Terminal owners make excessive profit on cooking gas – Marketers - Financial Daily News Site

Terminal owners make excessive profit on cooking gas – Marketers

Bassey Essien is the Executive Secretary of the Nigerian Association Liquefied Petroleum Gas Marketers. In this interview with OpeOluwani Akintayo, he opens up on the rising prices of cooking gas and their impact on the economy. He also touches on the President, Major General Muhammadu Buhari’s gas expansion programme, among other gas market issues.

 Prices of cooking gas have been on the rise for some time now, and the public has been made to believe that it was caused by the exchange rate, import duties, among others. How true is this?

We all know the LPG currently being consumed in the country is not being exported. It’s locally produced. And for some years, local production has not been able to go round and demand is being augmented by imports. However, the companies that import have been having issues. They have been complaining of their inability to source dollars at the right quantity that they need. They also complain of high prices at the international market, and the dwindling performance of the naira which has put a strain on importation. So, for a while, many have stopped importing. The few that still import are irregular and have depended mostly on supply from NLNG. The NLNG has been consistent in terms of delivery, especially when they said they would give their 100 percent, and they have been performing.

Do you mean NLNG has stopped importing?

The NLNG told us that all their propane production would now be for local consumption, which they are living up to. Whatever quantities they export is now for the local market. They have been supplying but still cannot meet demand.

What quantity does NLNG supply now, because it used to be 350, 000 metric tons in 2021?

In 2021, NLNG increased its LPG supply commitment from 350,000 MT , equivalent of 28 million 12.5kg cylinders, to 400,000MT, which is equivalent of 32 million 12.5kg cylinders. Their maximum propane is 450, 000MT and that’s what they are supplying to the market.

But today, we are having N12.5m for a 20MT gas. It has been on the increase, and whenever there is an increase, the whole effect is passed onto the consumer. People used to buy a 12.5kg gas for N3000, now it’s almost over N10, 000. Currently, the purchasing powers of consumers have dropped, and everybody has to adjust to what they can buy. Some have even diversified to other sources of cooking energy such as coal and firewood.

We learnt that gas consumption demand has dropped from 1.2miliion MT to 750, 000MT. What impact has the drop had on your businesses as marketers?

People don’t buy like they used to. As a result, the business is dropping. Cooking gas is expensive, and if an average home can no longer buy like they used to, then, there is a problem. Most homes that buy a 12.5kg gas now manage it for more than two months. Marketers are no longer selling what they used to sell. Some don’t even have sales at all. Many plants have closed shop.

How many are your members? And how many are currently in business?

We have members all over the country, and many are managing to survive. The business is not what it used to be. People are not buying and you can’t force them to buy because they complain about the cost of gas. Many that left charcoal and firewood long time ago have gone back to using them.

Marketers have accused terminal owners of inflating gas prices from N7mn being sold to them by the NLNG to N12.5mn. How true is this?

We are not accusing anybody. We are just saying that the NLNG supplies the current available products right now, and the price for which the company sells to them is known but is totally at variance with what they sell to us. So, somebody is not telling the truth.

The terminal owners get products directly from the NLNG and they get it way cheaper than they sell to marketers.

What are your members saying and doing about the almost 50 per cent price increase?

We have been complaining about the high costs for a while now. Except we don’t want to tell ourselves the truth, consumers are complaining, marketers are complaining. Maybe it will get to the stage where we would carry placards to protest.

Has the association approached the government, especially about extortion you talked about?

Majority of last year, we had meetings with who was who in this business from government to terminal owners, to NLNG. We had meetings with them on the issue of hike in prices. We’ve never slept over the issue and we are still talking about it with people involved so that something will be done about it.

You earlier talked about a certain cartel in the business, describing them as those holding everyone to ransom. Can you tell us more about them?

There are different segments in the business chain. The depot owners are the ones who get the products and sell to marketers. Some of them import and also take from NLNG, while others solely import. Prices have been on the increase since late 2020, although price increment has always been there. However, things have started getting out of hand.

I read the reason given by Nuhu Yakubu on high price of LPG, despite the fact that for some time now it’s the NLNG supplies that are sustaining the system. He forgot that not all off-takers have agreed to key into the systemic bleeding of consumers with high cost of LPG. There are also off-takers in the association who are God- fearing and tell the truth about what price NLNG sells their product. For imported gas and the excuses adduced for their price, that can be fairly understood. However, it begs for explanations when NLNG sells its product to off-takers at about N7m per 20MT and same off-takers sell the same product at N12.8m. Is there any moral justification for this, or is this not just an outright exploitation? If NLNG, with all its associated costs, puts the price at N7m, what are the associated costs to the terminal owners and off-taker beneficiaries of the NLNG product that will make them sell the same product at such an outrageous price of N12m and make the consumers believe it is a forex, VAT or Customs duty issue?

Nigerians are the problems of the country in all facets of the system.

Why are marketers just speaking up about this exploitation now?

We have been in touch with the media since I got into this business in 2015. We have been on TV, radios and newspapers, shouting about price increment. We have been on the issue for a while now. We have even written to the National Assembly on this matter.

After news broke that NLNG sells at N7mn to depot owners, while marketers buy at N12.5mn, NLNG has declined to say anything concrete about the price hike. I contacted them to know how much they sell to depot owners but they said they’d have to consult with some other persons. What do you think about this?

The point is that, if I am selling soft drink and people are complaining that it is expensive, and you come to ask me and I tell you that I have to consult before I can respond to your question, then something is wrong. The NLNG should tell us how much they sell to depot owners so the whole world can know.

There is so much insincerity on the part of some of the LPG stakeholders who have been lucky to benefit from the systemic exploitation. They perennially blame the foreign exchange, Customs and VAT for the high price of LPG whereas they are the leeches in the system bleeding the consumers to death and smiling to the banks. Unfortunately, the government sees, hears and, in their usual and characteristic nature are deaf to the cries of the people.

Falling demand negates the Federal Government’s Decade of Gas initiative that seeks to deepen the use of gas in the country. What’s your take on this?

The government has a programme of increasing LPG consumption in the country. Now, the price has gone above the reach of the common person. It has gone so high that you now see people buying 1kg of gas because that’s what they can afford. Government cannot say they are unaware. So, they should tell us their plans to solve the challenges. We are looking at the Decade of Gas, but consumption was over 1 million MT in 2020 and we can’t even attain such level anymore. It calls for help. People are crying. They have to do something about it.

What would you say is the solution to the gas market challenges in Nigeria?

Nigeria is one of the key gas producers in the world. What’s our consumption level? If we want to play in the market, we should have everything figured out to increase domestic production. How? By inviting investors and giving them the best playing field. Even if you invite investors but the playing field isn’t good enough, then, they will not stay. Has the government increased the consumption level? Have they sorted out the issue of security? Have they enacted policies that will be attractive enough for investment? I wonder what we would have done if NLNG had not waded into the matter by always supplying the market.

The NLNG is not the only gas producing company in Nigeria. Are others not supplying products to depots?

What quantities are they producing? Their contributions are minute compared to the quantity needed to meet local demand.

Are marketers or even depot owners not also looking at investing in gas exploration for the good of their businesses?

Do you know the cost of a gas plant, not to talk of a gas production facility?

But local investors can collaborate and pull resources together to achieve it.

Government is the one that regulates the sector. So, if I go into a business not approved by the government, then there is going to be a problem. What if we even want to but the enabling conditions aren’t there? What will I do? To build a gas plant today, almost every department and government body will visit me and demand for this, and that Government should encourage investors because there are some things investors can’t do by themselves and would have to depend on government policies to achieve it.

As a marketer, how would you assess the FG Decade of Gas initiative?

First of all, the government should increase local production. When the National Gas Policy was put in place in 2015, they told us that by 2020 we should be consuming 5mn/MT per year. Now, it is 2022, what has the government put in place to arrive at their target? Right now, the country consumes 40 percent domestically-produced gas but imports 60 percent. So, the Federal Government has to put structures in place to achieve the target.

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