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Why the Price of Cooking Gas is Increasing

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For some time now there has been a continual surge in the price of Liquefied Petroleum Gas (LPG) popularly known as cooking gas in Nigeria. Across the country, LPG has recorded an unprecedented increase in price by about 240 percent.

Data obtained from the website of the National Bureau of Statistics (NBS) shows that in August, the average price for refilling a 5kg gas cylinder for LPG was N2,215. It rose to N2,397 in September. The price of refilling 12.5kg cylinder also increased from N4,514 in August to N6,164 in September.

The data also showed variation in the prices of the commodity in different states. The data revealed that Cross Rivers ad and Anambra selling 12.5kg at N6,897 and N6,779 respectively were the two states with the highest average price for September.

The two states with the lowest average price for September are Borno and Osun states, the product sold at N5,100 and N5,006, respectively. A visit to a few LPG stations on Tuesday in Ibadan, Oyo state capital reveals that the prices of LPG goes for between N3,050 and N3,200 for 5kg. For 12kg, it ranges between N7,150 to N7,300.

Available information has therefore revealed that the surge in price is a result of the fact that importers of the product have stopped importing it.

According to the Executive Secretary of Nigeria Association of Liquefied Petroleum gas Marketers, Mr Essien, importers stopped importing the commodity because of the introduction of custom duty and the value-added tax now imposed on imported LPG. He claimed that there are other issues and that as long as the marketers are not importing the commodity, local supply will continue to suffer a severe drop.

It is to be noted that over 60 percent of LPG used in the country is imported, less than 40 percent is locally produced. Therefore a halt in import implies that the country is left with less than 40 percent produced locally.

The NLNG supplies LPG to terminals and these terminals sell to the marketers and at times in a day the price can go up by about three times. NLNG is now selling in the region of N11m per 20 metric tones truck with a cumulative daily increase of N300,000 to N500,000 without the imposition of VAT and custom duties,” he said in an interview with Punch.

NLNG stands for Nigeria Liquefied and Natural Gas. It is an independent incorporated joint venture that harnesses Nigeria’s vast Natural Gas (LNG) and Natural gas Liquids (NGLs) for export. Last week’s Tuesday, the company announced that it had decided to cut cooking gas exports to meet domestic demand. Despite this, the price of LNG has continued to increase.

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Economic Strain Halts Nigeria’s Cocoa Industry: From 15 Factories to 5

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Once a bustling sector, Nigeria’s cocoa processing industry has hit a distressing low with operational factories dwindling from 15 to just five.

The cocoa industry, once a vibrant part of Nigeria’s economy, is now struggling to maintain even a fraction of its previous capacity.

The five remaining factories, operating at a combined utilization of merely 20,000 metric tons annually, now run at only 8% of their installed capacity.

This stark reduction from a robust 250,000 metric tons reflects the sector’s profound troubles.

Felix Oladunjoye, chairman of the Cocoa Processors Association of Nigeria (COPAN), voiced his concerns in a recent briefing, calling for an emergency declaration in the sector.

“The challenges are monumental. We need at least five times the working capital we had last year just to secure essential inputs,” Oladunjoye said.

Rising costs, especially in energy, alongside a cumbersome regulatory environment, have compounded the sector’s woes.

Farmers, who previously sold their cocoa beans to processors, now prefer to sell to merchants who offer higher prices.

This shift has further strained the remaining processors, who struggle to compete and maintain operations under the harsh economic conditions.

Also, multiple layers of taxation and high energy costs have rendered processing increasingly unviable.

Adding to the industry’s plight are new export regulations proposed by the National Agency for Food and Drug Administration and Control (NAFDAC).

Oladunjoye criticized these regulations as duplicative and detrimental, predicting they would lead to higher costs and penalties for exporters.

“These regulations will only worsen our situation, leading to more shutdowns and job losses,” he warned.

The cocoa processing sector is not only suffering from internal economic challenges but also from a tough external environment.

Nigerian processors are finding it difficult to compete with their counterparts in Ghana and Ivory Coast, who benefit from lower production costs and more favorable export conditions.

Despite Nigeria’s potential as a top cocoa producer, with a global ranking of the fourth-largest supplier in the 2021/2022 season, the industry is struggling to capitalize on its opportunities.

The decline in processing capacity and the industry’s current state of distress highlight the urgent need for policy interventions and financial support.

The government’s export drive initiatives, aimed at boosting the sector, seem to be falling short. With the industry facing over N500 billion in tied-up investments and debts, the call for a focused rescue plan has never been more urgent.

The cocoa sector remains a significant part of Nigeria’s economy, but without substantial support and reforms, it risks falling further into disrepair.

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Nigeria to Suspend Import Levies on Food Crops to Ease Inflation Pressure

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The Nigerian government has announced a series of measures aimed at curbing the surging cost of food.

Among the most significant steps is the suspension of import levies on key food crops, including wheat and corn, for a period of 180 days.

Agriculture and Food Security Minister Abubakar Kyari outlined the new measures in a statement released on Wednesday.

“The government is committed to stabilizing food prices and ensuring that essential commodities are accessible to all Nigerians,” Kyari said. “This temporary suspension of import duties will help increase the supply of crucial food items and alleviate some of the pressure on consumers.”

The government will also introduce a recommended retail price for imported foods to prevent price gouging and ensure that the benefits of the duty-free window reach the general populace.

Specific guidelines to enforce compliance with these measures are being finalized and will be issued in the coming days.

This move comes amid a wave of economic reforms initiated by President Bola Tinubu, who took office in May 2023. These reforms, including the devaluation of the naira and increased electricity tariffs, have contributed to the inflationary spiral, with food prices jumping 41% in May—the highest rate in 28 years.

The steep increase in prices, compounded by a weakening naira—the world’s worst-performing currency this year after the Lebanese pound—prompted the Central Bank of Nigeria to raise interest rates to a record high.

Last month, the government signaled its intention to introduce measures to curb inflation through a so-called Inflation Reduction and Price Stability Order.

Despite earlier interventions, such as the release of 42,000 tons of assorted food commodities and the purchase of 88,500 tons of milled rice, food prices have continued to rise.

“In some cases, these days, food items are becoming unavailable,” Kyari noted.

To further boost supply, the government plans to import 250,000 tons of semi-processed wheat and a similar amount of semi-processed corn. These imports will be distributed to small-scale processors and millers across the country to enhance local production capabilities.

The Nigerian government has attributed the rising food supply challenges to inadequate infrastructure, multiple taxes and levies, and profiteering by marketers and traders.

The International Monetary Fund estimates that at least 19 million Nigerians are food insecure, with the nation having the world’s largest population of citizens living in poverty after India.

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Cocoa Processing Slows Amid Soaring Bean Prices

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Cocoa processing slowed last quarter and industry experts warn a steeper decline is looming as the ripple effects of skyrocketing cocoa prices hit chocolatiers globally.

Despite an historic shortage that sent cocoa prices to record highs this year, the impact on chocolate makers has been somewhat delayed.

However, as stockpiles of pre-crisis beans dwindle, manufacturers will soon face the full brunt of the price surge.

Cocoa prices soared to an all-time high of over $11,000 per ton in April due to poor harvests in West Africa, a key production region. Though prices have slightly eased, they remain more than double what they were a year ago.

This surge has not yet fully translated into higher costs for chocolate makers, who had previously secured beans at lower prices.

However, with inventories running low, the need to replenish supplies at higher costs is expected to significantly impact cocoa grindings in the latter half of the year.

Jonathan Parkman, head of agricultural sales at Marex Group, explained, “The cheap stuff is beginning to drop off, and the expensive stuff is coming in. The worst of input inflation will affect the second half of this year.”

A recent Bloomberg survey of six analysts and traders revealed that second-quarter cocoa grindings likely fell from a year earlier.

Processing in Europe, the largest consumer of cocoa, is estimated to have declined by 2%, potentially marking a four-year low.

All six analysts anticipate a larger global decline in the second half of the year.

Nestlé SA has already signaled the challenges ahead. An executive from the company warned last month that as manufacturers face higher cocoa costs, they will have to pass these expenses onto consumers, leading to a potential decrease in chocolate consumption.

Darren Stetzel, vice president of soft commodities for Asia at broker StoneX, echoed this sentiment, noting, “We are more likely to see a significant change in the grind number in the second half of the year.”

The rising costs have forced some cocoa processors to shutter factories, particularly in West Africa. This, combined with the tight supply of beans, has made it difficult to gauge true demand.

Traders and analysts are closely watching upcoming cocoa grinding data and earnings reports from major chocolate companies, such as Barry Callebaut AG, for further insights into the market.

To adapt to the high costs and scarce supply, some chocolate manufacturers have started using substitutes like palm oil to maintain production levels.

However, this is seen as a temporary fix rather than a long-term solution.

The cocoa crunch underscores the vulnerability of global supply chains to regional disruptions. As the second half of the year unfolds, the chocolate industry will be forced to navigate these challenges, balancing the need to secure sufficient cocoa supplies with the pressures of maintaining affordability for consumers.

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