.

In the immediately preceding week, prices on domestic markets for LPG were relatively stable while the international market price was on a fallen note.


Key Development in Nigeria's LPG Market

The international prices of LPG reached its peak in the middle of the week and started falling thereafter.

Depot prices were relatively stable from the beginning of the week till the end of the week compared to the previous week.

The narrowing disparities between prices at the depot level and those at the international level still prevail.

Price changes per kg of LPG in the week under review and in the past few weeks have remained within the limited range.

Regional disparities in the retail prices of LPG within the country continue to persist.

Regional Disparity in Retail
Regional disparity in the prices of LPG across the country has been a regular feature of the Nigerian LPG market. Even though the North Central is far from the coastal region, there is slight difference between the North-central and South-west prices region has the relative highest prices due to distance from the coastal regions.

Macroeconomics Variables and the LPG Market

Inflation Rate and the LPG: There has been a continuous rise in the rate of inflation in the past 13 months. The rate of inflation in November increased from 14.89 to 15.75 in December 2020 (Fig D). From 18.3 in November, 17.38 in October, 16.16 percent in September and 16.0 percent in August, the composite food index rose to 19.56 in December, 15.48 percent in July 2020 compared to 15.18 percent in June 2020. One of the causes of the growing trend is the closure of Nigerian land borders against vital products, the outbreak of the Covid-19 pandemic and the protest against EndSars. This implies that inflation erodes the monetary value of goods and services. The price becomes dearer and this reduces sales of LPG.

Exchange Rate and the LPG: Exchange rate value from the CBN official site still persistent at N380 to US.$1 throughout the week (Figure E), even as disparities continue to widen in the parallel market. The exchange rate is one of the variables that determine the price of LPG in the international market. A higher exchange rate will add to the cost price of the LPG. This reduces LPG in the market.

Crude oil Price and the LPG: As a by-product of crude oil, the relationship between the LPG price and crude oil price is positive. The Prices of crude oil in the international market experienced an initial fall at the begining of the week but increased for the rest of the week. (Figure F). This indicates that an increase in the price of crude oil in the international market results to an increase in the cost of LPG. This signal a high price to the LPG market.


Foreign Reserves: As in the previous week, the Nigerian Gross Foreign Reserve continues to decline, moving from $35.2 billion to $34.90 billion amid the devaluation and pegging of the Naira at N380 to US$1. This will signal to the forex market that further devaluation is inevitable in order to help support the naira.

PMI: The Purchasing Managers Index (PMI) of the CBN recorded overall growth in jobs, business activities, and inventory in the gas sector in December, while orders remained stagnant in the Electricity, gas, steam & air conditioning supply segment, while Business Activities and employment & inventory remained 45.7 percent in the same month.

Current Topical Issues of the Week
Covid-19: Nigeria is currently experiencing the second wave of the Covid-19 pandemic. Federal Schools have not fully resumed while the State universities are taken caution to prevent the spread of the virus. The implications of this on the LPG market is that its volume of sales will not increase in the areas where schools are not yet resumed.

Policy Recommendations
To reduce the effect of the Covid-19 on the economy, there should be a constant awareness programme through the media and places of worship; and also vaccine for Covid-19 should be made available for everybody

Outlook: Coming Weeks
The prices in the weeks to come may rise due to the persistent increase in the rate of inflation and rise in the price of crude oil

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