The Federal Government has implemented a 7.5% tax on imported Liquefied Petroleum Gas, popularly known as cooking gas, as its price increased by 100% within a period of eight months.
The government implemented the VAT on cooking gas imports about three weeks ago and some dealers were also mandated to pay the tax for commodities imported several months ago.
According to operators, Nigeria imports about 70% of the cooking gas while the rest was mainly supplied by the Nigeria Liquefied Natural Gas company (NLNG).
Also the cost of a 12.5kg of cooking gas that sold for about N3, 500 in December 2020 had jumped to as high as N6, 800 in parts of Abuja and a resident along the Lagos-Ibadan road said she bought cooking gas on Sunday at N7, 200 in Lagos.
The National Chairman, Liquefied Petroleum Gas Retailers Association of Nigeria, Michael Umudu, highlighted three factors that led to the increase in price.
He said, “There are three major factors to the hike in prices. Firstly, about 70% of the gas we consume in Nigeria is imported and importers have to contend with the high cost of foreign exchange.
“Secondly, there is a rise in the price of petroleum products in the international market and because of that, the cost of LPG has equally gone up. So importers now pay more on imports.
“And thirdly, the government added VAT on imported LPG about three weeks ago. It (VAT) was 7.5% of the cost of the commodity and this exacerbated the price hike of cooking gas in the past three weeks.”
Umudu stated that before the introduction of VAT, foreign exchange and cost of petroleum products in the international market had been the factors causing the rise in price.
“Around November/December last year, 12.5kg was sold at about N3,500, but in July, it went up to around N5,500 and when VAT was introduced about three weeks ago, it now escalated to about N6,500 and above.
“The price hike seems to be happening on a daily basis and nobody can tell when it will stop. There has been a lot of appeal to the government to find a way of persuading NLNG to increase its domestic supply so that the product can be affordable.
“NLNG supplies about 35% of the gas we consume locally and that percentage is not adequate.
And the gas sold by NLNG is even sold at international price and is priced in dollar not naira.”
On the cost of the commodity in metric tonnes, Umudu, said, “20MT is now in the average of about N8m. And before VAT was introduced, the price of 20MT was around N6.8m to N7m, which was the highest price then.
“If you come to Lagos, you will see heaps of firewood like groundnut pyramids. Many people who use LPG to run their small businesses cannot cope again because of the price. They are in crisis right now; some of them are now using firewood, others, charcoal.
“Many people in the rural and semi-urban areas are dropping their cylinders. Those who find it difficult to get alternatives are actually going through a very hard time.”
The Executive Secretary, Nigerian Association of Liquefied Petroleum Gas Marketers, Bassey Essien, also said the cost of 12.5kg gas could hit N10, 000 in December.
He said, “If by December they (government) don’t take time to address this surge, it (12.5kg) will be N10, 000. We are not the one causing this, rather it is the government. We sell what we get.
“The volume we produce in Nigeria is just about 40% of the total consumption; the rest is imported. And you don’t have a forex window for these people to access to import gas.
“And secondly, you suddenly woke up and said you want to start imposing VAT on imported gas, which was removed several years back. And now, you didn’t even start it fresh, rather you said it is going to be in retrospect, starting from several months back.
“And you are imposing billions in taxes on gas imports, for instance, you ask one company to pay about N4bn as tax. Now if they pay that money, some other person needs to shoulder this cost.”