) recorded overall growth in employment, business and inventory in the month of December while ordering in the category of supply for power, gas, steam and air conditioning remained stagnant while business operation & inventory were static in the same month at 45.7 per cent.

     

     

     

     

     

     

    • Covid-19: Covid-19 causes the demand for goods and services to fall due to the full or partial lock-down effect. The implication of the Covid-19 contracts the LPG market

    • Omicron Variant: A new strain of COVID-19 recently detected in southern Africa as a “variant of concern” by the World Health Organization is also no doubt causing concern among the world leaders. The implication of this variant contracts the LPG market if not curtailed early.

     

 

 

  • Reducing the effect of the Covid-19 and the Omicron variant entails more campaigns and public awareness of the virus as people are easily carried away and relaxing. Vaccines for Covid-19 and Omicron variant should be distributed without much delay if available.

 

The prices in the weeks to come may rise due to pressure on the supply of butane coupled with the increase in the price of goods and services in the country
 
 
The Nigerian LPG market is the next success story of the Global LPG industry, if you need a partner with a global perspective and local expertise in the Nigerian and African space, kindly book a free session with our team of experts to help you http://www.kiakiagas.com/book-session or write us an email at advisory@kiakiagas.com or Whatsapp: +2348085269328

 
 

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Nigeria offers several investment opportunities in a variety of industries, including gas production, financial services, and real estate. The gas industries, as well as other industries, are growing, and new investment opportunities are emerging on a daily basis. New productive industries must be formed in order for our economy to grow. This will create jobs, raw materials for our businesses, physical growth, and, most importantly, self-sufficiency. Within the petrochemical business, Liquefied Petroleum Gas (LPG) presents a fantastic investment opportunity. The LPG business was created expressly to meet the country's industrial and domestic gas needs. LPG is required in practically every element of business. For example, the automotive industry, manufacturing plants, and thermal energy generation are all in high demand. On a residential level, most households, particularly those in the middle and higher classes, increasingly rely on gas for cooking. Since firewood and kerosene stoves are quickly becoming outdated, hotels, catering companies, restaurants, and bakeries all want LPG as an alternate source of energy.
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ARE BUSINESSES PROFITABLE

Nigeria offers several investment opportunities in a variety of industries, including gas production, financial services, and real estate. The gas industries, as well as other industries, are growing, and new investment opportunities are emerging on a daily basis. New productive industries must be formed in order for our economy to grow. This will create jobs, raw materials for our businesses, physical growth, and, most importantly, self-sufficiency. Within the petrochemical business, Liquefied Petroleum Gas (LPG) presents a fantastic investment opportunity. The LPG business was created expressly to meet the country's industrial and domestic gas needs. LPG is required in practically every element of business. For example, the automotive industry, manufacturing plants, and thermal energy generation are all in high demand. On a residential level, most households, particularly those in the middle and higher classes, increasingly rely on gas for cooking. Since firewood and kerosene stoves are quickly becoming outdated, hotels, catering companies, restaurants, and bakeries all want LPG as an alternate source of energy.