Who Is Really Driving Up Cooking Gas Costs In Nigeria?

By Oluwabukola Jimoh ــ Last Update 28 October 2023

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Cooking gas marketers, under the umbrella of the Nigerian Association of Liquefied Petroleum Gas Marketers, have pointed fingers at gas terminal operators for the dramatic surge in cooking gas prices. The marketers have also accused these operators of capitalizing on the escalating demand for this essential commodity among Nigerians. They allege that these operators engage in bulk buying, limiting the volume of gas available to the public, which in turn paves the way for arbitrary price hikes. National President of the Marketers Association, Oladapo Olatunbosun, made these claims during his appearance before a Senate panel.

According to Olatunbosun, the Nigeria Liquefied Natural Gas (NLNG) has been consistently supplying gas to these terminal operators, but a select group is sabotaging these efforts for their own gain. Olatunbosun stated that "The Cabals are making it difficult for the average Nigerian to have access to gas." He pointed out that gas is sold to terminal owners at a significantly lower price than what the average consumer is charged.

The terminal operators alleged to be involved in this practice include NAVGas, NIPCOPLC, Matrix Energy Ltd, Prudent Energy Ltd, Shafa Energy, Techno Gas, StockGap Ltd, Mobil, Pan Ocean Limited, NNPC, OLogbo, NSPC Apapa, SHELL, and Dozzy LPG terminal. Olatunbosun expressed concern that consumers now pay exorbitant prices for gas, with the least they can obtain being N1,200 per kilogram. This has placed an immense financial burden on the average Nigerian.

He went on to highlight that countries like Cote d’Ivoire and Ghana have cheaper gas prices, despite not producing as much gas as Nigeria, which is the second-largest gas producer in Africa after Algeria. Olatunbosun stressed that the Nigerian government has made significant efforts to make gas accessible to its citizens, but the actions of a few are hindering these efforts.

Furthermore, Olatunbosun exposed that some terminal operators cite foreign exchange (forex) rates as a reason for raising gas prices, even though transactions are completed in Nigerian currency. He emphasized that these practices are unjustifiable and detrimental to the average Nigerian consumer.

Hence, Olatunbosun expressed the fear that if these practices continue, gas could become a luxury item affordable only to the wealthy, with prices potentially reaching N2,000 per kilogram or N25,000 for a 12.5 kilogram cylinder by December. Olatunbosun appealed for the Senate's intervention to protect the interests of ordinary Nigerians who are struggling with the high cost of cooking gas. Senate Committee Chairman on Gas, Jarigbe Jarigb, assured the marketers of the Senate's commitment to addressing these concerns and ensuring that Nigerians have access to affordable gas. Jarigbe thanked the marketers for their courage in raising these issues and vowed to match words with action to protect the interests of the people.

What does this imply for the Nigerian LPG Industry and Its Stakeholders

Price Manipulation and Market Control: The allegations of a small group of terminal operators controlling the LPG market and inflating prices could have far-reaching consequences. It suggests a lack of fair competition and transparency in the industry, which may deter potential investors and limit consumer access to affordable gas.

Consumer Burden: The soaring prices of cooking gas, if left unchecked, will place a heavy financial burden on consumers, particularly low and middle-income households. This can lead to increased reliance on alternative, less eco-friendly cooking fuels such as firewood and charcoal, impacting public health and the environment.

Economic and Environmental Implications: As consumers shift away from cooking gas due to high prices, it may lead to increased deforestation and air pollution. This has not only environmental but also public health consequences. Additionally, it could affect Nigeria's ability to meet its climate change and environmental sustainability commitments.

Investment Climate: The accusations of a few dominant players (referred to as "cabals") manipulating the LPG market may discourage new investors from entering the industry. A lack of competition and a perceived unfavorable business environment can stifle growth and innovation.

Regulatory Oversight: The allegations highlight the need for strong regulatory oversight and enforcement in the LPG industry. Regulators should ensure fair practices, competition, and adherence to pricing guidelines to protect consumers and promote a level playing field for market participants.

Public Perception: The controversy surrounding the LPG industry can contribute to a negative public perception of both the industry and the government's ability to address the issue. This can undermine trust in government efforts to make essential services affordable and accessible.

Policy and Legislative Response: The Nigerian government, in collaboration with legislative bodies like the Senate, may need to consider policy changes or new legislation to ensure fair pricing, competition, and accessibility within the LPG market.

Supply Chain Considerations: Stakeholders in the LPG industry should examine the entire supply chain, from production to distribution, to identify and address bottlenecks and inefficiencies that contribute to high prices.

Stakeholder Collaboration: Cooperation among all stakeholders, including government bodies, industry associations, marketers, and terminal operators, is crucial to creating a more equitable and consumer-friendly LPG market.

Our Opinion on the Matter Here at LPG in Nigeria.

The primary drivers behind the escalating LPG prices are the exchange rate, which has surpassed 1300 on the black market and the cost of diesel. When the current President assumed office, prices were relatively lower due to favorable international price trends, with the exchange rate and diesel costs also at more reasonable levels, approximately around 700 in the black market. This period was marked by a sense of relief among Nigerians, despite the involvement of terminal owners. So, what has triggered the recent surge in prices? The answer is closely tied to the exchange rate issue. While NLNG is priced at the official CBN rate, imports are influenced by the higher black market rate.

We should also bear in mind that the LPG industry has experienced remarkable growth, surpassing a 1,000 percent increase in terms of volumes since NLNG's intervention in 2007. This growth has primarily been driven by market forces rather than being subject to stringent price regulations.

As this is a topic that encourages dialogue, we will love to hear your opinion on the subject and how it is affecting you as a stakeholder.Make sure to comment below.

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Oluwabukola Jimoh

Oluwabukola Jimoh is a dynamic academic writer and captivating energy blogger. She is able to delve into intricate subjects with an insatiable thirst for knowledge, crafting thought-provoking essays that engage and enlighten her readers.