WEEK 71: Weekly LPG Insider Report

In the immediately preceding week, prices on domestic were on a lower level while the international markets for LPG fluctuated in the same week

By Teslim Waheed

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WEEK 71: Weekly LPG Insider Report


In the immediately preceding week, prices on domestic were on a lower level while the international markets for LPG fluctuated in the same week

  • The international prices of LPG reached its peak in the middle of the week but ended on a fallen note.

  • Depot prices were relatively stable 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 persists.

  • 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. There is wide gap between the South East and South-west prices, this is due to its distance from the coastal region, has the 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. The anticipate inflation rate for the month of Macrch is 14.37%. The post effect of Covid-19 and border policies against essential goods, are contributing to the growing trend.

 

  • 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 fluctuated throughout the week but ended on a risen note (Figure F). This indicates that fluctuation in the price of crude oil in the international market results in fluctuation in the cost of LPG. This signal an unstable price to the LPG market.

 

  • Foreign Reserves: As in the previous week, the Nigerian Gross Foreign Reserve increased from $34.94 billion to $34.70 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: 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: In the next four days Muslims all over the world will be celebrating Id el Fitri to mark the end of the fasting month. The rate of cooking will also increase on that day. Muslims in Nigerians will be filling their gas cylinders in order to have access to fast cooking energy. It is anticipated that demand for cooking gas will increase to celebrated the day.

       

    • 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

    • Muslims are implored to keep distance when praying in congregation during the month of observing their fasting to abide by social distance rule

       

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

 

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