FG directs FIRS, Customs to exempt LPG import from VAT, customs duty

Barely weeks after it mandated a committee headed by the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) to find a lasting solution to the constant rise in prices of cooking gas in one week, the Federal Government has announced exempting the product from taxation.

This followed the confirmation by the Ministry of Finance that the importation of Liquefied Petroleum Gas (LPG) from the Value Added Tax (VAT) and Customs Duty regime in a letter to President Bola Tinubu, and also to the Comptroller-General of the Nigeria Customs Service (NCS), as well as, Chairman of the Federal Inland Revenue Service (FIRS).

The decision to exempt imported LPG could see a drop in the market prices of cooking gas that has remained on a high side in the open market as distributors and importers continue to trade blames over the constant hike in prices of the product which has topped N1, 200/kg in parts of the country.

It would be recalled that the Federal Government had late month mandated a committee to be headed by the Chief Executive Officer of NMDPRA, Farouk Ahmed to find a lasting solution to the constant rise in prices of cooking gas ‘within one week.’

The committee is tasked with resolving the persistent hikes in the retail price of Liquefied Petroleum Gas (LPG), also known as cooking gas, across the country, which has hit N1, 200 in Lagos and other cities.

Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, further tasked the committee to resolve the challenges of constant price increment of LPG in the country’s domestic market.

“With the exponential increase in the price of LPG, there is the need for the Federal Government to intervene and I am that representative at this moment,” Ekpo said.

A statement issued by Louis Ibah, minister’s Spokesperson after a stakeholders meeting, quoted the Ekpo as mandating a committee headed by Farouk Ahmed, Chief Executive Officer of NMDPRA, to find a solution within one week.

The meeting had in attendance top officials of Chevron Nigeria Limited led by Sansay Narasimha; NMDPRA, led by its Chief Executive Officer, Farouk Ahmed and the NNPC Ltd.

Ekpo mandated the committee to recommend the best way to boost supplies and crash LPG prices, saying that the key challenges identified as responsible for the price increase included FX sourcing for imports and insufficient supply to the domestic market by producers.

He expressed the concerns of President Bola Tinubu over the astronomical increase in the price of cooking gas and the attendant hardship on the majority of citizens, as he further noted that the increase manifested where some of the multinational firms were more concerned with gas exports without dedicating huge volumes for the domestic market.

This, Ekpo said was unacceptable and should be discouraged since the country had abundant gas reserves.

“We acknowledge that some producers are exporting while we are faced with the challenges of importation.

“Public interest is the overriding interest all over the world for the government and the demand for LPG will increase as we approach December.

“You have a public service obligation to collaborate with the government to ensure security of gas supply.

“We need to therefore bend backwards and find solutions, to ensure that we have sufficient supply and stability in-country and that Nigerians have gas,” said the minister.

Meanwhile, the Ministry of Finance, in the letter dated November 28, addressed to the FIRS, Customs and Presidency, directed the exemption of LPG importation from further taxes. The letter was signed by the Minister, Mr. Wale Edun.

“In line with His Excellency, President Bola Tinubu’s commitment to improving the investment climate in Nigeria, increasing the supply of LPG to meet local demand, reducing market prices and promoting clean cooking practices, I hereby affirm Presidential directive dated July 29, 2022, with reference number PRES/88/MPR/99,” the letter reads.

“Accordingly, the importation of LPG utilizing HS Codes 2711.12.00.00, 2711.13.00.00 and 2711.19.00.00 is exempt from Import Duty and Value-Added Tax. Consequently, the Importation of LPG shall incur a 0% duty rate and 0% VAT rate, effective immediately,” the letter read.

Other items exempted from VAT and duty payment include; LPG cylinders, LPG cascades, gas leak detectors, steel pipes, steel valves and fittings, LPG dispensers, gas generators, LPG trucks, among others.

According to the Special Adviser to Tinubu on Energy, Ms Olu Verheijen, the decision was prompted after consultations with stakeholders revealed that the lack of a clear fiscal directive has hindered investments in the LPG sector.

She spoke while informing the chairman of the Nigerian Alliance for Clean Cooking of the exemptions in a separate letter, dated November 30, 2023.

Verheijen said the paucity of investment led to a rise in the prices of cooking gas and an uptick in the use of “unhealthy fuels such as kerosene”.

In 2019, VAT was removed on LPG, however, the Federal Government re-introduced the tax regime in 2021, as it commenced implementation of the 7.5 percent tax on imported LPG, though with exemption of locally manufactured gas.

Checks across filling stations and retail outlets in parts of Lagos State indicated that only few of them were dispensing the product with varied prices.

In prices monitored, the commodity now sells for between N1, 100 and N1, 300 per kilogram in Lagos alone, with the situation said to be worse in other parts of the country.

President of the Nigerian Association of Liquefied Petroleum Gas Marketers, Mr. Olatunbosun Oladapo, had also warned that the price of 12.5kg cooking gas could hit as high as N18,000 by December, 2023 if the Federal Government does not call terminal owners to order.

Mr Oladapo who informed newsmen that the government was yet to wade into the impasse between his members and the terminal owners over pricing of the commodity, said its dispute with the latter is yet to receive the attention of the Federal Government’s agency responsible, NMDPRA by way of its intervention into the matter.

According to him, the terminal owners were ‘hiding under the guise of high foreign exchange to increase price, and further increase the suffering of the masses,’ adding further that gas retailers still buy 20 metric tons of the commodity at the price of N14 million at the depot operated by the terminal owners.

“We still buy a 20 MT truck at N14m at the depots. And the price of diesel has increased that it now costs N1.7m to take gas from Lagos to the North due to the high cost of diesel. If we sell here at N1,000 per 1kg, just imagine how much it would cost in the Middle East and North.

“What we pray for is for prices to come down so that the ordinary masses can benefit from the decade of gas policy of the Federal Government that seeks to make gas accessible and affordable for the common man.

“There is a ridiculous hike in gas prices going on right now, and I am afraid that if the Federal Government does not step in to checkmate the activities of these terminal owners, price could reach as high as N18m for a 20 metric tons truck by December. This means that a 12.5kg could go as high as N18,000,” Oladapo said.