Stakeholders Seek Removal Of 40% Levy On Gas Cylinder Importation, Other Charges

As Nigeria targets five million metric tonnes of Liquefied Petroleum Gas in the medium term, stakeholders and major players have said that the biggest constraints will be availability of cylinders for distribution of the product.

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The stakeholders spoke at the panel session of the World LPG Association India/Nigeria LPG Summit 2022 themed, “Energising the Future: Leveraging the Indian Experience to Achieve Nigerian National LPG Aspirations.”

They spoke on the ‘Pricing and Financial Support for LPG Affordability Among the Poor.’

As at 2015, national consumption was around 250 metric tonnes, but the number grew close to a million in 2020 and the country targets to move the aspiration to five million metric tonnes per annum in coming years.

This would translate to a per capita consumption of around 19kg which would make Nigeria among the likes of Egypt, Kenya and Morocco that have high per capita KG.

Currently, Nigeria consumes around 5kg per capita, which exposes the low penetration of LPG.

But the cost of switching to the cleaner energy compared to coal and fire wood is the biggest challenge of the poor Nigerian.

It will cost around N50,000 for a household to switch to LPG in Nigeria where the national minimum wage is N30,000.

Dayo Adeshino, Programme Manager, National Liquified Petroleum Gas (LPG) Expansion Plan in the office of the Vice president responding on the cost and meeting national aspiration, said the government is working to improve supply of cylinders.

Adeshino said, “First let me speak on the affordability, the government looked at the risk assessment and it was clear that cylinders were a huge problem. For us to be able to achieve penetration, switching from firewood, kerosene to LPG cylinders is the main instrument for achieving this plan apart from filing plants.”

On the area of automation of cylinder and tracking to ensure a healthy state of the cylinder for use, he said new cylinders will have trackers install on them.

“We have done proof of concepts for the various technologies, trackers for the cylinders. Many years ago, certain marketers invested in cylinders. But how many of those cylinders can they find today. Those cylinders will obviously disappear because of the Nigerian system.

“So, yes we have done several proofs of concepts for several technologies and tracking- Radio Frequency and we have narrowed it down to about two of them. And so, those cylinders will definitely have trackers. And the platform would also enable the marketers to track the cylinders and know the level of consumption as well. So, technology plays a huge part in what we are doing.”

Felix Ekundayo, Deputy President, Nigerian LPG Association (NLPGA) who spoke on pricing of LPG, said the constraints in importing cylinders has contributed a lot in driving high the cost of LPG.

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He said, “If we are in the process or developing to five million metric tons, we need to look at what the market structure is at the moment and the focus if you look at the federal government policy on gas, there are actually four sectors for LPG: there is a domestic; there is industrial; power and there is auto gas. The burden of growth today has been on only one of those- the growth has been on the domestic.

“But what about the other three sectors? In each one of these sectors, they have containers that are required. This market is one of the very limited numbers of market that the containers is more expensive than the product.

“If you therefore cannot afford the container, you cannot afford the product. Therefore, policy that is designed need to make the container cheaper is paramount.

“What we need today is joined up policy so that we can drive this wholistically. Currently, we have policy mismatches.

“The containers that are required to drive the other sectors there have recently been an imposition of levy on, but we don’t have the manufacturing base to drive the production of those. That is going to impact the rate of growth for the other three sectors.

“So, if we will go for five million tones, we need to clean up a lot of the policy that is holding back growth of the three sectors.”

Ekundayo said the pricing of LPG which rose to N12.000 in 2022 from N4,000 has a portion driven by global energy crisis.

“The component that is actually due to global prices is another N4,000. It is a doubling. If it was only the global effect that we are looking on, we should be sitting at N8,000. Unfortunately, we have an interventionist policy that is not always joined up.

“The N4,000 arises from a constraint of supply. So, the market was growing, the private sector was doing its bit, it was one of the fasted growing market- 20 per cent a year, unfortunately, there were some policies directed towards imports that made imports a lot more difficult.

“We are now seeing that costal deliveries have slowed. Where you have demand rising and supply constrained, the other N4,000 arises from that deferential. We can’t go back to N4,000 that will be a subsidy situation, but we can certainly drive down to N8,000 which makes it still more affordable.”

He said to promote investment in LPG, the government must improve supply and direct them to households.

The NLPGA deputy president said we may see consumption depreciate this year due to supply limitations.

He said, “We will unfortunately barely reach one million tonne this year. We need stimulate not just the product but also the containers. We need to make available cheaper containers which means in terms of fiscal policy, that drives down the cost of the containers.

“On the regulatory side, we also need to slim down our regulation. It does not necessarily mean compromising safety. We have a situation where we believe as an association, we are over regulated.

“In other to move a truck across the country today, there are 53 licenses that the truck needs.”

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