In a decisive move to tackle the rising cost of cooking gas, the Federal Government of Nigeria has banned the exportation of Liquefied Petroleum Gas (LPG) by the Nigerian National Petroleum Company (NNPC) and other LPG producers.
The ban, which takes effect on November 1, 2024, is aimed at ensuring that more locally-produced LPG is available for domestic consumption, ultimately driving down prices for consumers.
The directive was issued by the Minister of State for Petroleum Resources (Gas), Mr. Ekperikpe Ekpo, during a high-level meeting with industry stakeholders in Abuja.
According to the Minister’s spokesperson, Louis Ibah, the government is responding to the skyrocketing prices of cooking gas, which have placed additional pressure on Nigerian households and businesses.
Short-Term and Long-Term Measures to Stabilize Prices
To offer immediate relief, the government has mandated that from November 1, 2024, NNPC Ltd. and LPG producers must stop exporting in-country-produced LPG. If export continues, producers are to import equivalent volumes at cost-reflective prices. This approach aims to reduce prices by ensuring locally produced LPG is available to Nigerian consumers.
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has also been tasked with creating a domestic LPG pricing framework within 90 days.
This new framework will index the price of LPG to the cost of in-country production rather than relying on external markets like the Americas and Far East Asia, which have contributed to the rising costs.
As part of a long-term solution, Ekpo announced that within the next 12 months, new facilities will be developed to blend, store, and deliver LPG. These infrastructure investments are expected to stabilize supply and prices before resuming exports.
Government’s Efforts to Improve Affordability and Availability
The government’s actions reflect an effort to shield Nigerians from the economic burden caused by soaring LPG prices. Ekpo emphasized that the measures would enhance the availability and affordability of cooking gas, thereby protecting Nigerians from further price increases.
In 2023, the minister established a high-level committee led by Mr. Farouk Ahmed, the Chief Executive of NMDPRA, to address the issue. However, despite these efforts, prices have remained volatile, recently rising to N1,500 per kg from an average of N1,100 to N1,250.
Broader Economic Impact
The continued increase in cooking gas processing is placing additional pressure on household costs, exacerbating inflationary challenges for Nigerians. Retail food businesses are particularly vulnerable, as they may be forced to raise their prices to cope with the rising cost of gas.
Experts warn that if prices continue to rise, many vulnerable households may resort to using firewood and other less environmentally friendly energy sources for cooking, which could have significant environmental and health consequences.
Will the Ban Be Enough to Stabilize Prices?
While the ban on LPG exports represents a strong, short-term measure to alleviate rising prices, its long-term impact on market stability remains uncertain. The Nigerian LPG market is influenced by a range of factors, including infrastructure limitations, global market volatility, and the country’s reliance on imports to meet domestic demand.
Unless the government accelerates investments in storage, distribution, and production facilities, the market could continue to experience price fluctuations.
Aligning domestic pricing frameworks with local production costs, while a positive step, may take time to implement effectively. The success of this policy will ultimately hinge on sustained regulatory oversight and the development of local capacity to meet growing demand.
