.

Prices on domestic markets for LPG relatively stable while international market for LPG fluctuated in the immediately preceding week

Key Development in Nigeria's LPG Market

The international prices of LPG reached its peak towards the end of the week but ended up on a fallen note.

Depot prices were relatively stable during the week but had a significant increase at the end of the week.

The market gaps between prices at the depot and those at the international level have begun to widen.

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
The regional variation in LPG prices across Nigeria has been a recurring feature of the Nigerian LPG industry. The South West area has the lowest rates due to its closeness to the coastal region.

Macroeconomics Variables and the LPG Market

Inflation Rate and the LPG: The rate of inflation has been gradually reducing over the last three months. It decreased from 18.17 in March 2021 to 18.12 in April 2021. (Fig D). This is due to the relief in the Covid-19's aftereffects. From 14.89 in November to 15.75 in December of the previous year. The composite food index increased to 21.79 percent in February 2021, 20.57 percent in January 2021, 19.56 percent in December 2020, and 15.48 percent in July 2020, up from 15.18 percent in June 2020. The upward rise in the rate of inflation in the past months is due to the border policies that targeted vital commodities. For the month of May, the expected inflation rate is 15.40 percent.

Exchange Rate and the LPG: In line with widening discrepancies in the parallel market, the Central Bank of Nigeria's (CBN) have adjusted the exchange rate (Figure E). Movement in the exchange rate sloped downward from 410.17 to 410.13/US$1 in the previous week. One of the factors that influences the price of LPG on the international market is the exchange rate. Since more LPG is imported, a lower exchange rate has little impact on the selling price of LPG on the local market.

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 fluctuated at an increasing rate throughout the week (Figure F). The cost of LPG increases as the price of crude oil rises on the international market. This suggests a high LPG market price.

Foreign Reserves: The Nigerian Gross Foreign Reserve fell from $34.17 billion to $34.00 billion last week. This is contrary to the effect of rising rate in crude oil prices. The decrease might be due to CBN policy to stabilize exchange rate against dollar during the week. This will send a message to investors and creditors about the naira's strength and capacity to repay debt.

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: 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

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 the price of goods and services


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