Unusual Cooking Gas(LPG) price rise in Nigeria from June 2020 to date(11th July, 2020)

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  • Author: Muyiwa Ige(LPG Stakeholder and Consultant)

Ø  Sharp players and investors in the downstream segment of Nigeria’s cooking gas industry are already cognizant that there are two major seasonal price change regimes within a year:

(a.)  December to April – When the price increases at the depots in a natural response to an increase in the international demand for cooking gas for heating needs during the winter season in very cold regions around the world.

(b.) May to November – When the price drops in tandem with the decrease in the international demand for cooking gas during the summer/early winter seasons.

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§  It is therefore very apparent that another factor has sneaked in to destabilize the international cooking gas(LPG) pricing system equilibrium, for the ex-depot price of 20 Metric Tons of cooking gas to rise from N3,000,000 in April, 2020, to a whooping N3,800,000 by the 5th of July, 2020, in Nigeria.

v  And that factor is undoubtedly the coronavirus(covid-19) currently ravaging the entire seven continents on planet earth.

v  The lockdown in most countries of the world, at the peak of the coronavirus(covid-19) pandemic, forced the major LPG(Cooking Gas) Production Plants around the world to drastically cut down on their production output, as a direct result of dwindling demand.

v  Since most of the industrial consumers, which account for the lion share of the international demand of cooking gas(LPG), had closed their factories or were only operating skeletally. LPG Production Plants had their storage tanks filled to the brim and had no other option than to cut down on their production volumes.

v  This invariably brought down the international price off cooking gas(LPG) to relatively low rates.

Ø  Fortunately for LPG Production Plants like Nigeria’s NLNG, the gradual easing of the lockdown and reopening of economies, which began in June 2020 in most countries of the world, has led to a steady increase in the demand from big industrial consumers of cooking gas(LPG) worldwide.

Ø  However, this increase in the international demand of LPG(Cooking Gas) has not been apace with the production output from LPG Production Plants around the world, which accounts for the paradoxical increase in the price of the product being experienced during this current summer season.

Ø  Without any molecule of doubt, a Cooking Gas(LPG) international demand – Production volume equilibrium state must be attained, for the ex-depot price of the product to reduce and stabilize in Nigeria.

Ø  This equilibrium is expected to be reached, sometime in August 2020.