The Nigeria LNG Limited has accused some marketers of contributing to the sharp rise in the price of cooking gas by buying liquefied petroleum gas from the company at prices between N800 and N900 per kilogramme and selling it for as much as N2,400/kg in the retail market.

The Managing Director and Chief Executive Officer of NLNG, Adeleye Falade, disclosed this during a recent media briefing in Lagos, where he attributed the price spike to supply shortages, artificial scarcity and distortions in the distribution chain rather than the company’s pricing.

According to him, when the retail price of LPG climbed to N2,400/kg, NLNG was selling the product to buyers at between N800 and N900/kg. He said the price was supposed to be in the range of N1,000 to N1,200, going by the recommendation of the Nigerian Midstream and Downstream Petroleum Regulatory Authority.

“When the product was being sold at N2,400 in the market, guess how much they (marketers) were lifting it from us? It was between N800 and N900 per kg. And NMDPRA recommended that by the time you put in transportation costs and all other things, it shouldn’t be selling more than N1,000, N1,100 or N1,200. So there’s also some distortion that happened on the sales side, which I know the regulators are working on right now to get control of it.”

The price of cooking gas jumped from below N1,000 per kg in May to as high as N2,400, pushing many households back to unclean cooking. Falade said investigations by the company showed that some buyers were stockpiling LPG instead of distributing it to retailers, thereby creating artificial scarcity that pushed up prices.

He said NLNG recently engaged one of the four largest consulting firms to assess its off-takers and determine their capacity to distribute LPG effectively, saying their findings showed that some off-takers were not selling the product immediately to retailers.

“Recently, we had to get one of the big four consulting firms to do an assessment of all our off-takers, looking at things like ‘Do you have your storage facilities? How much are you able to bridge at the retail level? And so on. What we discovered was that we have more than we’re able to satisfy, so we had to introduce a round order and give priority to off-takers that have the ability and the network to be able to get to retail.

“What we found out is that a number of people take the product; they will put it in their terminal, and they are part of those that have created the artificial scarcity that has led to the pricing. So, preference for us is not those kinds of people, but it’s those that can supply directly to the retailers,” he said.

The NLNG boss said infrastructure gaps remained across the LPG value chain but noted that they had not prevented the company from selling all the cooking gas it produced.

“There is a deficit of infrastructure generally when it comes to the industry, but that hasn’t played out to the point where our products aren’t lifted. No. We sell all of our products. We actually have more demand than we’re able to sell,” he said.

Falade also attributed the surge in cooking gas prices to inadequate supply, revealing that Nigeria experienced an estimated 400,000-tonne supply deficit when demand exceeded available volumes around May.

“Part of what drove that price up is a supply issue. There was about 400,000 tonnes per day that was in deficit. As aggregated, we had about 2.1 metric tonnes per day, but demand was about 2.5 mtpa. It was that shortage (that caused the price hikes). And part of what is now being done is to ensure that we don’t find ourselves in a situation where we have a shortage of supply in the market,” the managing director explained.

Speaking on NLNG’s contribution to domestic LPG supply, Falade said the company currently accounts for about one-third of Nigeria’s cooking gas production, although all of its LPG output is supplied to the domestic market.

He noted that the company would have shielded Nigeria from the price hike if it were the one supplying 100 per cent of Nigeria’s LPG needs.

He said, “If 100 per cent of the LPG that we produce in Nigeria today came from our plant, we would have been able to shield the country from that price increase. But as I mentioned, we only produce about 33 per cent. And that’s 100 per cent of what we produce.

“Before, we were just doing 70,000 tonnes; we’re now doing 500,000 tonnes, which in itself is good, because it means that the country is using more of the gas for its own consumption and in order to power its industry. But the gas source that we have continues to get leaner and leaner. And so the quantity of cooking gas we can extract from it is getting smaller and smaller.”

Falade expressed optimism that the completion of Train 7 would increase NLNG’s LPG production by about 50 per cent, helping to improve domestic supply and reduce the risk of future price spikes.

He noted that the Federal Government intervened after cooking gas prices soared, saying several meetings were held to identify the causes of the increase and measures needed to stabilise the market.

He noted that gas prices have since dropped from N2,400 per kg. “Right now, it has come down significantly lower. And I know they are putting mechanisms in place to ensure that that doesn’t happen again,” he said.

Speaking with our correspondent, the President of the Association of LPG Retailers, Ayobami Olarinoye, said there has been relative stability with product availability and LPG prices lately.

According to Olarinoye, the recent upward review of PMS prices has not affected the price of LPG. However, he said the price has yet to return to where it was before the May surge.

“Though we have not gotten to where we were before the upsurge, the retail price ranges between N1,350 and N1,600 per kg depending on locations and cost of logistics. Our members buy from the plants in the range of N1,100 to N1,200,” he stated.