In the immediately preceding week, prices on the foreign and domestic markets for LPG saw a slight increase, with significant increases in the international market.
The international prices of LPG were on a rise note throughout the week. .
Depot prices have shown some appreciation compared to the previous week.
There is consistency in the narrowing of the price differences between prices at the depot level and those at the international level.
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. The South East region has the highest prices due to distance from the coastal regions.
Inflation Rate and the LPG: There is steady increase in the rate of inflation in the past more than 11 months (Fig D). The composite food index rose to 18.3 in November from 17.38 in October, 16.16% in September and 16.0% in August, 15.48% in July 2020 compared to 15.18% in June 2020. The closure of Nigeria land borders against essential items, the outbreak of Covid-19 pandemic and the EndSars protest are among the causes of the risen trend. The implication of this is that large money chases fewer goods and the household purchasing power is weaken. Consumers goods are now competing against fixed consumers' income. As a result, LPG market shrinks.
Exchange Rate and the LPG: Exchange rate value still persistent at N380 to US.$1 throughout the week (Figure E), as disparities continue to widen in the parallel market. 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 purchasing price of the LPG at local market as larger quantity of the LPG is imported. This implies that the LPG market contracts.
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 continue to rise throughout the week (Figure F). This indicate that an increase in the price of crude oil in the international market results to increase in the cost of LPG. This signal a high price in the LPG market.
Foreign Reserves: As in the previous week, the Nigerian Foreign Reserve continues to rise despite the devaluation and pegging of the Naira at N380 to US$1, the slight increase has been persistent for two weeks. This is as a result of the increasing trend in the crude oil price that push up the LPG prices.
PMI: For the gas market in the month of December, the Purchasing Managers Index (PMI) of the CBN reported overall growth in employment, business activities and inventory while orders remained static in the Electricity, gas, steam & air conditioning supply category while Business Activities and employment & inventory remain 45.7% in the same month.
New Year Festive: January 1, 2021 marked the beginning of new year when people celebrate and give thanks to God for His endowed mercy on mankind. Different religious groups were seen keeping vigil asking for the favours of the most High in the new year. This is followed by celebration in the day and assorted foods will be cooked and served to friends and relatives. During the period the demand for LPG increases, most especially in the urban part of the country. As a result, the LPG market expands. This indicate that festive period is a favourable factor to the LPG market.
Covid-19: Nigeria is presently experiencing second wave of the Covid-19 pandemic even though the effects of the first occurrence still persist economically, socially and in the environment. 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
Government should create an enabling environment for the local farmers and manufacturers in order to produce products that will compete with foreign ones insead of shutting land borders. This will bring down the prices of the essential products like food items. When the food items are cheaper, the household consumption of the LPG will increase
To curb the effect of the Covid-19 on the economy, there should be a vibrant virtual infrastructure that will enable the employees to keep up with their jobs while working from home and vaccine for Covid-19 should be cheaper if not for free to all and sundry.
The prices in the weeks to come may rise due to persistent increase in the rate of inflation