By Anthony Agbo
It is no longer news that Liquefied Petroleum Gas (LPG), otherwise known as cooking gas, is one of the commodities hit the hardest by inflation this year. As a friend of mine joked recently, “cooking gas is now a status symbol in Nigeria.”
When in January 2021, a kilogram of cooking gas was selling for N336 per kilogram, many thought it was too high and hoped it would adjust at the end of winter because usually during winter, the demand for LPG rises, and so does its price until sometime around February when demand starts to drop.
Today, a kilogram is selling for as high as N750, more than double its price at the beginning of the year, even as I am holding my breath waiting for the next increase. This drastic change has been ascribed to a combination of factors that include: the general rise in international market price, unfavorable Naira to Dollar exchange, multiple government taxation and the recent reintroduction of 7.5% Value Added Tax (VAT) on imported gas, an extensive infrastructural deficit that hinders supply logistics, and a host of other factors.
When businesses experience rising costs in their operations, they shift the burden at every level until it reaches the final consumers. The final consumers, in this case, are the poor Nigerian masses – cooking gas is more or less an essential commodity that is used across the spectrum of the Nigerian population. Sadly, these masses are already bedeviled with untold hardship following our country’s current harsh economic conditions.
The majority of our citizens are struggling with low income and rising inflation and have since lost the capacity to absorb further rises in price, so they are left with no other choice but to start making the necessary adjustments in an attempt to balance their finances. Consequently, many are now going back to firewood and charcoal, which they consider cheaper alternatives to cooking gas.
As affordable as these alternatives may seem, the impact on people’s health and the consequent health costs, the degrading impact on our environment, and general quality of life are some of the reasons the world is moving away from them.
Nigerians are going through a lot already.
The economic downturn brought about by COVID-19 is still lingering. Businesses are struggling to stay afloat. Workers are still losing their jobs, and those that survive have their salaries slashed by varying percentages. Like farmers and artisans, the self-employed are not spared as many can no longer freely carry out their daily activities without fear of attack by bandits, terrorists, and sundry criminals. People are losing purchasing power at every level, so it is no surprise that they are seeking cheaper alternatives as prices increase.
On the corporate side, we are beginning to see an increasing number of investors closing shops due to growing losses and as it becomes challenging to shift the burdens of increasing taxes, high operating costs, and inflation to end-users. Many gas refilling plants, cooking gas accessories, and other gas-related businesses scattered across the country provide jobs for many Nigerians who earn their daily living from the sector. This multitude of Nigerians could be thrown back to the streets soon if the price of cooking gas continues to trend as it has since the beginning of this year.
It is evident that there is no magic wand that can reverse the current situation overnight. A lot needs to be done over time to stabilize the Naira and close the huge infrastructural gaps, among other solutions, but the low-hanging fruit for the government is to remove the 7.5% VAT on imported cooking gas.
This will, no doubt, reduce the pressure on the product’s price. Cooking gas is a grass-root commodity that affects the daily lives of the Nigerian masses, and a government that means well for its people shouldn’t be thinking of adding such a burden to its population at a time like this.
Some may argue that government needs money to revive the economy but the call to reverse its VAT policy on cooking gas, at this time, is not just to alleviate the suffering of the masses; it is also because of the overall benefit of doing so outweighs the revenue it will forgo in the process.
Think about the additional health burden that the increasing use of firewood and charcoal will bring on Nigerians on top of an already broken health system. What about the impact of an unhealthy population on productivity? We are already experiencing food shortages due to insecurity, as if that is not bad enough. When people cut trees for fuel, they expose the soil to erosion and other environmental hazards that will ultimately cost money to repair.
Also, collapsing businesses will deepen our unemployment situation, and additional revenues that accrue to the government from their activities will be lost.
The imposition of VAT on cooking gas not only depicts the government as insensitive to the sufferings of the Nigerian masses it also undermines its National Gas Expansion Program that has been applauded by many. So, if this Buhari-led government wants us to believe it is a government of the “talakawas” (poor masses) as it claims, then it must reverse VAT on cooking gas imports now.
Anthony Agbo, a financial expert and certified accountant, is the CEO at Unigas Global Energy Limited.
He can be reached via his email: firstname.lastname@example.org