Marketers protest as Dangote seeks to reduce cooking gas costs.
Alhaji Aliko Dangote, President of the Dangote Group, has announced plans to cut the price of Liquefied Petroleum Gas (LPG), often known as cooking gas. He also pledged to begin direct sales of the product to customers if the existing wholesalers failed to allow the price drop in cooking gas.
However, industry players have expressed concerns about the idea, claiming that the billionaire intends to monopolise the LPG sector. On Monday, dealers protested the decision, citing concerns about a potential monopoly.
During a recent tour of his refinery with several local and foreign guests, Dangote emphasised that the current cost of cooking gas is prohibitively high for ordinary people who rely on firewood to cook.
He said that the refinery now produces 22,000 tonnes of LPG per day and is increasing production for distribution into the Nigerian market, particularly as Nigerians switch to gas for cooking.
Speaking to members of the Lagos Business School CGEO Africa at the refinery in Lekki, Dangote stated, “The one that we did not write, which you must have seen, is LPG.” Currently, we process around 2,000 tonnes of LPG every day. You are aware that Nigeria is gradually going towards the use of LPG. But, while I agree it is pricey, we are now working to reduce the cost and make it more affordable.”
Dangote put it bluntly: ‘if the distributors are not striving to bring it down, we’ll go straight and sell to the customers, so that people will now transit from firewood or kerosene to LPG for cooking’.
Dangote intends to begin direct distribution of petrol, diesel and aviation fuel to marketers nationwide in August, with 4,000 CNG-powered vehicles acquired for the purpose.
Currently, cooking costs between N1,000 and N1,300 per kilogramme. Dangote stated this would be reduced to ensure affordability.
Operators kick.
It appears that LPG market players are unhappy with Dangote’s plan to disrupt the business.
During a conversation with our correspondent, Godwin Okoduwa, former Chairman of the Lagos Chamber of Commerce and Industry’s LPG and Natural Gas Downstream Group, condemned the idea as monopolistic.
Okoduwa expressed worry that the billionaire businessman should acknowledge the fact that certain investors developed the market from 70,000 metric tonnes in 2007 to more than 1 million metric tonnes in 2022, stating that partnership is the way to progress.
“I believe it is monopolistic. I believe that a market should be safeguarded to encourage growth. Nigeria’s LPG business rose from 70,000 metric tonnes in 2007 to more than 1.3 million tonnes by 2022. That was accomplished through coordination with the Federal Government, NLNG, and offtakers. Everything was done collaboratively. It increased from 70,000 to 250 to 800, and now over a million,” Okoduwa stated.
He emphasised that teamwork, not monopolies, is the only way to accomplish growth. “We currently consume slightly under 5kg or 6kg of LPG per capita. Other countries are doing significantly more. South Africa, Morocco, and Tunisia are all doing double digits. We can accomplish much more.
“So, as an industry and a country, we should focus on how to grow the LPG industry rather than allowing someone to frustrate the players.” Yes, he has invested; yes, this is a capitalist economy; nonetheless, he should not be permitted to frustrate the players.
“There are people who have spent money, resources, even business and growth, only to have someone come in and reap the benefits of their efforts. I am confident he would not have built if there had not been an existing market. The task is done; he should respect the market and allow us to grow. It should not be a zero-sum strategy. “It should be collaborative,” he explained.
The gas expert recommended that, despite having the upper hand, Dangote welcome teamwork.
“My advise to him is that the pie can be larger. The Nigerian market is around 1.3 million tonnes. The Nigerian LPG market could reach 5 million tonnes. He should focus on collaboration rather than rivalry since, in the end, everyone benefits,” he said.
Dangote’s main objective, according to sources, is to lower the cost of cooking gas so that everyone can afford it and to eliminate the use of firewood. Okoduwa responded, “I have news for him. He should go to the Northeast, where LPG is consumed the least. He should travel to the Northeast and begin establishing the LPG infrastructure there. I think we’ll thank him for that.”
Similarly, Bassey Essien, Executive Secretary/Chief Executive Officer of the Nigerian Association of Liquefied Petroleum Gas Marketers, questioned Dangote’s ability to sell gas directly to customers or drive down prices.
“I’m saying it’s unrealistic.” What is the situation with PMS? Has the refinery been able to supply petrol to you and me at a very low price?” Essien asked.