WEEK 97: LPG Insider Report

Prices on the international market for LPG sloped downward from the middle of the week while the domestic markets for LPG rose continuously in the immediately preceding week  

By Teslim Waheed

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WEEK 97: LPG Insider Report


Prices on the international market for LPG sloped downward from the middle of the week while the domestic markets for LPG rose continuously in the immediately preceding week

  • The international prices of LPG ended up increasing after several initial drops from the beginning of the previous week.

  • Depot prices were also on the risen note in the preceding week with a maximum of N550.00 per kg in the previous week.

  • The market gaps between prices at the depot and those at the international level continued to widen as number of depot that loaded LPG shrank.

  • 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 5 months, the rate of inflation has been steadily decreasing. It fell from 17.01% in August to 16.63% in September 2021. (Fig D). From 18.17 in March 2021 to 18.12 in April 2021. The anticipated inflation rate for the month of September is 16.80%. The monetary measure put in place by the monetary authorities contributes to the fall in the rate of inflation trend. The composite food index reduced to 20.3% in August 2021 from 21.03% in July. It was 22.95% in March 2021 to 22.72% in April 2021, 20.57% in January 2021, 19.56% in December 2020, 15.48% in July 2020 compared to 15.18% in June 2020.

     

    • Exchange Rate and the LPG: In line with widening discrepancies in the parallel market, the Central Bank of Nigeria's (CBN) adjusted the exchange rate to fine-tune the forex market. (Figure E). Movement in the exchange rate along the same line was increased and ranged from 411.17 to 411.29/US$1 in the previous week. One of the factors that influence 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 continued to fall but ended up rising in the previous 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 $41.59 billion to $41.72 billion last week. Despite a rise in the reserves, the exchange rate was ranged from 410.87 to 410.91 in the previous week. This is positively correlated to the crude oil prices that continued to rise till the end of the week. An increase in the reserve might be a result of the increase in the prices of crude oil over the preceding 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

 

  • Inflation Rate and the LPG: Over the last 5 months, the rate of inflation has been steadily decreasing. It fell from 17.01% in August to 16.63% in September 2021. (Fig D). From 18.17 in March 2021 to 18.12 in April 2021. The anticipated inflation rate for the month of September is 16.80%. The monetary measure put in place by the monetary authorities contributes to the fall in the rate of inflation trend. The composite food index reduced to 20.3% in August 2021 from 21.03% in July. It was 22.95% in March 2021 to 22.72% in April 2021, 20.57% in January 2021, 19.56% in December 2020, 15.48% in July 2020 compared to 15.18% in June 2020.

 

  • Exchange Rate and the LPG: In line with widening discrepancies in the parallel market, the Central Bank of Nigeria's (CBN) adjusted the exchange rate to fine-tune the forex market. (Figure E). Movement in the exchange rate along the same line was increased and ranged from 411.17 to 411.29/US$1 in the previous week. One of the factors that influence 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 continued to fall but ended up rising in the previous 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 $41.59 billion to $41.72 billion last week. Despite a rise in the reserves, the exchange rate was ranged from 410.87 to 410.91 in the previous week. This is positively correlated to the crude oil prices that continued to rise till the end of the week. An increase in the reserve might be a result of the increase in the prices of crude oil over the preceding 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.


 

 

  • 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 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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