Deepening LPG usage

Nigeria’s per capita consumption of Liquefied Petroleum Gas (LPG) commonly called cooking gas is about 2 kg or 350,000 metric tons a year. It ranks very low especially when compared to some African countries like Ghana (4.7kg), Senegal (9kg), Egypt (60kg) and Morocco (68kg). LPG is the least utilized of the four major cooking fuels (Firewood, Kerosene, Charcoal, and Gas) in Nigeria.

Though, Nigeria’s LPG market has witnessed massive growth from less than 70,000 metric tonnes consumed in 2007 to the current 400,000MT (471.4 percent increase within 10 years), there is, however, potential to grow Nigeria’s consumption to over 1 million metric tonnes in the near term. This will throw up investment opportunities in the LPG value chain especially in-country cylinder manufacturing which was previously the case for Nigeria.

Nigeria currently relies mostly on gas from Nigeria Liquefied Natural Gas Limited (NLNG) to meet local demand but even that suffers from delays due to government’s decision to prioritise petrol in discharge to jetties and limited number of jetties and terminals.

Recently, there was price volatility of LPG due to unpredictable and supply shortages. The cost of 12.50 kg cylinder moved from between N2, 900 and N3, 100 to between N 6,000 and N 7,000. During the price hike, some of the users of cooking gas around the country, especially food sellers vowed that except the price of cooking gas becomes affordable they would return to their old ways of using fire wood.

One of the impediments to ramping up LPG usage is Nigeria’s gas cylinder manufacturing capacity which is still low largely due to high cost of steel, power challenges and freewheeling exchange rate that has seen the cost of production hit the roof. Raw materials for gas cylinders are imported and they suffer 40 per cent duties and tariffs. The consequence of this situation is increased importation of gas cylinders and the use of expired gas cylinders which pose risk of leakage and endangers lives and property.

Industry analysts say the Federal Government should put in place intervention funds to encourage the manufacture of cylinders in the country to stem the loss of about $10m being spent annually to import them.

Another major issue is that Lagos is the only point in the country where you can bring in LPG. Ships have to wait for many days sometimes to unload leading to demurrages. This means that consumers cannot depend on LPG because supply is sporadic and unreliable and will instead continue to use kerosene. Consumers become extremely susceptible to fluctuation in prices due to inconsistent availability or government support.

There should be a deliberate policy by government to drive investments in the LPG sub-sector and remove current challenges. There are operators who need to have certain guarantees in relation to market, even in terms of taxes when they are investing in much needed infrastructure.

There is an urgent need for an LPG road-map in Nigeria that would drive development and growth in the market. If this is not done, we will continue to talk and work without noticeable progress. There is also the need for a greater level of sensitization of Nigerians on the importance and relevance of the usage of LPG, which is a factor for the pursuit of a cleaner energy that is also affordable.

Editorial