Operators Fume over Alleged Sharp Practices, Excess Fees, Others Hampering LPG Penetration

Peter Uzoho

Operators and marketers in the Nigerian domestic gas market have lamented the lack of transparency in Liquefied Petroleum Gas (LPG) supplies from the Nigeria LNG Limited by some off-takers, who they allege have no receiving facilities.

Aside that, THISDAY gathered from some of the industry players that multiplicity of taxes and fees by agencies of government coupled with the huge infrastructure deficit was impeding the distribution of the product in-country.

The Executive Secretary of the National Association of Liquefied Petroleum Gas Marketers (NALPGAM), Mr. Bassey Essien, told THISDAY that one of the major issues in the LPG supply system was a trend where some off-takers have allocations with the NLNG, but with no offtake facilities.

He revealed that the so-called operators would receive the supplies from the company and then turn around to sell it at a double offtake price to some marketers on standby and waiting for supply.

“That shouldn’t be. If you ask NLNG why their product is so high at the market, they will tell you they don’t determine the price in the market, that they only sell to their off-takers. And I keep asking, why won’t they know how much the products they supply to people are being sold in the market.

“Why will LPG from NLNG be higher than the one imported? Is it not locally produced? They said they have committed 100 per cent of their LPG production to the local market, but we can’t feel it in terms of the prices.

“And the thing is, some companies, who don’t have offtake facilities will go and collect allocation from NLNG and then sell it at higher prices, and this is affecting the market, “Essien lamented.

Normally, the off-takers are the oil marketing companies that have depots, terminals and trucks, who either import or get supply from the NLNG and then supply to gas marketers who have gas refilling plants or skids.

Nigeria still falls far below its targeted 3 million tons LPG consumption set for 2023, with domestic consumption still hovering between 1.2 million and 1.4 million tons per annum, as of February 2023.

Of this number, NLNG supplies 40 per cent while the rest 60 per cent is imported. Curiously, as disclosed by the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Nigeria exported 700,000 tonnes of LPG in 2022, even when the country is still grappling with shortages and price hike.

The industry players spoke against the backdrop of the persistent rise in the prices of LPG despite the supplies by the NLNG and the production of the commodity at different manufacturing plants in the country.

Currently, a 12.5kg unit of LPG sells for about N12,000 and above while that of 6kg unit goes for N5,500 and above, depending on the location of the consumer.

THISDAY learnt that with the foreign exchange challenge and the many charges imposed on LPG including the 7.5 per cent Value-Added Tax (VAT), the customs duties, taxes and other agency fees, in addition to the cost of transportation, the cost of importing LPG had ballooned in recent times.

Essien noted that a 20-metric ton LPG truck now costs well over N14 million as against about N12 million sold previously.

“So, if you buy it at such high amount, won’t you try to recover your cost at least? Because you have to factor in the VAT, the cost of transportation and other fees you have to pay.

“So, it’s not easy for marketers just as it’s not easy for consumers and we marketers are also consumers because we use gas like every other person,” Essien added.

While questioning the rationale behind the removal of VAT only on diesel and not on LPG that is used by both the rich and the lower class of society, he said that VAT was part of the things driving the price of the product up.

However, the Chief Executive Officer of Gasavant Limited, Mr. Emeka Iheme, who decried the impact of LPG distribution infrastructure deficit and the high cost of diesel for powering trucks, warned that the cost of trucking the product could hit N1.8 million if urgent steps were not taken.

Iheme explained that domestic truck movements in Nigeria range from N800,000 to N1.5 million depending on the location, which he said also contributes to the rise in the LPG price.

“But soon, if diesel price isn’t checked, it will keep rising till we reach 1.8 million. So, my ideal situation of the future is that there are some low-hanging fruits now for us to address LPG price.

“So, the government should remove some of the extra taxes, fees and levies. There are so many layers on top of the LPG price that have nothing to do with the product and nothing to do with the transport. There is NUPENG levy and others

“I can’t really speak about the FX market because that’s more of a national issue. But if we are going to start moving forward, we need to stop those little rent-seeking fees,” he stressed.

Also lending his voice on the infrastructure issue, the Manager, New Business, Falcon Corporation, Mr. Oladeji Olaoti, mentioned that the price of LPG in the southern part of the country varies from what obtains in the north because of lack of LPG distribution pipelines and functional railway.

“One of the key requirements that we are also advocating for is that there needs to be major infrastructure. Imagine if we have functional railway that is moving from major storage tank farms in Lagos, Port Harcourt or Delta, interconnected and you are going all the way to maybe Kaduna, Sokoto or many parts of the country, you are guaranteed  almost similar pricing.

“So, there are huge infrastructure deficit that we are seeing in the market. Government needs to provide that. If government cannot provide those infrastructure, there are rooms for public, private partnership so that investors can also come in to play,” Olaoti suggested.