The unrelenting surge in the price of Liquified Petroleum Gas, also referred to as cooking gas, stands in contrast to the Federal Government’s efforts to reduce it, according to insights from Dr. Ayo Anthony.
Dr. Anthony, an economist, shared in an Abuja interview on Sunday that the economic ramifications of government policies take time to manifest.
In a letter dated November 28, 2023, signed by Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, the Federal Government communicated the removal of customs duty and Value-Added Tax (VAT) on the importation of LPG and its related equipment.
Ekperikpe Ekpo, the Minister of State for Petroleum Resources (Gas), has delved into the issues surrounding the consistent price increases of cooking gas in the domestic market.
The minister, acknowledging the recent spike in LPG prices from around N700 to above N900 per keg in specific regions, has tasked a committee to formulate recommendations aimed at bolstering supplies and bringing down prices
Reports has it that the prevailing prices for cooking gas are between N4,750 and N4,900 for the 5kg size, and N11,875 to N12,300 for the 12.5kg size in the Federal Capital Territory.
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Anthony attributed the delay in the realization of government policies to a phenomenon known 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 make a decision when there is a problem. It is not immediately when a problem emanates that the government takes a decision 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 added that a contributing factor to the high cost of cooking gas despite the government’s policy to remove VAT from its importation was the issue of old gas stock.
He said that cooking gas that had been stocked by marketers before the policy pronouncement would still be sold 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, as reported by NAN, reveals that the average cost of a 5kg cylinder of cooking gas rose from N4,562.51 in October 2023 to N4,828.18 in November 2023.
On a month-on-month basis, the average expense for refilling a 12.5kg cooking gas surged by 5.78%, escalating from N10,545.87 in October 2023 to N11,155.15 in November 2023.