Cooking Gas Prices Going Up Next Week, Marketers Warn Nigerians
Marking an imminent shift in the economic landscape, gas consumers find themselves bracing for the oncoming wave of price hikes. The forecast, delivered by Olatunbosun Oladapo, the President of the Nigerian Association of Liquefied Petroleum Gas Marketers, points to an impending rise in prices scheduled to take effect in the upcoming week.Citing a confluence of factors, Oladapo highlights the growing burden on consumers’ pockets. The surge in international prices, compounded by elevated tax rates, escalating vessel costs, foreign exchange scarcity, and the devaluation of the local currency, emerges as a complex tapestry of influences behind this prospective price revision.”We stand on the precipice of this adjustment due to the upward trajectory of international prices. The costs associated with vessels have experienced a substantial surge, coupled with an oppressive tax regime. Regrettably, consumers continue to grapple with stagnant income,” Oladapo explicates.The consequence of this impending change is profound, and Oladapo characterizes it as a somber turn of events. “We find ourselves enmeshed in an unfortunate situation, as prices spiral upwards. The Nigerian populace is navigating through a period of profound economic hardship, wherein the affordability of gas becomes an increasingly elusive notion,” he remarks with a tinge of concern.The evolving dynamics are causing a significant behavioral shift among consumers. Oladapo underscores the resurgence of traditional alternatives like firewood, charcoal, and sawdust for cooking, underscoring the dire nature of the predicament.In light of these developments, Oladapo directs attention to governmental intervention as a beacon of hope. He implores authorities to extend palliatives, alleviate tax burdens, and usher in measures to mitigate the mounting strain on the populace.”The calculus is simple. When a single kilogram of gas, priced at N700, sees N3.50 siphoned off for taxes, what remains for the business to thrive?” Oladapo articulates, underscoring the need for a reassessment of the taxation framework.In a compelling plea, he calls for a shift in taxation strategy, urging authorities to pivot towards taxing profits rather than the products themselves. With consumers increasingly veering away from purchasing gas, the urgency for recalibration becomes evident.The backdrop to Oladapo’s pronouncement is illuminated by The PUNCH’s findings, which illuminate the impending impact of vessel scarcity in the global market on local liquefied natural gas (LNG) prices, commonly known as cooking gas.As winter demand for heating fuel draws near, the international stage has witnessed a surge in charter rates, a phenomenon that has far-reaching implications. By August 1, 2023, charter rates surged to unprecedented heights, reaching $284,750 per day for November and $206,750 per day for October, a staggering quadrupling of the established $70,500 per day.As the maritime sector contends with a scarcity of tankers, traders are resorting to the unconventional practice of using ships as floating storage. This calculated gamble on a rise in LNG prices as temperatures plummet further compounds the volatility of shipping rates.The collateral damage of such volatility is evident – the margins of LNG traders are increasingly compromised, making it challenging to capitalize on the anticipated upswing in winter prices. Consequently, this trend is poised to exert upward pressure on prices for buyers in Europe and Asia, illustrating the interconnected nature of the global energy landscape.With 42 LNG vessels adrift for over 20 days, reflecting a 27% increase from the previous year, the ripple effect is palpable. This surge in vessels points to the profound impact of supply chain dynamics on price stability.Nigerian LPG prices, tethered to international benchmarks, remain vulnerable to market fluctuations. The Nigerian Liquefied Natural Gas Contract prices serve as a fulcrum, susceptible to the pendulum swings of international dynamics. The outcome is a price index perpetually in flux, with potential revisions in either upward or downward trajectories occurring at varying frequencies.Moreover, the devaluation of the local currency adds another layer of complexity to this intricate tapestry. As the naira weakens, the domestic price of LPG bears the brunt, a stark manifestation of the interplay between global and local economic forces.A glance at recent developments underscores this evolution. The dollar’s exchange rate against the naira reveals the depth of the challenge – a sobering N749.62, as reported by the Central Bank of Nigeria.The symbiotic relationship between currency fluctuations and pricing is unveiled in the operational modality of the Nigerian LNG, which aligns its pricing with the prevailing exchange rate. This linkage perpetuates the vulnerability of local prices to the volatilities of the global financial landscape.Notably, the past few months have granted local consumers of cooking gas a temporary respite, with the plummeting international prices translating to cost reductions. The transition from an average of N730 per kilogram in June to approximately N600/kg in July was a welcome respite, albeit short-lived.In August, the narrative took a turn, with the naira’s depreciation causing the price to scale up once more, reaching N750/kg. This oscillation underscores the fragility of affordability for the average consumer.The broader context of this narrative is reinforced by empirical data. The Energy Information Administration’s figures illustrate a drastic 76.1% price drop in June, marking a decline from 8.78 to 2.10 per one million British Thermal Units (BTU) by the end of May.A closer look at retail gas prices reveals an intriguing trend. The National Bureau of Statistics’ report demonstrates a month-on-month reduction of 6.71% in the average retail price for refilling a 5kg cylinder of cooking gas, dwindling from N4,360.69 in May to N4,068.26 in June. On an annual basis, this reduction measures at 3.56% from N4,218.38 in June 2022. The study delves into state-specific analysis, showcasing the nuanced pricing dynamics across Nigeria. Kwara stands as the vanguard, recording the highest average price for refilling a 5kg cylinder at N4,750.00. Trailing closely are Niger with N4,691.16 and Zamfara with N4,683.33.However, on the flip side, Ondo emerges as an outlier, charting the lowest price at N3,287.86. Ekiti and Nasarawa follow suit with N3,288.46 and N3,364.62, respectively.The intricate interplay between international market forces, local economic conditions, and governmental policies weaves a complex tapestry of influences on the trajectory of gas prices, casting a looming shadow over the gas consumers’ wallet.