.

Prices on domestic markets and international market for LPG were relatively reduced in the immediately preceding week

Key Development in Nigeria's LPG Market
The international prices of LPG sloped downward throughout the week.
Depot prices have shown some depreciation compared to the previous week.
The narrowing of the price disparities between prices at the level of the depot and those at the international level is consistent.
In the week under review and the previous two weeks, price variations in LPG per kg remained within a narrow range.
Within the region, regional variations in LPG retail prices continue to exist.

Regional Disparity in Retail
A frequent feature of the Nigerian LPG market has been the regional variance in the price of LPG across the country. Due to its close proximity to the coastal region, the South West region has the lowest rates.

Macroeconomics Variables and the LPG Market

Inflation Rate and the LPG: Over the last 11 months, the rate of inflation has been steadily increasing. In December, the rate of inflation increased to 15.75 percent from 14.89 percent in November 2020, and the expected rate of inflation in January 2021 is 14.96 percent (Fig D). The composite food index increased to 19.56 percent in December from 18.3 percent in November, 17.38 percent in October, 16.16 percent in September, and 16.0 percent in August, and to 15.48 percent in July 2020 from 15.18 percent in June 2020. The killing and kidnapping of farmers and businessmen, as well as the outbreak of the Covid-19 pandemic, are some causes of the rising trend. The implication is that inflation depreciates the value of naira. This reduces purchasing power of money used to buy LPG.

Exchange Rate and the LPG: Exchange value, as pegged by the Central Bank of Nigeria (CBN) (Figure E), is still persistent at N380 to US$1 throughout the week as discrepancies continue to expand in the parallel market. One of the factors deciding the price of LPG in the foreign market is the exchange rate. As greater amounts of LPG are imported, a lower exchange rate would not raise the selling price of LPG on the local market. This means the LPG sector is growing.


Crude oil Price and the LPG: The price of LPG is positively related to the price of crude oil since it is a by-product of crude oil. The Prices of crude oil in the international market continue to fluctuate in the preceding week but showing some appreciation at the end of the week (Figure F). The cost of LPG increases as the price of crude oil rises on the international market. This suggests a strong LPG market price.

Foreign Reserves: As in the previous week, despite the devaluation and pegging of the Naira at N380 to US$1, the Nigerian gross Foreign Reserve continues to fall from $34.66 billion to $34.44 billion. This will signal to the forex market that there is imminent further devaluation to assist support the naira.

PMI: The CBN Purchasing Managers Index (PMI) recorded overall growth in employment, business and inventory in the month of December while ordering in the category of supply for power, gas, steam and air conditioning remained stagnant while business operation & inventory were static in the same month at 45.7 per cent.

Current Topical Issues of the Week

Covid-19: Nigeria is presently experiencing a second wave of the Covid-19 pandemic. This has made some state government in to ban a gathering of people that is more than 20. Covid-19 causes demand of goods and services to fall due to the full or partial lock-down effect. The implication of the Covid-19 contracts the LPG market

Covid-19 Vaccine arrived in Nigeria: Nigerian President Muhammad Buhari on Saturday urged all "eligible Nigerians" to be vaccinated against coronavirus as soon as possible using the AstraZeneca COVID-19 vaccine, manufactured by the Serum Institute of India and provided through the global COVAX initiative. The implication of this is that people will be confident health-wise and this will lead to free flow of activities in the economy without full or partial lockdown.

Policy Recommendations

Reducing the effect of the Covid-19, entails more campaign and public awareness of the virus as people are easily carried away and relaxing. Vaccines for Covid-19 should be distributed without much delay if available.
Nigerians are advised to take the AstraZeneca COVID-19 vaccine, manufactured by the Serum Institute of India to be immune against the virus.

Outlook: Coming Weeks
The prices in the weeks to come may rise due to increase in in the price of goods and services


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