Good day,
Trust that you have been great. Today, we will like to take the time to discuss a subject that a lot of our clientele in Nigeria have been curious about. If you have been in the LPG business for a long time, it is easy for you to notice the instability in price both at the wholesale and retail levels. As in any business, such fluctuation has the propensity to wreak havoc if not managed properly. This is why my team and I have decided to openly educate you on Price instability in the Nigerian LPG sector, its effects, and how to maneuver it for your own good.

With a population of slightly more than 200 million people, Nigeria is easily the most populous African country. Given this status, Nigeria’s economy is relatively booming, especially if you put into context the state of its currency.

Experts have pointed out that a reason for this economic growth is the influx of people from lower class to middle and higher class. Nigeria has recorded a significant amount of growth in the middle-class and upper-class income groups. What this translates for the LPG sector is more Nigerian consumption. Every year, more people can now afford LPG for their daily activities, rather than relying on biomass, as they used to.



This situation should translate to growth for the LPG industry in Nigeria. However, it does not. At least, not in the massive amount it should. In an ideal business, more consumption (increased demand) leads to more supply, which is business growth, isn’t it? However, for the Nigerian LPG sector, there are other worms eating into the business structure and hindering growth. One of these major worms is price instability. The other is the lack of infrastructure in storing LPG and distributing it effectively to the end-users.

According to a study conducted in 2021, retail prices of LPG in Nigeria saw a 100% increase since 2020. The September 2021 issue of the National Bureau of Statistics on LPG reports that the price to fill 5kg worth of cylinder increases 8.23% every month, and 21.42% every year. The Nigerian LNG Limited (NLNG) is the major source of LPG to the Nigerian LPG industry, and since NLNG mainly exports most of its LPG, LPG consumers rely on off-takers to distribute the gas from NLNG to the many retail users. This was the summary of the distribution of LPG in Nigeria until January 2022 when NLNG announced that it will be pushing 100% of its products to the local markets. Yet, this has not solved the issue of price instability.


There are many factors that affect the price instability of LPG products.

Global LPG Prices.
LPG is sold all around the world, mainly because of its function in producing an efficient amount of energy. Due to this simple fact, it has a global price that regulates its distribution across the world. Of course, the market in Nigeria will be affected by this pricing. The international price of LPG is what leads to the NLNG cost price, also known as NLNG CP. NLNG CP changes on a monthly basis as a result of the changes in LPG international pricing.


Exchange Rates
One of the biggest problems with the Nigerian economy is the proper regulation of its currency. Since buying of all products within Nigeria, including LPG, is done through its currency, the LPG industry within the country is affected by this as well.

The international price of LPG is in US $, and so, the rising value of the US dollars affects the price of LPG in Nigeria, even though it is produced within Nigeria. In 2016, N190 equaled $1, 20MT of LPG was sold at N3.5million ($18,421). During this time, the retail price to fill 12kg worth of LPG resulted in N2,700-3,500 ($14-18). iN 2017, the rate changed and $1 was N305. 20MT of LPG was sold at N5.1million ($16,721). 12kg of LPG at a retail value cost N4500-5500 ($14-18).

It is easy to realize that during this time, the change in LPG prices both at the retail and wholesale price was as a result of the change in the Naira-Dollar rate.

Lack of LPG Storage and Distributive Infrastructure.
The lack of LPG infrastructure to enable effective distribution of LPG also affects the price of LPG within Nigeria. There are three LPG terminals in Lagos, however, only one of these terminals can be used to discharge LPG.

This means that discharge and distribution of LPG will be slow, as when the only terminal capable of discharging LPG is in use, other LPG supplies have to wait The situation is made worse because petrol is given a higher priority within the country because of its contribution to the country’s GDP. In essence, LPG supply is reduced creating scarcity. Basic economics teaches that when supply is reduced, demand increases, and when this happens, prices have to be increased to regulate the system.

Transportation
The bulk of LPG in Nigeria is distributed from Lagos. This means that distributing LPG to other corners in Nigeria is solely dependent on transportation, and so prices of LPG in these other parts have to consider the price of transporting the products to them. So if the cost to distribute 20MT of LPG from the terminal in Apapa, Lagos, through a bridger truck, to Port Harcourt is N200,000 and N95,000 for a bob-tail truck (if a mini skid plant is involved), then the price of LPG in Port Harcourt has to reflect this cost. This is why LPG is more expensive in Northern parts of Nigeria than in the Southern or Western parts (where the terminals are located).

Also the cost of transporting it to retail outlets affects the retail prices.

Now you know why the prices of LPG are so unstable in Nigeria. The question now is what can you do about it. Although, it is true that the situation seems mirthless. However, as an entrepreneur, we are aware that there is always opportunity behind every challenge. The opportunity in this regard presents itself through international trade.

The NLNG plant is the biggest source of LPG in Africa. This means that Nigeria supplies LPG to other African countries. Below is a 2017 list of prices of LPG in African countries.

1. South-Africa- $0.96
2. Kenya- $1.69
3. Togo- $0.51
4. Ghana- $0.79
5. Nigeria- $0.65

It is easy to observe that LPG price in Nigeria is the lowest in these African countries. The situation is the same even in 2022 (feel free to contact us for a recent update on LPG prices across Africa), and the opportunity is more potent. This is because NLNG, in 2022, reported that the majority of its LPG produce will be distributed locally. This leaves the African market open for you to distribute LPG to. You can buy cheap LPG and distribute to other Sub-saharan African countries.

You will probably require a partner who is well-versed in the prices of LPG across Africa and how to bend these circumstances to your advantage. Kiakia Gas has garnered vast experience in the field, as we have been involved in LPG trade and distribution for the last seven years. We are the perfect choice to advise you on how to manevre the pricing situations for your own good through our available and easy-accessible feasibility analysis that puts into consideration a variety of hotspots across Africa.

Furthermore, we are well-versed in the materials needed to start an LPG business or maintain it across Africa. Whether it is a gasplant or a storage facility, we have you covered. We can help you procure the right materials you need to sustain your LPG ambitions, while providing adequate resources that can guide you.

The challenges highlighted above are industry opportunities for investors and entrepreneurs who are ready to plunge into the growing industry of LPG. Let us guide you through it.

For more enquiries, write to us at gaspreneur@kiakiagas.com. We will love to hear from you.

Warm regards.