Factory-fitted Problems in the new Federal Government Marketer LPG (Cooking Gas) Cylinder Ownership Policy

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  • Author: Muyiwa Ige(LPG Stakeholder and Consultant)

Nothing can interrupt the elaborate jubilation and celebration that will erupt in the camps of marketers of alternative cooking fuels like charcoal, firewood and kerosene, if the Federal Government makes the awful mistake of implementing the new marketer cylinder ownership policy exactly the way it is presently structured.

It will be very unfortunate, in all honesty, for a government that has been severally commended- most deservedly, for its sublime interventions which have translated to the growth in the country’s LPG consumption from a paltry 50,000MT per annum in 2007 to an impressive 850,000MT per annum in 2019, to embark on a program that will easily abort its aspiration to increase the annul LPG consumption in Nigeria to 5,000,000MT by 2025.

The new policy which allows LPG users/consumers in Nigeria to pay only for the gas content of LPG cylinders exclusively owned by LPG Marketers, is fraught with some problems that threaten to erode the gains made in the LPG Industry from 2007 to date.

Heavy Burden on the back of the ‘carmel’ of LPG Retailers/Marketers

Under the new Micro Distribution Center dispensation, LPG Cylinders will be entirely owned by LPG retailers/marketers and not LPG users/consumers.

This means that an LPG retailer/marketer that has 300 customers (please note that most LPG users have two cylinders) will purchase at least 300 cylinders. At the rate of N10,000 per 12.5KG cylinder, the LPG retailer/marketer needs to cough out N3,000,000 to purchase the cylinders.

Even if the payment is in installments, where will a struggling LPG retailer get this huge sum of money from?

Another problem that will arise is that some LPG users will not return to the LPG retailer who initially loaned them their cylinder for subsequent cylinder exchange, citing reasons such as the gas didn’t last to their expectation.

Some LPG users will relocate without informing the LPG retailer, taking the retailers’ cylinder(s) along with them to their new location. A few unscrupulous LPG users with dubious intentions will give out fake addresses to LPG retailers/marketers.

The factory-fitted challenges LPG retailers/marketers will have to contend with, are as follows:

• LPG Retailers/Marketers will have to verify the addresses of all their customers, which will consume a lot of time, energy and money and is a disincentive to the business.

• LPG Retailers/Marketers will have to source for the money to replace the cylinders that are not returned by their customers.

• LPG Retailers/Marketers will spend a lot of time, money, undergo stress and can even be attacked, while trying to retrieve their cylinders from recalcitrant customers.

• LPG Retailers/Marketers will be responsible for the repairs and replacement of damaged cylinders.

• LPG Retailers/Marketers will be responsible for the periodic re-certification of LPG Cylinders.

Decrease in the overall LPG Consumption in the country

This may be unbelievable to the rich, which make up less than 5% of the Nigerian population: many owners of the 12.5KG capacity LPG cylinder can only afford to refill 1KG, 1.5KG and 2KG in their cylinders, most of the time. Many owners of 3KG,5KG and 6KG cylinders refill as low as 0.25KG, 0.4KG and 0.8KG, due to the prevailing unfavorable economic situation in the country.

Since the 3KG LPG cylinder is the most commonly used in the country, this category of LPG users will be ‘stranded’ when they can’t afford to pay for 3KG of gas via the cylinder exchange program. The only alternative left for them is to return to alternative sources of cooking fuel like kerosene, firewood and charcoal.

Now, if two million people refill 1KG of gas each, that translates to 2,000,000KG.

2,000,000KG of LPG is equal to 2000 Metric Tons. The shortfall of 2000 Metric Tons is a huge loss to the government in revenue, to the environment via environmental pollution and degradation, and to the national economy.

Rise in the retail price of LPG (Cooking Gas)

The LPG Retailers/Marketers that have invested their money to purchase LPG cylinders to loan to their customers are expected to recoup their investment one way or the other.

The most attractive way is to recover it through the sale of LPG to the same customers; which will invariably lead to an increase in the retail price of the product.

Other associated costs such as the cost of replacing damaged valves etc. and the re-certification of LPG cylinders will have to be passed on to the LPG consumer.

The increase in the retail price of LPG will apparently undermine its competitiveness with other alternative cooking fuels.