The Federal Government of Nigeria has taken decisive action to address the mounting challenges faced by consumers grappling with soaring cooking gas prices.
In an announcement made by Ekperikpe Ekpo, the Minister of State for Petroleum Resources, during an “Internal Stakeholders’ Workshop” convened in Abuja, the government revealed its immediate suspension of Liquefied Petroleum Gas (LPG) exports.
This strategic move aims to bolster the availability of LPG within the domestic market and mitigate the financial strain on consumers.
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Ekpo noted the significance of halting the exportation of locally produced LPG, emphasizing the need to retain the entire production within the country. He stated that the suspension of LPG exportation is a crucial step in addressing the challenges faced by consumers and ensuring a more stable and affordable cooking gas market.
Additionally, he disclosed ongoing discussions with key stakeholders, including the Nigerian Midstream and Downstream Petroleum Regulatory Authority, as well as major operators like Mobil, Chevron, and Shell, aimed at collaboratively devising strategies to enhance market stability and affordability.
The initiative comes amidst reports of escalating cooking gas prices, with prices soaring to N1,300 per kilogram earlier this month, a significant increase from less than N500 in 2018. This surge has compounded financial pressures on households across Nigeria, exacerbating existing economic strains.
While the government’s intervention has been welcomed by some, skepticism remains among experts regarding its efficacy in addressing the underlying causes of the price surge.
“The issues with the rising cost of LPG from butane (C4) that is imported is mostly because of the FX rate. Fix exchange rate and the prices of LPG will come down,” Kelvin Emmanuel, an energy expert, said, adding that “Banning NLNG from exporting propane is only going to reduce the dividend that they generate for shareholders.”
Emmanuel elucidated the complexities of the LPG market, noting that NLNG exports 700k metric tonnes of Propane (C3) gas due to two main reasons:
Unsuitability for Tropical Weather: The pressure and boiling point of Propane (C3) are not conducive to the tropical climate in Nigeria.
Low Composition in Local LPG: Propane (C3) constitutes only 15% of the composition of the LPG consumed in Nigeria.
Furthermore, Emmanuel raised concerns about potential ramifications stemming from the export suspension, including penalties arising from existing forward sales agreements with international off-takers.
“I didn’t mention that they already have forward sales agreement (FSA) with international off-takers and banning export of propane (C3) means they have to pay penalties,” he said.
He questioned the decision-making process within the government, querying, “Is it that the President doesn’t have actual Oil & Gas people explaining these things to him?”
While the government’s suspension of LPG exports represents a proactive step towards alleviating cooking gas price pressures, experts caution that it may not fully address the root causes of the issue.