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Week 55: LPG Insider Report

Regional disparity in the prices of LPG across the country has been a regular feature of the Nigerian LPG market. The South west region has the lowest prices due to closeness to the coastal region.

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Week 55: LPG Insider Report


Prices on domestic markets for LPG were relatively static In the immediately preceding week, with significant increases in the international market.
 

  • The international prices of LPG increased throughout the week.

  • Depot prices have shown some appreciation 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.

  • Price changes per kg of LPG in the week under review and in the past few weeks have remained within the limited range.

  • Regional disparities in the retail prices of LPG within the country continue to persist.

     

 

Regional disparity in the prices of LPG across the country has been a regular feature of the Nigerian LPG market. The South west region has the lowest prices due to closeness to the coastal region.

 

Inflation Rate and the LPG: There is steady increase in the rate of inflation in the past more than 11 months. The rate of inflation in November increased from 14.89 to 15.75 in December 2020 (Fig D). The composite food index rose to 19.56 in December from 18.3 in November, 17.38 in October, 16.16% in September and 16.0% in August, 15.48% in July 2020 compared to 15.18% in June 2020. The closure of Nigeria land borders against essential items, the outbreak of Covid-19 pandemic and the EndSars protest are among the causes of the risen trend. The implication of this is that the value of the hard-earned money by the households is eroded by inflation. As a result, LPG market contract.

 

Exchange Rate and the LPG: Exchange value still persistent at N380 to US.$1 throughout the week as pegged by the Central Bank of Nigeria(CBN) (Figure E), as disparities continue to widen in the parallel market. Exchange rate is one of the variables that determine the price of LPG in the international market. A lower exchange rate will not hike the purchasing price of the LPG at the local market as the larger quantity of the LPG is imported. This implies that the LPG market expands.

 

Crude oil Price and the LPG: As a by-product of crude oil, the relationship between the LPG price and crude oil price is positive. The Prices of crude oil in the international market fluctuated throughout the week but ended on a fallen note (Figure F). A decrease in the price of crude oil in the international market reduces the cost of LPG. This signal a reduced price in the LPG market.

 

Foreign Reserves: As in the previous week, despite the devaluation and pegging of the Naira at N380 to US$1, the Nigerian Foreign Reserve continues to grow, with a marginal increase lasting for two weeks. This is due to the growing trend in the price of crude oil, which is driving up the price of LPG.

 

PMI: For the gas market in the month of December, the Purchasing Managers Index (PMI) of the CBN reported overall growth in employment, business activities and inventory while orders remained static in the Electricity, gas, steam & air conditioning supply category while Business Activities and employment & inventory remain 45.7% in the same month.

 

 

 

 

ASUU Strike: The academic staff Union of Universities in Nigeria called off a strike of more than 9 months recently. The strike forced the students to stay at home while the business activities of food, snacks, beverages were put on hold on campuses. The strike has resulted to a drastic reduction in LPG demand, especially for LPG sellers around the campuses. Activities will soon return to normal in the universities after the university management has fully prepared for the second wave of Covid-19.

Covid-19: Nigeria is presently experiencing a second wave of the Covid-19 pandemic. This has made some state government in the southwest to impose curfew and ban a gathering of people that is more than 20. 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

 

In order to tackle the rising composite food index, the Government should secure the life of farmers against the herdsmen. Farming projects should be funded and monitored to increase the volume of food production in the country. This will bring down the prices of the food items. When the food items are cheaper, the household consumption of the LPG will increase.

To curb the spread of the Covid-19, protective kits should be affordable to all and sundry and establish programs that will keep people aware of the pandemic

 

 

The prices in the weeks to come may rise due to persistent increase in the rate of inflation

 

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