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Week 58: LPG Insider Report

Prices on domestic markets for LPG were relatively stable in the immediately preceding week, while it fluctuated in the international market.

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Week 58: LPG Insider Report


Prices on domestic markets for LPG were relatively stable in the immediately preceding week, while it fluctuated in the international market.

  • The international prices of LPG fluctuated throughout the week but ended with a fallen note.

  • Depot prices have shown some appreciation compared to the previous week.

  • The narrowing of the price disparities between prices at the level of the depot and those at the international level is consistent.

  • Price variation in LPG per kg have stayed within the restricted range in the week under review and in the past couple of weeks.

  • Regional variations continue to persist in the retail prices of LPG within the region.

     

     

     

     

    A frequent feature of the Nigerian LPG market has been the regional variance in the price of LPG across the country. Due to its close proximity to the coastal region, the South West region has the lowest rates.

     

    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 December increased to 15.75 from 14.89 in November 2020, while the expected rate of inflation in January 2021 is 14.96 (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 killing & kidnapping of farmers, and businessmen are among the causes of the risen trend. The implication of this is that the value of is eroded by inflation. As a result, LPG market contract.

    Exchange Rate and the LPG: Exchange value, as pegged by the Central Bank of Nigeria (CBN) (Figure E), is still persistent at N380 to US$1 throughout the week as discrepancies continue to expand in the parallel market. One of the factors deciding the price of LPG in the foreign market is the exchange rate. As greater amounts of LPG are imported, a lower exchange rate would not raise the selling price of LPG on the local market. This means the LPG sector is growing.

    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 continue to rise in the week under review. (Figure F). An increase in the price of crude oil in the international market raises the cost of LPG. This signal a high 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 gross Foreign Reserve continues to fall from $36.3 billion to $36.1 billion. This will signal to the forex market that there is imminent further devaluation to assist support the naira.

    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.

     

     

     

    Quit Notice for Fulani Herdsmen from the Southern: Some parts of East and West of Nigeria have served the Fulani herdsmen a quit notice from the areas. This is due to the frequent issues of kidnapping, killing and terrorizing the people of the area. 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 cooking good 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: Nigeria is presently experiencing a second wave of the Covid-19 pandemic. This has made some state government in to 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 and an approved vaccine should be available 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 increase in the rate of inflation.

     

    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 for 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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