- NLNG said some major LPG offtakers bought cooking gas for N800–N900 per kg and sold it for as much as N2,400 per kg during the recent scarcity
- The company blamed some of the price increases on hoarding at terminals, which created artificial scarcity and pushed retail prices above N1,200
- NLNG said its Train 7 project will increase LNG capacity by 35% and LPG production by 50%, helping to boost supply as Nigeria’s LPG consumption rises
Legit.ng journalist Victor Enengedi has over a decade’s experience covering energy, MSMEs, technology, banking and the economy.
Major Liquefied Petroleum Gas (LPG) offtakers made more than N1,600 in profit on every kilogramme of cooking gas purchased from Nigeria LNG Limited during the recent period of scarcity, the company has disclosed.
According to NLNG, some of its major customers bought LPG for between N800 and N900 per kilogramme but sold the product to consumers for as much as N2,400 per kilogramme.
Source: UGC
The company said the huge price gap was partly driven by the hoarding of LPG at some terminals, which contributed to artificial scarcity and pushed retail prices beyond recommended levels.
Oftakers hoarded LPG, NLNG says
NLNG Managing Director and Chief Executive Officer, Adeleye Falade, disclosed the development at the company’s Facts & Figures Presentation in Lagos.
Falade said investigations showed that some customers were storing LPG at their terminals instead of releasing it promptly into the market, contributing to the supply squeeze experienced by consumers.
Falade said:
“What we found out is that a number of people who take products will put them in their terminal, and they are part of those that have created the artificial scarcity that has led to the price increase.”
He explained that while cooking gas was selling for about N2,400/kg in the market during the scarcity, some of the affected offtakers were obtaining the product from NLNG for between N800 and N900/kg.
The development created a significant disparity between the price at which the product was purchased and the amount ultimately paid by consumers.
LPG prices rose above recommended levels
The Nigerian Midstream and Downstream Petroleum Regulatory Authority had previously indicated that LPG retail prices, after accounting for transportation costs, should generally remain within the range of N1,000 to N1,200 per kilogramme.
Falade said the wide difference between the recommended retail range and the prices paid by consumers reflected distortions within the downstream LPG market.
“So there’s also some distortion that happened on the sales side, which I know the regulators are working on right now to get control of it,” Falade added.
NLNG distributes LPG domestically through its dedicated vessel, Alfred Temile. More than 15 terminal operators currently take the product from the company and subsequently supply bulk quantities to gas plant operators and independent petroleum marketers.
Source: Getty Images
An assessment carried out for NLNG by one of the Big Four consulting firms reportedly found that the practice of retaining LPG at terminal level slowed the movement of the product to retailers.
The resulting supply constraints contributed to higher prices at the retail end of the market, even when adequate volumes were available earlier in the distribution chain.
Source: Legit.ng