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WEEK 85: Weekly LPG Insider Report

Prices on domestic markets for LPG increases during the week while international market for LPG also showed some level of appreciation in the immediately preceding week  

By Teslim Waheed

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WEEK 85: Weekly LPG Insider Report


Prices on domestic markets for LPG increases during the week while international market for LPG also showed some level of appreciation in the immediately preceding week
 

  • The international prices of LPG continue to be rising throughout the previous week.

  • Depot prices also showed some level of apprciation in the preceeding week despite official public holidays for Id-El-Kabir.

  • 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: Over the last 13 months, the rate of inflation has been steadily increasing. However it reached its highest point In March 2021 (18.17%), before it started decreases in the last three months. It fell from 18.12 to 17.93 in May to 17.75% in June 2021. (Fig D). From 12.8 in July 2020, to 13.2 in August 2020. The composite food index reduced from 22.95 in March 2021 to 22.72 in April 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 anticipated inflation rate for the month of May is 15.4%. The relax of Covid-19 rule might contribute to the change in the rate of inflation trend.

 

  • Exchange Rate and the LPG: In line with widening discrepancies in the parallel market, the Central Bank of Nigeria's (CBN) pegged the exchange rate to fine tune the forex market. (Figure E). Movement in the exchange rate along the same line was maintained at 410.12/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 sometimes a by-product of crude oil. The Prices of crude oil in the international market reached its peak at he middle of the week after then, it started falling till the end of 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 rose from $33.11 billion to $33.25 billion last week. Despite a rise in the reserves, the exchange rate was ranged from 412.10 to 413.11 in the previous week even though crude oil prices continued to rise till the end of the week. Increase in the reserve might be as a result of increase in the price of crude oil over the preceeding week.

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    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.

 

The prices in the weeks to come may rise due to pressure on the US supply of butane couple with the increase in the price of goods and services in the country
 
 
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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