Expert explains why cooking gas is expensive despite FG's special efforts to crash prices

The cost of Liquified Petroleum Gas (LPG), also known as cooking gas, has increased across the country, adding more pressure to Nigerian households.

The latest data from the National Bureau of Statistics showed that the average price of 5kg of cooking gas increased from N4,562.51 in October 2023 to N4,828.18 in November 2023.

Meanwhile, the average cost of refilling a 12.5kg cooking gas increased by 5.78% on a month-on-month basis, rising from N10,545.87 in October 2023 to N11,155.15 in November 2023.

FG efforts to crash prices

The increase comes despite the Federal Government's policy to make cooking gas cheaper for citizens.

Legit.ng had earlier reported that the Federal Government announced the removal of customs duty and Value-Added Tax (VAT) on the importation of LPG and its associated equipment.

This is contained in a letter dated November 28, 2023, signed by Wale Edun, the Minister of Finance and Coordinating Minister of the Economy.

Also, the Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, constituted a committee and mandated them to recommend the best way to boost supplies and crash LPG prices, following the rise in prices in recent months, from about N700 per kg to above N900 per keg in parts of the country.

Economist explains why there is no impact yet

Speaking on the price changes, Dr Ayo Anthony, an economist, explained that it will take time for government policies to impact the economy.

He explained that the delay in seeing government policies materialise before the Yuletide was caused by what was referred to as inside and outside lag.

His Words: “In economics, we have what we call lag. Lag is the time it takes for government policy to materialise, and we have inside lag and outside lag.

“Inside lag is the time it takes the government to decide when there is a problem. It is not immediately when a problem emanates that the government decides on it.

“So the time it takes the government or policymakers to make decisions to address a problem or shock to the economy is called inside lag. While outside lag is the time it takes for the decision to be implemented.

“Decisions made by the government are not implemented immediately, bureaucratic processes will come in, that will cause another delay in implementation.”

Anthony said a contributing factor to the high cost of cooking gas in the Yuletide, despite the government's policy to remove VAT from its importation, was the issue of old gas stock, Leadership reports.

He said that cooking gas that marketers had stocked before the policy pronouncement would still be sold during the Yuletide at the old price to cover the cost of importation.

He added: “The seller will sell it at the price that covers the cost of importation of the gas.

“So until this stock finishes and they buy at the prevailing price that reflects the new government policy, that is when they will sell at the price that will show a reduction of VAT.”