WEEK 72: Weekly LPG Insider Report

In the immediately preceding week, prices in the foreign market were on a risen note while domestic prices for LPG were relatively stable during the week

By Teslim Waheed

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WEEK 72: Weekly LPG Insider Report


In the immediately preceding week, prices in the foreign market were on a risen note while domestic prices for LPG were relatively stable during the week

  • The international prices of LPG reached its apex point at the middle of the week, despite a fluctuating trend during the preceding week but ended on a risen note.

  • Depot prices was relatively stable compared to the previous week.

  • Despite a somewhat higher price in foreign markets, the shrinking of price gaps between prices at the depot level and those at the international level has remained consistent.

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

  • Due to transportation costs and proximity to the coast, disparities in LPG retail pricing still exist across the country.

     

     

     

     

     

    A daily feature of the 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: Over the last 13 months, the rate of inflation has been steadily increasing. Inflation rose from 16.47 percent in January 2021 to 17.33 percent 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, up from 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. The outbreak of the Covid-19 pandemic, as well as Nigerian land border policies against essential goods, are leading to the rising trend. As a result, the monetary value of goods and services is reduced by inflation. If the price of LPG rises, so does the number of people who buy it.

     

    • Exchange Rate and the LPG: The exchange rate remained at N380 to $1 for the entire week due to the continued growth of inequalities in the parallel market. The exchange rate is one of the factors that influences LPG prices on the international market. A higher exchange rate would boost the price of LPG on the local market by a considerable amount. This means that the LPG market is in a state of flux Figure E.

     

    • Crude oil Price and the LPG: The relationship between LPG price and crude oil price remains positive, as a by-product of crude oil. However, it fluctuated in the preceding week. Crude oil prices reached its highest point at the middle of the week but showed some appreciation towards the end of the week (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, the Nigerian Gross Foreign Reserve showed some level of depreciation from $34.71 billion to $34.61 billion amid the fluctuation in the price of oil 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 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

      • Id el Fitri: Muslims completed their fasting and were observed celebrating Id el fitri to mark the end of year 2021 Ramadan period. During the celebration the demand for LPG increased as Muslims engaged in cooking.

      • 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 the effect of increase in the rate of inflation.

       

 

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