Nigeria’s cooking gas market faces old foes as demand grows

Demand for Liquefied Petroleum Gas (cooking gas) in Nigeria has been increasing but the sector still struggles with some old foes, such as high cost of steel, foreign exchange bottlenecks and cost of imported raw materials needed to manufacture gas cylinders.

Nigeria’s LPG market has witnessed massive growth from less than 70,000 metric tonnes consumed in 2007 to the current 400,000MT, a 471.4 percent increase within 10 years.

Some of the challenges that must be addressed to enhance the cooking gas market include: availability, affordability, acceptability and accessibility of the product. Functional terminals are a critical component of the solution.

The retail side of the business is not growing as fast as it should because of affordability. Experts say the product is not delivered to consumers at the right price because of sharp practices and the bottlenecks at the jetties. Also, limited number of trucks for distribution of the product is a challenge. The roads are bad leading to delayed deliveries and accidents in extreme cases.

In 2008, the Nigerian Gas Master Plan (NGMP) came into force to provide for conditions necessary to drive domestic gas market and encourage local consumption.

The NGMP provided that multinational oil and gas companies necessarily channel certain proportions of the gas production to the local market. On case-by-case bases this ranges between 20 percent and 35 percent.

The Master Plan also provided for a gas pricing strategy aimed at expanding gas infrastructure and sustaining the domestic gas market. Next is provision for power supply. While all three provisions together would great sustainable market environment, the first two have direct bearing on domestic gas market.

Industry operators call for a policy that will drive the sector. “There is an urgent need for an LPG road-map in Nigeria that would drive development and growth in the market, otherwise, there would be limitations to the attainment of the desired position that should be seen,” said Ken Abazie, corporate services and strategy, Techno oil Limited at a stakeholder conference recently.

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

Nigeria is a net exporter of LPG. We produce more than five million metric tones of LPG per annum and we are exporting over four million metric tones. Nigeria only consumes about 500,000 metric tones when we have the capacity to consume five million tones. The LPG market is a $10 billion industry with many multiplier effects, including employment.

Average price for the refilling of a 5kg cylinder for Liquefied Petroleum Gas (Cooking Gas) decreased by -1.55 percent month-on-month and by -15.24 percent year-on-year to N2,058.19 in April 2018 from N2,090.64 in March 2018.

States with the highest average price for the refilling of a 5kg cylinder for Liquefied Petroleum Gas were Borno (N2,428.57), Yobe (N2,387.01), and Kogi (N2,207.14). States with the lowest average price for the refilling of a 5kg cylinder for Liquefied Petroleum Gas (Cooking Gas) were Jigawa (N1,812.50), Abuja (N1,800.00) and Ebonyi (N1,783.33).

Similarly, average price for the refilling of a 12.5kg cylinder for Liquefied Petroleum Gas increased by 0.36 percent month-on-month and decreased by -11.62 percent year-on-year to N4268.95 in April 2018 from to N4, 253.73 in March 2018.

States with the highest average price for the refilling of a 12.5kg cylinder for Liquefied Petroleum Gas were Benue (N5,000.00), Niger (N4,583.33) and Imo (N4,571.43). States with the lowest average price for the refilling of a 12.5kg cylinder for Liquefied Petroleum Gas were Ogun (N3,966.67), Oyo (N3,947.50) and Lagos(N3,752.94).

STEPHEN ONYEKWELU