WEEK 79: Weekly LPG Insider Report

Prices on domestic markets for LPG fluctuated during the week while international market for LPG remain the same after an initial increase in the immediately preceding week

By Teslim Waheed

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WEEK 79: Weekly LPG Insider Report


Prices on domestic markets for LPG fluctuated during the week while international market for LPG remain the same after an initial increase in the immediately preceding week
 

  • The international prices of LPG rose and reached its peak in the beginning of the week but fell from the middle of the week and ended up on a flat rate note.

  • Depot prices significantly fluctuated throughout the week.

  • The market gaps between prices at the depot and those at the international level have begun to widen.

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

  • Within the Nigeria 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 reducing over the last three months. It decreased from 18.17 in March 2021 to 18.12 in April 2021. (Fig D). This is due to the relief in the Covid-19's aftereffects. From 14.89 in November to 15.75 in December of the previous 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. The upward rise in the rate of inflation in the past months is due to the border policies that targeted vital commodities. For the month of May, the expected inflation rate is 15.40 percent.
 
 
Exchange Rate and the LPG: In line with widening discrepancies in the parallel market, the Central Bank of Nigeria's (CBN) have adjusted the exchange rate (Figure E). Movement in the exchange rate along the same line was maintained at 410.16/US$1 throughout the previous 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 sometimes a by-product of crude oil. The Prices of crude oil in the international market rose throughout the week (Figure F). The cost of LPG increases as the price of crude oil rises on the international market. This suggests a high LPG market price.
 
Foreign Reserves: The Nigerian Gross Foreign Reserve fell from $33.53 billion to $33.32 billion last week. Despite the reduction in the reserves, the exchange rate was pegged at 410.16 throughout the week even though crude oil prices continued to rise till the end of the week. Reduction in the reserve ought to appreciate the naira value, nevertheless, the exchange rate were stabilized against dollar during the week.
 
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
 

  • 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
 
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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