Week 65: LPG Insider Report

In the immediately preceding week, prices on domestic and international markets for LPG showed some levels of depreciation.

By David Alenoghena

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Week 65: LPG Insider Report

 

In the immediately preceding week, prices on domestic and international markets for LPG showed some levels of depreciation.

  • The international prices of LPG fluctuated throughout the week but ended on a risen note.

  • Depot prices were relatively stable from the beginning of the week till the end of the week compared to the previous week.

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

  • 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. Even though the North Central is far from the coastal region, there is slight difference between the North-central and South-west prices region has the relative highest prices due to distance from the coastal regions.

 

 

  • Inflation Rate and the LPG: There has been a continuous rise in the rate of inflation in the past 13 months. The rate of inflation in January 2021 increased from 16.47 to 17.33 in February 2021 (Fig D). From 14.89 in November, to 15.75 in December 2020. The composite food index rose to 21.79 in February 2021, 20.57 in January 2021, 19.56 in December 2020, 15.48 percent in July 2020 compared to 15.18 percent in June 2020. One of the causes of the growing trend is the Nigerian land borders policies against vital products, the outbreak of the Covid-19 pandemic. This implies that inflation erodes the monetary value of goods and services. The price becomes dearer and this reduces sales of 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), even 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 reduces LPG in the market.

     

  • 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 experienced an initial fall at the beginning of the week but increased for the rest of the week. (Figure F). This indicates that an increase in the price of crude oil in the international market results in an increase in the cost of LPG. This signal a high price to the LPG market.

     

  • Foreign Reserves: As in the previous week, the Nigerian Gross Foreign Reserve showed some level of appreciation from $34.44 billion to $34.62 billion amid the devaluation and pegging of the Naira at N380 to US$1. This will signal to the investors and country's creditors the strength of naira and ability to repay debt.

 

  • PMI: The Purchasing Managers Index (PMI) of the CBN recorded overall growth in jobs, business activities, and inventory in the gas sector in December, while orders remained stagnant in the Electricity, gas, steam & air conditioning supply segment, while Business Activities and employment & inventory remained 45.7 percent in the same month.

     

     

     

     

     

    Covid-19: Nigeria is currently experiencing the second wave of the Covid-19 pandemic. Federal Schools have not fully resumed while the State universities are taken caution to prevent the spread of the virus. The implications of this on the LPG market is that its volume of sales will not increase in the areas where schools are not yet resumed.

     

    To reduce the effect of the Covid-19 on the economy, there should be a constant awareness programme through the media and places of worship; and also vaccine for Covid-19 should be made available for everybody

     

     

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

     

     

     

    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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