WEEK 70: Weekly LPG Insider Report

Prices on domestic markets for LPG fluctuated at a decreasing rate and international market for LPG relatively increased in the immediately preceding week

By Teslim Waheed

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WEEK 70: Weekly LPG Insider Report

Prices on domestic markets for LPG fluctuated at a decreasing rate and international market for LPG relatively increased in the immediately preceding week

 

  • The international prices of LPG sloped upward after a fall in the beginning of the week.

  • Depot prices have shown some level of depreciation compared to the previous week.

  • The market gaps between prices at the depot and those at the international level are narrowing consistently.

  • In the week under review and the previous two weeks, price variations in LPG per kg remained within a narrow range.

  • Within the region, regional variations in LPG retail prices continue to exist.

     

     


 

The regional variation in LPG prices across Nigeria has been a recurring feature of the Nigerian LPG industry. The South West area has the lowest rates due to its closeness to the coastal region.

 

 

  • Inflation Rate and the LPG: The rate of inflation has been gradually rising over the last ten months. It increased from 16.47 in January 2021 to 17.33 in February 2021. (Fig D). From 14.89 in November to 15.75 in December of the following year. The composite food index increased to 21.79 percent in February 2021, 20.57 percent in January 2021, 19.56 percent in December 2020, and 15.48 percent in July 2020, up from 15.18 percent in June 2020. For the month of March, the expected inflation rate is 14.37 percent. Covid-19's aftereffects, as well as border policies that target vital commodities, are all contributing to the upward trend.

 

  • Exchange Rate and the LPG: Despite widening discrepancies in the parallel market, the Central Bank of Nigeria's (CBN) pegged exchange rate (Figure E) has remained steady at N380 to US$1 throughout the week. One of the factors that influences the price of LPG on the international market is the exchange rate. Since more LPG is imported, a lower exchange rate has little impact on the selling price of LPG on the local market.

 

  • Crude oil Price and the LPG: The price of LPG is positively related to the price of crude oil since it is a by-product of crude oil. The Prices of crude oil in the international market were on appreciated value in the preceding week but ended up fallin (Figure F). The cost of LPG increases as the price of crude oil rises on the international market. This suggests a strong LPG market price.

 

  • Foreign Reserves: The Nigerian Gross Foreign Reserve fell from $35.15 billion to $34.94 billion last week, owing to fluctuating oil prices and the peg of the Naira at N380 to US$1. This will send a message to investors and creditors about the naira's strength and capacity to repay debt.

 

  • 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: 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

       

    • Ramadan Period: Muslims all over the world are in the last 10-days of the one-month fasting period. The rate of cooking among them still persisted in the preceding week. For the last 10-days, they will be careful to avoid disappointment from unreliable cooking energy. Muslims in Nigerians were observed filling their gas cylinders in order to have access to fast cooking energy. It is anticipated that demand for cooking gas will remain the same till the Id el-Fitri.

       

      • 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.

      • Nigerians are advised to take the AstraZeneca COVID-19 vaccine, manufactured by the Serum Institute of India to be immune against the virus.

         

         

        The prices in the weeks to come may rise due to increase in in the price of goods and services

 

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