Tougher times are looming for gas consumers as market indicators suggest that prices will experience an increase in the upcoming week. Olatunbosun Oladapo, President of the Nigerian Association of Liquefied Petroleum Gas Marketers, has advised gas consumers to brace themselves for imminent price hikes that will take effect starting next week.

Oladapo highlighted various contributing factors that have prompted the intended price adjustment. These include escalating international prices, elevated tax rates, increased vessel costs, foreign exchange scarcity, and the devaluation of the Nigerian currency.

Explaining the situation, Oladapo stated that the price escalation is being initiated next week due to the surge in global prices and the elevated costs associated with vessels. He noted that high taxes coupled with stagnant consumer earnings have led to a decrease in purchasing power, affecting consumers, middlemen, and retailers alike. The prevailing circumstances have taken a toll on business activities.

Regrettably, Oladapo expressed that the impending price increment is unfavorable. He emphasized that the mounting prices have placed significant strain on Nigerian consumers, causing them to face substantial difficulties in affording gas. Consequently, many consumers have reverted to using firewood, charcoal, and sawdust for their cooking needs.

To alleviate the challenges faced by the masses, Oladapo urged the government to step in and provide relief measures, including reducing taxes and levies. He pointed out the adverse impact of high taxes on gas prices, suggesting that the government should focus on taxing profits rather than the products themselves. He appealed to marketers to adopt pricing strategies that consider the consumers' well-being.

These concerns come in response to recent findings reported by The PUNCH indicating that vessel scarcity on the international market is expected to drive up local prices of Liquified Natural Gas (LNG), commonly known as cooking gas, in the coming months. The scarcity of vessels has led to increased charter rates, particularly in anticipation of the higher demand for heating fuel during the upcoming winter season.

As of August 1, 2023, charter rates had surged to $284,750 per day for November and $206,750 per day for October, marking a significant increase from the current rate of $70,500 per day. This information is sourced from data provided by Spark Commodities and quoted by Bloomberg.

Furthermore, the scarcity of LNG vessels has prompted traders to use these ships as floating storage, banking on the expectation that LNG prices will rise as colder weather approaches. This situation has led to a rise in the number of LNG vessels remaining afloat for at least 20 days, with the current count being approximately 27% higher than the previous year.

Nigerian LPG prices are closely tied to international benchmarks, particularly the Nigerian Liquefied Natural Gas Contract prices, and are influenced by global market dynamics. These prices are subject to adjustments, either upward or downward, based on market fluctuations and changes in international prices.

In addition to these factors, the devaluation of the local currency has also contributed to the domestic price adjustments for LPG. As the exchange rate of the Nigerian Naira against the US Dollar has shifted, it has impacted the cost structure of LPG within the country.

The recent exchange rate was N749.62 to 1 US Dollar, according to the Central Bank of Nigeria. The Nigerian LNG typically sells domestically produced cooking gas based on prevailing exchange rates.

An examination by The PUNCH of prices for 20 metric tonnes of LPG between July 28 and August 7 at major depots in Apapa, Lagos, revealed a range between N10.7 million and N11 million.

In recent months, local consumers of cooking gas have enjoyed lower prices due to decreased international prices. However, the price of LPG underwent fluctuations, dropping from an average of N730 per kilogram in June to around N600 per kilogram in July. The price then increased to N750 per kilogram in August, driven by the devaluation of the Nigerian Naira.

Consequently, local retail gas prices have undergone changes as well. The National Bureau of Statistics reported a decrease of 6.71% in the average retail price for refilling a 5kg cylinder of cooking gas, from N4,360.69 recorded in May to N4,068.26 in June.