Week 60: LPG Insider Report

In the immediately preceding week, prices in the foreign market and domestic markets for LPG stable

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Week 60: LPG Insider Report


In the immediately preceding week, prices in the foreign market and domestic markets for LPG were stable
 

  • The international prices of LPG had a slight initial fall but reached its highest point at the middle of the week and ended on a lower note.

  • Depot prices were relatively stable with an increase at the middle of the week compared to the previous week.

  • The narrowing of price disparities between prices at the depot level and those at the international level has remained constant, despite relative stability in both markets.

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

  • Disparities in LPG retail prices throughout the country still persist.

     

     

     

     

    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). The rate of inflation in November increased from 14.89 to 15.75 in December 2020 (Fig D). The composite food index inclined to 19.56 in December from 18.3 in November and 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 kidnapping and killing of farmers in the agrarian part of the country. The expected rate of inflation in January 2021 is 14.96%. Goods and services are now competing against fixed, and even declining, revenue from consumers. The LPG market declined 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 was on a fallen note from the middle of the week till the end of the week after reaching its apex in the middle of the week in international market (Figure F). This shows that the price of crude oil has not been stable in the international market and that the price of LPG fluctuated. This reflects variability in the 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 decrease further from $35.8 billion to $35.5 billion in the week under review despite the devaluation and pegging of the Naira at N380 to US$ 1. This might be due to instability in the price of oil.

     

    • 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: 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 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.

       

      • 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 chase 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 the persistent increase in the rate of inflation particularly driven by food price 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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