I will attempt to provide a summarised explanation of the current fuel situation in the country, and provide my opinion on what should be done to eradicate it once and for all. It's a very important matter and needs to be properly discussed and debated because it affects us all.

Fuel Subsidy

The current landed price of PMS in Nigeria is N119. The government insists that it must be sold at N87. Therefore, to persuade ANY marketer to do that, they must subsidise the cost of importation for them. Hence the fuel subsidy.

However, the fuel subsidy is a massive fraud on the Nation, and fully 40% of all subsidy payments are fraudulent. This is a FACT, let's just say I know more on this subject than most.

The subsidy is also destroying Nigeria in several major and critical ways:

1. It's bankrupted the treasury
2. It's acted as a heavy disincentive for private investors into oil refineries, because, for obvious reasons, fuel marketers will prefer to import and steal from the government than buy from local refineries at lower cost.
3. Demand for USD driven by the importation of PMS accounts for 80% of all USD demand in Nigeria. This is what's causing continual pressure on Naira, and hence, the slide to N230 to $1 on the parallel market.

Cause of Current Fuel Scarcity

The government has refused to pay any more subsidy to marketers, who have in turn refused / are unable to buy any more product overseas, because their banks refuse to lend them more money. As a result, the nation is running short of supplies and will run out of fuel completely in 3 weeks if new supplies are not made immediately.

The fact is, the government will not (and should not) pay any more subsidies to them. They will instead (I seriously hope) focus on resurrecting refining capacity. So what happens in the meantime? Well, it's fairly obvious. The restrictions on selling price of N87 will be lifted, and marketers will be able to charge whatever they like, like any REAL business, not a Government aided and supported basket case.

The current landed price per litre is N119, but is expected to rise sharply due to the continued fall of the Naira against Dollar. I therefore expect prices to increase sharply over the next 3 to 6 months, to somewhere in the region of N130 - N160 per litre on average. This it what the TRUE price of PMS should be, and when the government subsidy is removed, that's exactly where it WILL be.

With luck, as oil refining capacity increases again (Dangote's 500,000 barrels a day plant is due to become operational by Q1 2017), we should see a gradual decrease in pump prices, to somewhere in the N110 - N120 per litre range.

Long Term Solution

Nigeria is hopelessly addicted to PMS, largely due to the power crisis. It's very noticeable to any Nairalanders who travel overseas frequently that you don't see anywhere near the number of Filling Stations that you see here. I have observed this extensively in USA, UK (where I was born and raised), and most recently, in China, where I was just 2 weeks ago. Bear in mind that these are far far more developed countries than Nigeria, with much larger economies, who's fuel demand should therefore be commensurately larger than Nigeria's.

Evidence of this is as follows - 65% of all PMS demand in Nigeria is to fuel generators, not cars. Ask yourself the simple question - how many litres do you buy daily for your generator versus your car, and this fact should become obvious to you.

The solution to this madness is to crash the domestic demand for PMS, by eliminating the need to use it to generate power in our homes and businesses. We do this by a wholesale switch to renewable energy sources such as Solar Power, to power our homes and businesses. The technology is readily available, and tried and tested, even here in Nigeria. There are approximately 5,000 homes and businesses right here in Nigeria that already have guaranteed 24 hours power supply through Solar Energy.

The challenge is to rapidly scale that across the estimated 100 million homes and business structures that currently use generators every single day for power. Major plans are afoot to make this happen, and I will confidently predict that within 5 - 7 years, generator usage, particularly in homes and small businesses, will have largely been eradicated.

Regards

Within 5 to 7 years?? OP you are too optimistic. The tech for solar energy is very very expensive, how many struggling hustlers living in rented face me I face you homes will be able to afford it? Compared to the 15k I pass my neighbour gen (7k for fairly used).
Even if the cost of solar energy is drastically reduced over the years, it would be balanced out by an equally drastic reduction in the price of generators.

Our dependence on PMS is not ending anytime soon

bestestgirl:
Within 5 to 7 years?? OP you are too optimistic. The tech for solar energy is very very expensive, how many struggling hustlers living in rented face me I face you homes will be able to afford it? Compared to the 15k I pass my neighbour gen (7k for fairly used).
Even if the cost of solar energy is drastically reduced over the years, it would be balanced out by an equally drastic reduction in the price of generators.

Our dependence on PMS is not ending anytime soon

You have just made the very basic mistake that most people make when evaluating the cost of generator. Ask yourself the following questions:

1. How many litres do you consume daily of PMS for your generator
2. For how many hours of daily run time
3. How much is that every month
4. How much is that every year - base it on current N87 per litres price, then do the same based on N130 per litres price
5. Add the cost of generator maintenance

I hope I have now gotten your attention. Your, and the majority of Nigerian's energy costs are just horrendous. People never factor this in when comparing the cost of running a generator with going solar.

Now, what if i told you that on average, what the average household spends on running and servicing their generator in just 2 years, for just 8 hours a day, is enough to buy them a complete Solar Power System that will power them for 24 hours a day. For over 25 years.

Next, what if I told you that there is now a financing scheme available where a person can spread the cost of their Solar Power System over 2 years, so after dropping their deposit, their monthly payments for those 2 years are actually less than what they currently spend on fuel today for their generators.

The real challenge in the entire going Solar is Financing, that is, enabling people to spread the cost of their Solar system over a 2 year period, making it easily affordable for the majority of Nigerians. That problem has now been solved.

In short, if you can afford to run a generator, you can afford to go Solar.

Put into this light, do you still think i'm being optimistic in my analysis?

Regards

Uvie

Hi OP,

I have seen some of your posts on Facebook. It might be a good idea to repost some of your favorites here with a little explanation of electricity generated, cost, what they are powering, and any other interesting tidbits.

I really like your strategy of arranging financing for customers as that is our main worry (how to outlay such a huge amount of cash)

I'm interested in a 100% off-grid solution about 1kva for one small 24v dc-only building (no inverter) I'm experimenting with. What kind of cost and payment plan would we be looking at?