Cooking Gas: Marketers Explain High Retail Prices as Dangote, Depots Lower Rates
- NALPGAM says LPG marketers bear at least 17 operational costs before cooking gas reaches consumers
- The association explained that lower gantry prices do not automatically lead to immediate retail price cuts
- Costs including haulage, storage, electricity, insurance and bank charges all factor into the final retail price
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Nigerian consumers continue to pay high prices for cooking gas even as the product's depot price has dropped significantly, and the Nigeria Association of Liquefied Petroleum Gas Marketers (NALPGAM) has now explained why the gap between gantry and retail prices persists.
Bassey Essien, Executive Secretary and CEO of NALPGAM, said that cooking gas is a logistics-heavy commodity, and the cost structure between the supply point and the end consumer is far more complex than most buyers realise.
Source: Getty Images
Essien said:
"A reduction in gantry price does not automatically translate into an equivalent reduction in retail price because LPG is a delivered commodity, and the cost structure between the gantry and the consumer is substantial."
17 Costs Between Depot and Consumer
Essien listed the expenses that marketers must absorb before the product reaches a cylinder, Nigerian Tribune reports.
These include haulage and freight, truck loading, bridging and logistics, depot and terminal handling, plant receiving charges, and storage and inventory financing.
Marketers also bear staff costs, electricity and diesel expenses, maintenance of storage and filling equipment, cylinder handling, regulatory and licensing fees, insurance, local government levies, union and community dues, operational losses, bank charges, and their own operating margins.
He noted that not every marketer incurs these costs at the same level, which is why prices differ across locations and retail outlets.
Some marketers also do not buy directly from primary gantries but source the product from other marketers at higher prices, pushing their base cost upward before any of the additional expenses are added.
Why Price Cuts Take Time to Filter Through
Essien pointed to inventory timing as a key reason retail price reductions lag behind gantry price drops.
A marketer selling cooking gas today may have bought the current stock when prices were higher, and selling that purchase price below would mean taking a direct loss.
He gave a specific example: a marketer who bought a truckload at N1,100 or N1,150 per kilogram could not reasonably sell immediately below N1,000 per kilogram without incurring losses.
He said:
"Price transmission in LPG is not always instantaneous in either direction. When the market price rises, marketers cannot always immediately pass the full increase to consumers; equally, when it falls, the reduction may take some time to work."
Essien also confirmed that broader price movement has occurred.
Source: Getty Images
When depot prices ranged between N29 million and N30 million per truckload, retail prices hit between N1,700 and N2,000 per kilogram.
With depot prices now around N20 million, retail prices have come down to between N1,000 and N1,300 per kilogram, depending on the location.
NALPGAM said it does not support exploitative pricing but called for a distinction between legitimate cost recovery and excessive profit.
The association said it is working with government and regulators to eliminate unnecessary charges along the supply chain, and that marketers have been encouraged to pass on sustained reductions in acquisition costs to consumers.
Dangote, marketers announce new rates
Earlier, Legit.ng reported that Dangote Petroleum Refinery has reduced its depot price for Liquefied Petroleum Gas (LPG), commonly known as cooking gas, from N980 to N950 per kilogram, making it the cheapest among major depots currently quoting rates in Lagos and Warri.
The N30 reduction amounts to a 3.1% price drop.
Based on the new Dangote depot rate, filling a standard 12.5kg cylinder would cost N11,875 at the point of purchase, before transportation, distribution charges, and retailer margins are factored in.
Source: Legit.ng
