October 5, 2024

We will resist attempt by terminal operators to hike price of cooking gas- NALPGAM President, Oladapo Olatunbosun

0

Mr. Oladapo Olatunbosun, National President of the Nigerian Association of Liquefied Petroleum Gas Marketers(NALPGAM) in this interview with Oredola Adeola, Managing Editor of EnergyDay, vowed that his members and other concerned Nigerians will resist any attempt by Liquefied Petroleum Gas(LPG) terminal owners to increase the price of the product due to high exchange rate of dollar to Naira, which they claimed is hurting importation.

Olatunbosun made this known while reacting to the statement of Mike Osatuyi, National Operations Controller, Independent Petroleum Marketers Association of Nigeria, IPMAN, who revealed the plan by the terminal operators to hike the price of LPG.

The NALPGAM President also challenged the terminal operators to provide receipts of products imported and supplied to the local market by Nigeria LNG Limited (NLNG), arguing that there is no evidence to support the importation claim by the LPG importer. Except

 

What is your reaction to the plan by LPG terminal operators to increase the price of cooking gas due to the exchange rate crisis?

There is no justifiable reason for Nigerians to be refilling their cooking gas cylinders at above N800 per kilogram(kg). The importers, terminal owners, and off-takers are making super margins on the LPG commodity, without considering the purchasing power of the masses, which has been weakened by the rising rate of inflation.

The Nigerian masses are helpless, having been made to bear the brunt of economic hardship, without regulatory interventions. As stakeholders in the LPG value chain, we insist that any attempt to increase the terminal price of LPG above N12million per 20MT, would be resisted. The proposed increase will be a big insult to all Nigerians.

As the National President of NALPGAM, representing thousands of members spread across the country, I have the sole responsibility of drawing the attention of all Nigerians to this devilish attempt by the terminal owners and LPG off-takers to impose economic untold hardship on them. The majority of my members were severely affected by the current price. Most of them are facing liquidity issues because of insufficient capital required to evacuate products from the terminals.

The proposed hike is a capitalist tactic by the LPG cartels, who have ganged themselves up with the intention of declaring an economic war against the Nigerian masses. Nigerians have been sidetracked from using cooking gas. The masses have been denied access to the safest and cleanest energy solution.

The annual consumption which used to be around 1.35 million metric tonnes per annum(mmtpa), has deeply declined to 800,000MT pa. Nigeria’s per capita consumption is very low compared to Egypt, Morroco, Libya, and Ghana other developing countries. This is despite having the largest proven gas reserves in Africa with over 209 trillion cubic feet and being the 9th largest in the world. The declining per capita consumption is attributed to the price, which is significantly above the reach of the Nigerian masses.

What role can the Federal Government play differently to drive down the price of LPG?

The Nigerian Government has been doing enough, but this is not been properly championed by the relevant government agencies. President Muhammadu Buhari, during his recent state visit to Imo state, extolled his administration for economic growth including tackling infrastructure despite the scarce resources at his disposal but expressed worry that his officials are not doing enough to bring this development to public notice.

 

This attestation by the President is reflective of the poor manner in which some of the relevant government agencies have been able to interpret the policies of the administration.

The Federal Government has over the last few months initiated programmes aimed at driving down the upstream prices of LPG in Nigeria. That notwithstanding, the terminal owners and off-takers have been frustrating that level of progress because of their capitalist mindset targeted at ripping off the distributors and LPG consumers across the country.

For instance, in March this year, I wrote an open letter to Chief Timipre Sylva, Minister of State for Petroleum, urging the Federal Government to do something about the LPG price hike.

The Minister took the letter seriously and immediately informed President Buhari about it. Shortly after his return from the United Kingdom, the President had a meeting with the NLNG and other producers, where it was agreed that 100 percent of butane produced locally will be released to the domestic market.

The local producers also got permission to add a minimum quantity of propane into the LPG production ratio with butane. The FG and LPG producers agreed to a mixture of 85% butane and 15% propane.

NLNG has been committed to the agreement and supplying 100 percent butane produced to the local market. As of today, NLNG produces about 450,000MT, while other local producers of LPG in Nigeria, including BRT, and KWALE, are also supplying the local market. Available data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority(NMDPRA) shows that the local supply of cooking gas is higher than imported LPG. Now that propane is blended with butane, all the local producers have more than enough LPG to release to the market.

The permission given to LPG producers to blend propane with butane was aimed at driving down the price of LPG with increased domestic production. Despite these interventions by both the FG and producers, the champions of the market(off-takers/terminal owners) have ganged up against the Nigerian masses by halting the price from dropping.

NLNG took a step further by jettisoning the Mont Belvieu pricing template, which it used to determine the prices, and has been adopting a local pricing template. This new template made the price of cooking gas quite lower for the terminal owners. NLNG is selling to the importers precisely at the rate of N5.6million per 20MT, but the importers and off-takers are selling same the volume of product at above N12million.

This is why the retail prices of LPG are quite high for Nigerian consumers. The powerful cartel determines the price that they wish to sell to the distributors. I challenge the terminal operators to present the domestic price template of what NLNG and other local producers are selling to them and the invoice that they are selling the same product to the distributors. If we factor propane blended LPG into the supply market, the prices should have significantly reduced.

There is no evidence to justify the LPG price hike with the exchange rate crisis. This falsehood is unacceptable, and we understand that this is deliberately done to set the Nigerian masses against the Government.

I am still challenging the terminal owners and importers to present data on the products that they import over the last six months. How many of them are truly importing in the last few months? NLNG has not reneged in its supply commitment to the domestic market both in Lagos and Port Harcourt. We are all aware that the products sold by NLNG and other local producers are denominated in Naira. Who are those buying in US dollars?

The fact available also showed that some of the terminal owners who could not directly receive supply from NLNG are also picking LPG from other local producers. The off-takers and terminal owners are deliberately making the situation tough for the masses, thereby setting them against the Government.

They are creating the impression that the FG has not been doing anything to drive down the price of LPG, but that is not the case.

Since the LPG market is deregulated, don’t you think the investors have the right to make profits based on their operational costs?

It is understandable that setting up an LPG storage facility is quite high and capital intensive, which may be the reason why the operators are profit-driven, but it is a shylock opinion for the terminal owners to set up such a capital-intensive project and expect to recoup such investment in less than three years.

An ideal capital project has a payback period of about 10 to 15 years, depending on the gestation period of the asset. It would be suicidal for the consumers of LPG, to be subjected to the shylock tendencies of the terminal owners who would like to recoup their initial investment in less than a few years.

That is what is driving the price higher beyond the reach of the Nigerian masses. The profit margin of the importers and off-takers is quite high, despite the cost of operations, landing cost, and other associated costs they may have incurred in process of storing the product.

What is NALPGAM planning to do to salvage the situation?

The conspiracy between IPMAN and terminal owners to create another price increase will be resisted by the Nigerian masses. It is libelous, scandalous, and unacceptable. NALPGAM will continue to be on the side of the masses and we shall mobilize our members to stop this move of the capitalists. Nigerians should ask questions because, at this moment, the poorest of the poor have been cut out of the market because of the inflation rate.

Recall that National Bureau of Statistics , in its recent data on the consumption trend of essential commodities, stated price of cooking gas on a year-on-year basis increased by 101.17 percent in August 2022 compared with August 2021. This in essence means that LPG prices contributed significantly to the inflation of food items. Ideally, research should have been conducted by the relevant agencies of government to ascertain the cause of the sharp rise in the cost of LPG in less than three months.

The captains of the industry making ridiculous gains are capitalising on the weakness of the government agencies, thereby selling LPG at a cut-throat price.

We may start rethinking the idea of full deregulation of the petroleum downstream sector being advocated by the private sector. The capitalists are having a full takeover of the markets and have formed themselves into a cabal manipulating the market.

If this is how we wish to go about the deregulation of the petroleum product downstream sector, then Nigerians should be prepared for economic upheavals. The cabals would gang up and rip the masses off.

Of course, we agreed that the market should be deregulated, but there is nowhere in the world that essential and basic products are subjected to manipulations of the forces of the market. Relatively few oligarchies would monopolize the economy and determine the price at the expense of the poor.

The elementary principle of economics said that essential products should not be left in sole control of market forces.

 

What urgent measure that be deployed to correct this anomaly?

The major problem is that the poor and voiceless masses do not have agencies protecting their interest. The masses are being exploited and this is the right time for everybody to wake up. Government agencies should be more accountable to Nigerians.

NALPGAM meets regularly with these agencies and departments to discuss some of these issues. The Government has made significant efforts, and the head of agencies should be proactive in helping the government reach out to the masses.

With the kind of steps that have been taken in the supply and price angles, the agencies should challenge the importers and terminal owners to provide the receipt of products that have been taken in the last few months.

If IPMAN and other organisations are collaborating with the terminal owners to increase the prices of LPG, on frivolous exchange rate excuses, NALPGAM will protest this by calling out names and presenting the evidence to the general public so that Nigerians will identify the faces of those behind the price hike.

I quite understand the need for the private sector players to make margins with their investment in the sector, but normal profit is healthy for the entire LPG market. If the profit is too much, the present 800,000MT per annum that we are doing will decline further to about 400,000, when we should be doing about 6 million MT per annum.

Nigeria’s present population is the reason why more people should be using gas, if we committed to combating climate impact. The 800,000MT per annum shows that a large proportion of Nigerian masses are not using gas. This is not sustainable in the long run. Nigeria is endowed with a large reserve of natural gas, I do not see reasons why Nigeria is still ranked lowest in sub-Saharan Africa in per capita usage of LPG.

Most investors are rushing to invest in the storage facility because it is low-hanging fruit. The kind of profits that the storage facility owners are making can’t be made in the exploration sub-sector.

The tank farm owners can’t make a 100 percent margin if they had invested in exploration. The LPG market in Nigeria is a free and less regulated market, which enables investors to make a super profit while ripping off the masses.

NALPGAM is not calling for strict regulation of the market, we are only challenging the agencies of government to be proactive in protecting the less privileged and sustain the level of mobilization by operators and civil society groups to deepen the use of LPG in Nigeria.

Nigerians need redemption and liberation from the manipulative tendencies of the oligarchy and the capitalist.

NALPGAM will knock out the proposed hike. Recall that we now have a national spread, and our membership data keeps increasing daily. We have just had our national AGM which was massively attended by industry stakeholders.

So many distributors are now joining the Association. So with the kind of membership straighten that we have, we will do all that is needed to be done to resist any form of price manipulation.

We are the first contact with the poor. These people interact with us daily over the price hike. The only response to this lamentation is to reawaken the consciousness of Nigerians and the Government to the manipulations of the oligarchy. If the agencies of the government are not ready to do anything, we will help them out.

We understand that the government has done the needful and what is expected of them, NLNG and other producers of LPG have also supported the market by increasing supply at a very friendly price. What then is responsible for the price hike? Why are we making life difficult for our people, when the bulk of the volume being sold to the market is made in Nigeria cooking gas? If the terminal owners should invest in the exploration of gases, instead of expanding their investment in storage tanks?

All the players must be reasonable with their profit margins. We must also be driven by human interest supported by market reality and sustainability.

The only way to achieve this is to make the price cheaper and affordable for commoners. We need to increase our consumption rate to the level of Morocco, South Africa, and the Republic of Benin. If LPG is affordable large population of Nigerians will dump the use of charcoal, and firewood and turn to using cooking gas.

Imported LPG, if need be, would come at a more competitive landing cost. But wherein, we are operating at 800,00MT per annum with a population of over 200 million.

The LPG market should not be dedicated to the few but to the larger population of the people. When the entire population of Nigeria uses gas for cooking, the multiplier effect is that terminal owners would need to increase their storage capacities, attracting more investors across the value chain. But the idea of limiting LPG consumption to a few will not be in the interest of everybody.

We want to know who they are and how much of the product they have received from abroad within the last few months. What is the volume of the locally imported LPG out of 800,000MT consumption per annum?

Our argument is not that 100 percent of 800,000 MT per annum is locally sourced, that has to be corrected. We are quite sure that the percentage of importation of the LP to Nigeria is quite low.

Those terminals that are not receiving products from NLNG are sourcing their molecule of supply from other local sources including BRT and Kwale using smaller vessels to convey products into their facilities. Greenfield and other small producers are also selling.

Is it not ideal to differentiate the prices at which products are sold from NLNG receiver terminals from imported terminals? Why are the prices varying between about N12.3million and N12.5million per 20MT when NLNG is selling to them at around N7million per 20MT?

We want to know the terminals that are imported and those receiving from local sources. Why are they all selling the product at imported determining price when over 80 percent of the products are locally sourced? We understand the reason for the silence of NLNG because it is not their responsibility to regulate the prices.

The price hike is deliberately decided by only a few whose only duty is to store the product that has been produced. Nobody is jealous about their profits, of course, it is a deregulated market, but it is unjust and unfair to rip Nigerians off. If all the players are doing the same, then only the rich would be using cooking gas in Nigeria. I am afraid, if we allow the situation to continue at this pace, LPG will become a commodity only for the rich.

We all know the health and environmental crisis associated with other forms of cooking. LPG is an environmentally friendly transition fuel. If LPG is made a luxury product, then climate-related issues will continue to grow while and flooding will become a permanent crisis in the country.

 

Which of the agencies of government are you calling on to intervene?

 

The agencies of government all understand their duties, they all have their duties properly spelt out. President Buhari has intervened with the producers, so the relevant agencies of government should conduct a fact-finding mission to identify those creating crises within the market. LPG supply has been guaranteed so the price should have dropped significantly, this is the basic principle of economics. The prices are not coming because the cartels are dominating the market.

We all need to collaborate across the board to increase domestic demand for LPG, this would spur investors to drive the exploration sub-sector, while NLNG is also encouraged to complete train 7. In the next five years, LPG the market would be friendly for all while also guaranteeing returns for investors.

Advertisements
ads_img

Leave a Reply

Your email address will not be published. Required fields are marked *