January 24, 2025/CSL Research
The National Bureau of Statistics (NBS) recently released the December 2024 price watch report for Liquefied Petroleum Gas (LPG), commonly known as cooking gas. The report shows that the average retail price for refilling a 5kg cylinder of cooking gas increased by 1.26% month-on-month (m/m), rising from ₦7,088.16 in November 2024 to ₦7,177.27 in December 2024. On a year-on-year (y/y) basis, this reflects an increase of 44.62% y/y compared to ₦4,962.87 in December 2023. Conversely, the average retail price for refilling a 12.5kg cylinder of cooking gas decreased marginally by 0.05% m/m, inching down from ₦17,283.58 in November 2024 to ₦17,274.16 in December 2024. Y/y, this marks a substantial 50.08% rise, compared to ₦11,510.16 in December 2023.
The marked depreciation of the Naira in recent times and the heavy reliance on imports due to insufficient local production has significantly driven up costs in the domestic market, as LPG is priced in Dollars. On 01 November 2024, the Federal Government kicked off the ban on export of locally produced cooking gas to prioritize domestic supply and address the rising cost of LPG in the country, with the adoption of a new pricing framework based on local production costs. We assume that the implementation has begun to yield the positive near-term benefits, given the improved moderation in m/m price increase of the commodity. The average m/m price change in December 2024 for the 5kg and 12.5kg categories were +1.26% and -0.05% m/m respectively compared to +2.49% and +3.28% m/m in November 2024.
However, it is noted that domestic distribution networks are still struggling with inefficiencies due to poor infrastructure, leading to higher costs for local suppliers.
Over the long term, the Federal Government plans to improve local storage, blending, and distribution infrastructure within 12 months from 01 November 2024. Reports show that talks remain underway between the government and major oil companies such as Chevron and ExxonMobil on the domestication of LPG produced in the country, just as the Nigerian Liquified Natural Gas (NLNG) has done, domesticating 100 percent of its butane production since the year 2022. If the government follows through on its commitments, the initiative could attract foreign direct investment for the storage and blending facilities. More positively, the long-term plans could help alleviate the high cost of living of the populace, support the push for cleaner energy use, and promote energy affordability for households.
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