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Week 54: LPG Insider Report

In the immediately preceding week, prices in the foreign market rose significantly while prices in the domestic markets for LPG fluctuated

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Week 54: LPG Insider Report


In the immediately preceding week, prices in the foreign market rose significantly while prices in the domestic markets for LPG fluctuated

  • The international prices of LPG were on an increasing trend throughout the week.

  • Depot prices fluctuated throughout the week compared to the previous week.

  • There is consistency in the narrowing of the price differences between prices at the depot level and those at the international level even though, the local price slightly fluctuated

  • In the week under review, the price increased per kg of LPG and have been within the specific ranges in the last few weeks.

  • There are continued regional disparities in the country's retail prices of LPG.

     

    A daily feature of Nigerian LPG market was regional variance in LPG prices across the country. Because of the distance from coastal areas the South-East region has the highest price.

     

     

    Inflation Rate and the LPG: In the last 11 months, inflation has been steadily rising (Fig D). It inclined to 18.3 in November from 17.38 in October, 16.16 percent in September and 16.0 percent in August, 15.48 percent in July 2020 compared to 15.18 percent in June 2020. This is caused by the lasting effect of the closure of Nigerian land borders against vital products, the outbreak of the Covid-19 pandemic and the protest against EndSars. Goods and services are now competing against fixed, and even declining, revenue from consumers. The LPG market declned as a result.

    Exchange Rate and the LPG: Due to the continued development of disparities in the parallel market, the exchange value continued at N380 to US $1 throughout the whole week (figure E). The exchange rate is one of the variables which in the international market determines the prices of LPG. A higher exchange rate would add a significant amount to the purchase price of the LPG on the local market. This implies that the LPG market contracts.

    Crude oil Price and the LPG: The correlation between LPG price and crude oil price remains direct, as a by-product of crude oil. Crude oil prices continue to increase over the week in the international market (Figure F). This shows that the price of crude oil is growing in the international market and that the cost of LPG is rising. This reflects a high market price for LPG.

    Foreign Reserves: As in the previous week, despite Naira devaluation and the pegged exchange rate at N380 to US$ 1, the Nigerian Foreign Reserve has continued to rise, and this has marginally increased for three weeks. The rising trend in the price of crude oil is causing the increase in the prices of LPG.

    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.

     

    Post New Year Day Period: Activities in the country are now returning to normal after winning and dinning during the New Year festival that saw a sharp increase in the demand for LPG. People have now returned to work and businesses after a two-day holiday declared by the federal government to celebrate the year 2021. The LPG market is expected to return to normal while people continue with their usual cooking behavior prior to the New Year period.

    Covid-19: Nigerians are still seen observing caution not to spread the virus in its second wave period even though there is no lockdown measure applied in the country at present. Economic activities are normal and social distance is maintained. Covid-19 causes demand of goods and services to fall due to the full or partial lock-down effect. The implication of the Covid-19 contracts the LPG market

     

    The Government should embark on a monetary policy measure that will reduce the rate of inflation in the country. This will make the consumers to appreciate the value of their money, as more money will not be chasing fewer goods.

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

     

    The prices in the weeks to come may rise due to increase in the price of crude oil and persistent rate of inflation

 

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