Week 56: LPG Insider Report

In the immediately preceding week, prices on domestic markets for LPG were relatively stable with significant decreases in the international market

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Week 56: LPG Insider Report


In the immediately preceding week, prices on domestic markets for LPG were relatively stable with significant decreases in the international market

  • The international prices of LPG were on a fallen note throughout the week but maintained a stable movement in the middle of the week.

  • Depot prices have shown some appreciation at the beginning of the week but slightly fall in the end compared to the previous week.

  • The narrowing disparities between prices at the depot level and those at the international level still prevails.

  • 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 East region has the highest prices due to distance from the coastal regions.

     

    • Inflation Rate and the LPG: There is a continuous 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). From 18.3 in November, 17.38 in October, 16.16 per cent in September and 16.0 per cent in August, the composite food index rose to 19.56 in December, 15.48 per cent in July 2020 compared to 15.18 per cent in June 2020. One of the causes of the growing trend is the closure of Nigerian land borders against vital products, the outbreak of the Covid-19 pandemic and the protest against EndSars. The consequence of this is that inflation erodes the value of households' hard-earned income. This reduces sales f LPG.

    • Exchange Rate and the LPG: Exchange rate value from the CBN official site still persistent at N380 to US.$1 throughout the week (Figure E), as disparities continue to widen in the parallel market. The exchange rate is one of the variables that determine the price of LPG in the international market. A higher exchange rate will add to the cost price of the LPG. This implies sales in the LPG will reduce.

    • 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 initially increased till the middle of the week but ended with a fallen note (Figure F). This indicates that an increase in the price of crude oil in the international market results to an increase in the cost of LPG. This signal a high price in the LPG market.

    • Foreign Reserves: As in the previous week, the Nigerian Foreign Reserve continues to rise. It increased from $36.3 billion to $36.4 billion in the week under review despite the devaluation and pegging of the Naira at N380 to US$1, the slight increase has been persistent for four weeks. This is as a result of the increasing trend in the crude oil price that pushes up the LPG prices.

    • 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.




 

Quit Notice for Fulani Herdsmen from the Southwest: The people of southwest Nigeria have served the Fulani herdsmen a quit notice from the southwest. This is due to the frequent issues of kidnapping, killing and terrorizing the people of the area. Some herdsmen were chased away from the area and this has denied them the easy facility they enjoy in the area. An Example of this is easy access to food and other essential livelihoods. The herdsmen can have access to cooking if they are settled. As a result of this demand for LPG in the area reduced during the week.

Covid-19: Even though the effects of the first event still persist, Nigeria is currently experiencing the second wave of the Covid-19 pandemic. Schools have not fully resumed while the universities in Nigeria are awaiting government directives to fully open. The implications of this on the LPG market is that its volume of sales will not increase in the affected areas.

 

  • The Government should create an enabling environment for the local farmers and herdsmen in order to restore peace in the affected areas. There should be dialogue between the indigenes and non-indigenes to live in harmony and avoid chaos to create an everlasting peace and order.

  • To reduce the effect of the Covid-19 on the economy, there should be a vibrant virtual infrastructure that will enable the employees to keep up with their jobs while working from home and vaccine for Covid-19 should be cheaper if not for free to all and sundry.

     

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

 

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