High Cooking Gas Prices Persist Despite Tax Cuts

Despite the federal government’s policy to reduce the price of Liquified Petroleum Gas (LPG), also known as cooking gas, the price has continued to increase even during the yuletide season.

However, an economist, Dr Ayo Anthony, told the News Agency of Nigeria (NAN) in Abuja that it takes time for government policies to impact the economy.

The federal government announced the removal of customs duty and Value-Added Tax (VAT) on the importation of LPG and its associated equipment.

This was contained in a letter dated November 28, 2023, signed by Wale Edun, the Minister of Finance and Coordinating Minister of the Economy.

Recall that earlier, the minister of state for Petroleum Resources (Gas), Ekperikpe Ekpo, had waded into the challenges of constant price increment of cooking gas in the country’s domestic market.

The minister had constituted a committee and mandated them to recommend the best way to boost supplies and crash LPG prices, following the rise in prices in recent months, from about N700 per kg to above N900 per keg in parts of the country.

Survey by NAN shows that 5kg cooking gas is currently sold at N4,750 to N4,900 and 12.5kg is sold at N11,875 to N12,300 in the Federal Capital Territory (FCT), and up to N13,000 in Lagos.

Anthony said the delay in seeing government policies materialise before the Yuletide was caused by what was referred to as inside and outside lag.

“In economics, we have what we call lag. Lag is the time it takes for government policy to materialise, and we have inside lag and outside lag.

“Inside lag is the time it takes the government to decide when there is a problem. It is not immediately when a problem emanates that the government decides on it.

“So the time it takes the government or policymakers to make decisions to address a problem or shock to the economy is called inside lag.

“While outside lag is the time it takes for the decision to be implemented.

“Decisions made by the government are not implemented immediately, bureaucratic processes will come in, that will cause another delay in implementation.”

Anthony said a contributing factor to the high cost of cooking gas in the Yuletide, in spite of the government’s policy to remove VAT from its importation, was the issue of old gas stock.

He said that cooking gas that marketers had stocked before the policy pronouncement would still be sold during the Yuletide at the old price to cover the cost of importation.

“The seller will sell it at the price that covers the cost of importation of the gas.

“So until this stock finishes and they buy at the prevailing price that reflects the new government policy, that is when they will sell at the price that will show a reduction of VAT.”

Recent data from the National Bureau of Statistics (NBS) states that the average price of 5kg of cooking gas increased from N4,562.51 in October 2023 to N4,828.18 in November 2023.

The average cost of refilling a 12.5kg cooking gas increased by 5.78 per cent on a month-on-month basis from N10,545.87 in October 2023 to N11,155.15 in November 2023