Marketers list 17 reasons cooking gas prices stay high despite depot drop

The Nigeria Association of Liquefied Petroleum Gas Marketers (NALPGAM) says marketers bear at least 17 operational costs before cooking gas reaches consumers. This explains why lower gantry prices do not automatically lead to immediate retail price cuts.

Nigerian consumers continue to pay high prices for cooking gas even as the product's depot price has dropped significantly. NALPGAM has now explained why the gap between gantry and retail prices persists.

Logistics-heavy commodity

Bassey Essien, Executive Secretary and CEO of NALPGAM, said cooking gas is a logistics-heavy commodity. The cost structure between the supply point and the end consumer is far more complex than most buyers realise.

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."

Essien listed the expenses marketers must absorb before the product reaches a cylinder. 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.

Why prices differ and lag

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 do not buy directly from primary gantries but source the product from other marketers at higher prices, pushing their base cost upward.

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. Selling below that purchase price would mean taking a direct loss.

He gave an 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."

Current price movement

Essien confirmed that broader price movement has occurred. 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 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. Marketers have been encouraged to pass on sustained reductions in acquisition costs to consumers.

Earlier, Dangote Petroleum Refinery reduced its depot price for LPG from N980 to N950 per kilogram, making it the cheapest among major depots in Lagos and Warri. The N30 reduction amounts to a 3.1% drop. Based on that rate, filling a standard 12.5kg cylinder costs N11,875 at the point of purchase, before transportation, distribution charges, and retailer margins.

For consumers, the takeaway is that retail prices should keep easing gradually as marketers clear older, more expensive stock. But the gap between depot and retail prices will remain because logistics, storage, and financing costs are unlikely to disappear.