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Prices on domestic markets for LPG increases during the week while international market for LPG also showed some level of appreciationin the immediately preceding week


Key Development in Nigeria's LPG Market
The international prices of LPG continue to be rising throughout the previous week.
Depot prices also showed some level of apprciation in the preceeding week despite official public holidays for Id-El-Kabir.
The market gaps between prices at the depot and those at the international level have begun to widen.
In the week under review and the previous two weeks, price variations in LPG per kg remained within a narrow range.
Within the Nigeria region, regional variations in LPG retail prices continue to exist.

Regional Disparity in Retail
The regional variation in LPG prices across Nigeria has been a recurring feature of the Nigerian LPG industry. The South West area has the lowest rates due to its closeness to the coastal region.

Macroeconomics Variables and the LPG Market

Inflation Rate and the LPG: Over the last 13 months, the rate of inflation has been steadily increasing. However it reached its highest point In March 2021 (18.17%), before it started decreases in the last three months. It fell from 18.12 to 17.93 in May to 17.75% in June 2021. (Fig D). From 12.8 in July 2020, to 13.2 in August 2020. The composite food index reduced from 22.95 in March 2021 to 22.72 in April 2021, 20.57 in January 2021, 19.56 in December 2020, 15.48 percent in July 2020 compared to 15.18 percent in June 2020. The anticipated inflation rate for the month of May is 15.4%. The relax of Covid-19 rule might contribute to the change in the rate of inflation trend.

Exchange Rate and the LPG: In line with widening discrepancies in the parallel market, the Central Bank of Nigeria's (CBN) have adjusted the exchange rate (Figure E). Movement in the exchange rate along the same line was maintained at 413.11/US$1 up till the middle of the week but fell towards the end of the week. One of the factors that influences the price of LPG on the international market is the exchange rate. Since more LPG is imported, a lower exchange rate has little impact on the selling price of LPG on the local market.

Crude oil Price and the LPG: The price of LPG is positively related to the price of crude oil since it is sometimes a by-product of crude oil. The Prices of crude oil in the international market rose throughout the week (Figure F). The cost of LPG increases as the price of crude oil rises on the international market. This suggests a high LPG market price.

Foreign Reserves: The Nigerian Gross Foreign Reserve rose from $33.11 billion to $33.25 billion last week. Despite a rise in the reserves, the exchange rate was ranged from 412.10 to 413.11 in the previous week even though crude oil prices continued to rise till the end of the week. Increase in the reserve might be as a result of increase in the price of crude oil over the preceeding week.

PMI: The CBN Purchasing Managers Index (PMI) recorded overall growth in employment, business and inventory in the month of December while ordering in the category of supply for power, gas, steam and air conditioning remained stagnant while business operation & inventory were static in the same month at 45.7 per cent.

Current Topical Issues of the Week

Covid-19: Covid-19 causes demand of goods and services to fall due to the full or partial lock-down effect. The implication of the Covid-19 contracts the LPG market

Id-El- Kabir: Muslims throughout the world celebrated the Id-El- Kabir when rams were killed to make some sacrifice as ordained by Allah. People were seeing rejoicing and happy to eat meat cooked with cooking energy. During this period the demand for gas was expected to rise

Policy Recommendations
Reducing the effect of the Covid-19, entails more campaign and public awareness of the virus as people are easily carried away and relaxing. Vaccines for Covid-19 should be distributed without much delay if available.
Nigerians are advised to take the AstraZeneca COVID-19 vaccine, manufactured by the Serum Institute of India to be immune against the virus.

Outlook: Coming Weeks
The prices in the weeks to come may rise due to pressure on the US supply of butane couple with the increase in the price of goods and services in the country.



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