How FX scarcity, VAT raise cost of cooking gas – Report

Indications are that the astronomical rise in the prices of the Liquefied Petroleum Gas (LPG) also known as cooking gas may not be unconnected with the scarcity of forex, hike in inflation rate and other related factors, reports Ibrahim Apekhade Yusuf.

Like other essential commodities, the Liquefied Natural Gas otherwise known as cooking gas has been experiencing hike in prices lately so much so that it’s almost priced out of the reach of the common man.

A report by the National Bureau of Statistics on retail gas prices said the average retail price for refilling a 5kg cylinder of cooking gas was N6600 at a range of N1200, N1250 and N1350 per kilogramme as sold across major outlets in the country.

The hike in the prices of the cooking gas, according to available information, may not be unconnected with a plethora of reasons chief among which is the scarcity of the Foreign Exchange (FX).

FX scarcity VAT increase to blame

Confirming this development, the Nigeria Liquified Natural Gas, (NLNG) Ltd., also attributed the rising cost of cooking gas in the country to scarcity of forex, Federal Government’s import and Value Added Tax (VAT).

The Managing Director and Chief Executive of NLNG, Dr Philip Mshelbila, made this disclosure while speaking on the sidelines of the ongoing African Investment Forum (AIF) in Marrakesh, Morocco, recently.

The News Agency of Nigeria (NAN) reports that the event has as its theme “Unlocking the Africa Value Chain”.

Mshelbila, therefore urged the Federal Government to address those factors, which he said impact about 60 per cent of the product component.

According to him, if this is addressed, it will go a long way to lower the prices of cooking gas for the benefit of Nigerians.

“In terms of pricing, I cannot speak about the back end of the market. But you should understand that our supply makes only 40 per cent of supply for the local market.

"The remaining 60 per cent has to be imported and many of the marketers are struggling to source forex.

"LPG is also subject to import duty and VAT and that is one area that Federal the Government has to look at if we want to lower the price of the product,” he said.

According to Mshelbila, the NLNG took a decision two years ago, that our butane and propane will be sold to the local market as cooking gas, and we have kept to that.

He said: “We have struggled with propane because our local market cannot take all our production.

“We have just a few customers that can take our propane which includes Indorama a private company. But they could not take all our propane and so from time to time, we export some of the products.

“Not because we want to export, but because our local market cannot take all of our production,” he said.

According to the NLNG boss, Nigeria needs more investments in that area so that more development and investments will take place.

He said there was a huge investment opportunity in propane as it could be used for transportation, power generation, and cell phone tower.

“The product is there, but it is a question of balancing supply and demand to create opportunity for more investment inflows to come into the country.

On takeaways from AIF, Mshelbila said: “I believe Nigeria can benefit from investments, not only from the natural gas industry, but also in the renewals and across the energy value chain.

“NLNG is a good demonstration of FDI in Nigeria where billions of us have been investing. But there are still opportunities for small investment across the oil and gas value chain that need to be embraced.”

According to him, there should be a system approach, we need to look at the whole system to make policies that drive investments,” he said.

View from the streets

Independent check by The Nation at an NNPCL outlet in Akowonjo axis of Lagos revealed that the price of a kilogramme sold N1250, indicating that the price surged by 26 percent in less than one month when it sold at N950 owing to high global crude oil and gas prices and scarcity of FX.

This recent surge will further squeeze cash-strapped consumers, erode their purchasing ability and amplify a cost of living crisis in Africa’s most populous nation.

“It is getting difficult daily for Nigerians, especially with the recent petrol subsidy removal and naira float,” Demola Balogun, a mechanic at Ketu, Lagos said.

“Everyday prices keep surging and now it is cooking gas. We don’t know if the price surge will even come to an end,” he said.

According to him, survival is now a daily struggle for millions of Nigerians and if the government fails to stabilise gas prices, a large chunk of the population will return to using firewood for cooking, reversing the progress the country has made in moving towards clean energy.

“I don’t know when Nigerians will experience some relief. The situation has been like this for the past five years and we all just keep managing,” she said.

She stated that relocating out of the country is the only option for her right now as things keep getting worse in the country. “I intend travelling abroad because it doesn’t look like things will improve here.”

Nigeria’s inflation at 27.33 percent in October according to the latest NBS figures, signposts a very troubling phenomenon on the back of poor wage and biting economic crunch.

For lower-income households with little or no cash cushion, they are making harder choices such as what to buy or not, experts say.