gohome:


you can not change the worth of a product by just wishing. It is 1.1 dollars per litre.

gohome:


It is mathematically impossible to buy PMS below 1 dollar per litre at the current crudeoil price without some form of subsidy

gohome:


A cheap 60K capacit refinery will cost 3 billion dollars we need 6. Government is broke and dont have money to build. If they do? they cant maintain it. It is the practical fact. Only private individuals can. They wont if you have full government interference just like the markerters are facing at th moment.

9jatatafo:


I thought Jimoh Ibrahim was into insurance and he owns NICON.

NovusHomo:


Shut up and read, that is all that is required.

989900:


Well said.

I posted the below yesterday:


For those asking why we were against subsidy in 2011.

We were against it because;

1. We can't fathom how subsidy payments that never exceeded N200-N300b naira for the past years would suddenly leap to N1.3t (roughly 400-500% increase) within the first year thereabout of President GEJ -- we were shocked. #fraud.

2. We also could not fathom how any half-sane man could be drilling oil in his backyard, with 4 refineries in his backyard (with land and space to build more, and 11 licences issued already to build more), but still imports finished petroleum products. (OBJ and GEJ=culprits).

3. To the common Nigerian man, the only 'direct' benefit he gets from the government is, the so called 'subsidized fuel', which we later discovered to be a farce after all . . . so when you are going to take those extra litres/miles from him, or make him pay extra to get them, he has no choice than to revolt/demonstrate/remonstrate.

4. Unless you are among the 1% of the 1%, every other person on the street knows fuel scarcity goes along with insane inflation.

5. You ask him to make sacrifices while the president feeds on N3m/day and has 10 aircrafts in his fleet, his senators get paid more than their counterparts in the richest country on earth. Yet, they find it hard to pay same minimum wage paid in the poorest countries on earth!
How can we trust people of that ilk?

6. ATEOTD, subsidy was partially removed with promises of palliatives, and prosecution of the defrauders aka 'cabals', what did we get?Nothing, bar further fraud and corruption; from bribery scandals up to the speaker of the house (Cabal Otedola, well played) to mismanagement of the said saved funds from subsidy payments.

How can you trust such people?!!
Same people from the NNPC to the Petroleum ministry, to the CBN, to the Finance ministry, Budgets, both houses, up to the presidency that have no reliable database of how much oil is being drilled/sold per day, nor how much NNPC refines locally, nor how much we do consume/day.

holuphisayor:

I don't accept the fact that Nigeria can't build even 10 refineries when Libya can and also sell PMS far cheaper than nigeria . if you say 3billion is enough to build one refinery....what about the unremitted $20billion....will it not go a long way in turning around our petroleum industry?

PassingShot:


Says who?

Have you checked fuel price in OPEC economies?

Even though we don't refine our crude, there are other arrangements we can have with some international oil companies that operate in Nigeria but have refineries outside Nigeria to refine some crude for us for cheaper rate.

PassingShot:


In addition to all of these and especially the boldened, GEJ was completely wrong in just waking up to announce an increase in fuel price without previously discussing with major stakeholders. Nowhere in the world would such announcement have been allowed to stay unchallenged.

Anyway, we will soon know that the subsidy is a big scam.

Esdb3:



I'm sure whoever gave this answer is a rich man...... Do you know how 'cheap' 1 dollar is to Americans? 1 dollar will feed a man over here, that same 1 dollar is like 10 naira to an American man.... They pay per hour in America. You can earn 18 dollars per hour or in a day sometimes that is 3240..... How many Nigerians earn 3240 in an hour talk less of a day? Corruption is the norm of our society, people don't receive salaries for 7months sometimes. How do you want these people to pay 180-220 naira for fuel?
NIGERIANS CAN'T AND WE WON'T! WE CAN'T ENRICH THE RICH WHILE WE DIE POOR! A senator receives 2billion every year, he spends not more than 50million out of the money meant for empowerment, you want us to now pay more and probably increase his keep to 2billion? THINK PLEASE.

gohome:


This thread has nothing to do with GEJ. I am talking about my Tax being used henceforth to pay for subsidy. My kids future will be mortgage with debt if we continue like this

gohome:


Most OPEC economies do subsidy. The good thing about is that while some have a much more diverse economy, others have smaller population.

The UAE is 8 million migrant and 1.4 millions citizens. Budget is in excess of 4 trillion Naira. Economy is so diversed that only 4% of oil revenue go to Dubai city budget. If AkwaIbom gets 4 trillion annually, let me see how it won't be Dubai with free fuel.

i really do not know how to explain to these guys that we cannot afford it. No country with a population of 150 million plus pay subsidy on PMS.

Let them keep hiding under masses. Borrowing money to enrich few rich men. Sometimes I feel like disowning this country. People you try to help are the same people killing you.

gohome:


Look at your annual budget and tell me where the money will come from?

emiye:


Oga, what do you think is the average volume of petrol consumed by Nigerians daily?

We have a 445,000 barrels/day refineries, if the refineries have a 40% performance, that is like 175,000barrels /day.

What volume of Petrol , diesel, kerosene/jet fuel , will a 175,000 barrels/day produce daily?


I have other questions ? if you answer these ones, maybe i can proceed.

Anyone who can help to provide answers is appreciated.

adanny01:


I have a little problem with the analogy as it undermine the importance of petrol to Nigerians. You need fuel not just to power generators but for many other goods and services. The cost of those goods and services depends on the price of petrol so such goods or services will go up with the price of petrol. For example, due to the recent fuel shortage in which my initial petrol monthly spending is 25% of my salary, it is now 50%. I am now poorer than i used to be just because of fuel. i may need to dump my car and life becomes harder.

In the end, government will become richer if subsidy is removed, but Nigerians will become poorer. So removal is not the most suitable option. The best option is refining our own petrol. One more thing, the government who is crying for money has the responsibility of refining the crude oil, if they cant do it, they should bear the brunt not innocent Nigerians. Its their failure, so they should deal with it.

gohome:




Answer

ohzee better position to debate whether we should retain subsidy or not.[/i]

[b]This analysis has been done by so many Nigerians. It has been done by your neighbors, Ghana, Togo etc. It has been done by your felow African brothers like Kenya SA. The world bank too has done this shockingly. The Average Price (landing cost) of crude oil is +/- 1.1 dollars per liter. It can vary based on Transportation, grade of refine products and taxes.


wirinet:

Having said that, i am not a fan of deregulation in a critical sector like the petroleum sector. There is never deregulation in the real sense of the word in any country in the world, government always regulate to some extent all industries in order to prevent abuse, monopoly and to protect public interest. It is the degree of regulation we should be debating about. "Deregulation" is good in situations with efficient market economy with strong institutions, but had been proven to be disasterous in countries with inefficient or underdeveloped markets with very weak institutions. All you will produce is monopoly or Oligarchy and the masses being at the mercy of a few powerful cabals.

gohome: If you do not deregulate, you wont build efficiency in Nigeria. Refining margines are very small with the volatile oil market you have. Big players like Shell BP Total etc would not build refineries if you do not let you government hands off. When Dangote's refinery is ready he will sell to Ghana, Togo and the likes if your Govt does not hands off. Fuel is not cheap. it is 220 Naira per liter. Get use to it.


wirinet:

This is what we have in almost all sectors of the Nigerian economy that had undergone deregulation. This is why deregulated Diesel and aviation fuel will never be cheap and available. This is why DSTV, MTN, Etisalat, etc can charge the masses very high tarrifs with very poor services. This is why deregulated NEPA is worse than regulated NEPA. I can go on and on. Before Thatcher deregulated or privatized the British economy, she made sure that the public run enterprises were running optimally and efficiently and very efficient regulatory bodies were in place.

gohome:

Thats the good thing about deregulation.

MTN better than NITEL
DSTV better than NTA
NESCO better than NEPA.

If you choose to use NITEL because MTN service is not good, go ahead. If you choose to watch NTA, go ahead. If you choose to use NEPA instead of solar and inverter, or NESCO go ahead.

NESCO is an independent power company in Jos that supplies 24 hours light to its customer


Reply to Shiftmarket Comments




gohome: I will say it again. Corruption is one of the problems. Maybe the major problem, but it is not all the problem.

The best way to fight corruption is to totally remove what fuels the corruption. It is that simple. Also 100 billion, 350 billion, !1 Trillion, we do not have the money to pay for subsidy.





gohome: If you can trust them with 4 trillion annual budget, then trust them with 1, 2 300 billion. y dont you go collect the 4 trillion Naira because you dont trust them with it and put in your house. You want to waste 300 billion on petroleum subsidy and blame your government for infrastructural decay, No power, No light, external and internal debt, non payment of salary etc. You want your kids to be out of school, you want your wife to die in the hospital because you do not have good medicare, but you want to fuel your Gen in a leaking house? SMH





gohome: Subsidy removal has nothing to do with scarcity. PMS subsidy does not exist in 90 percent of the countries in the world, yet no scarcity. Why should it be scarce in Nigeria. No subsidy in Ghana, Niger, Togo, Benin, Kenya, SA, No scarcity. PMS is available worldwide if you want to have it at 1.1 dollars per liter. The only reason for Diesel scarcity is the fact that marketers refused to lift. If MTN refuses to give you service, Etisalat will. If OandO refuses to give you diesel, Capital Oil will. Deregulate the downstream sector is the only way. 3% of your budget goes to your National Assembly. Let them pass law and implement policies to guide against capitalism excess. Go and read about the meager between ATT and Tmobile.





Reply to Wirinet Comments

[b]450,000 for domestic consumption does not fall from the sky. You have to produce it. It cost 30 dollars per bbl to produce it. Depending on the oil price, you will likely lose 9 billion dollars a year. This is minus the so called subsidy. With an infrastructural decay that needs hundreds of billions to solve, you want to pay subsidy? You are in a country where the government expenditure per person to tax is the highest in the world and you want to still pay subsidy. Your economy (mass transit, banks and industries) runs with diesel not PMS.

What is the population of the UAE? You are 170 million boy. It is not affordable.

Your budget is a mere 4 trillion. Guess what the budget of New York City with 8.9 million people alone is 15 trillion. Your government is poor, it needs money from anywhere. Help it.

Help it create a level playing field to unlock new opportunities. If we show investors we can buy fuel at 200 to 250 naira a liter, you will see them come. We then will be talking about 200K direct jobs easy and another 5 million indirect jobs.

Your country is poor. You need to start paying 30% tax so your government can run your country.

Buhari will not pay a dime on PMS subsidy. Petrol will sell at 1.1 dollars per liter. Unless he wants to throw away 9 billion dollars (465000 bbl) another form of subsidy. You won't die. My grandma in the village buys petro at 210 per liter, food are transported via diesel, mass transit is via diesel, industry via diesel. Nothing will happen

Because 9 million people with a budget the same as yours can afford it doesn't mean we can.

The UAE is 8 million migrant and 1.4 millions citizens. Budget is in excess of 4 trillion Naira. Economy is so diversed that only 4% of oil revenue go to Dubai city budget. If AkwaIbom gets 4 trillion annually, let me see how it won't be Dubai with free fuel.

i really do not know how to explain to these guys that we cannot afford it. No country with a population of 150 million plus pay subsidy on PMS.

Let them keep hiding under masses. Borrowing money to enrich few rich men. Sometimes I feel like disowning this country. People you try to help are the same people killing you.

[/b]

PassingShot:

You don't subsidize what is yours

PassingShot:

You don't subsidize what is yours

PassingShot:

Mister, GMB will remove any subsidy that may exist now and fuel price will not astronomically go up. Such action will only save Nigeria the money those cabals steal from our treasury. Try to reason!

ttmacoy:
The truth is bitter. People keep saying they want change yet are not ready for the sacrifices and pain that change brings.
You are right we cannot afford the subsidy. We like to abuse countries like the UK that they pay too much tax but that tax is crucial for the government to be able to provide the services to citizens.
No pain no gain.

Chinese Subsidies:

How did China move so swiftly in capital-intensive industries without labor-cost or scale advantage from bit player to the largest manufacturer and exporter in the world? This book argues that subsidies contributed significantly to China’s success. Industrial subsidies in key Chinese manufacturing industries may exceed thirty percent of industrial output. Economic theories have mostly portrayed subsidies as distortive, inefficiently reallocating resources according to non-market criteria. However, China’s state-capitalist regime uses subsidies to promote the governments’ and the Communist Party of China’s interests. Rather than aberrations, subsidies help Chinese businesses and governments produce, stabilize and create common understandings of markets; the flows of capital reflect struggles between critical Chinese actors including central and provincial governments.

gohome:


Without Subsidy, The price will be 1.1 dollar per litre. Producing nation or no producing nation. corruption or no corruption. Total government hands off - 1.1 dollars per litre. It get worse with naira devaluation. The US with the most efficient refining system with a population of 320 million and production of 12 million bbl/day pays 1.2 dollars/litre, and you think you should pay less.


Read: http://www.economicshelp.org/blog/5862/oil/petrol-price-per-gallon-around-the-world/

gohome:


It is not a benefit inany way. PMS subsidy is giving you 20 Naira and taking 200 Naira from you.

gohome:


Without Subsidy, The price will be 1.1 dollar per litre. Producing nation or no producing nation. corruption or no corruption. Total government hands off - 1.1 dollars per litre. It get worse with naira devaluation. The US with the most efficient refining system with a population of 320 million and production of 12 million bbl/day pays 1.2 dollars/litre, and you think you should pay less.


Read: http://www.economicshelp.org/blog/5862/oil/petrol-price-per-gallon-around-the-world/

sparkleboy:
Booked

GEJ should have removed this subsidy on Pms completely then and spent the SURE-p fund on building or repairing new refineries that should have been handed over to private companies to handle and manage.
We wouldn't have been in this mess if such had been done but the wicked cabals that are enjoying the deep corruption in that sector would not allow such.
People like Wale Tinubu, ifeanyi uba, pres obasanjo, otedola, rahamaniyya oil,
These people enjoy the loot from under supplying and been overpaid. If you see the deep corruption that goes on in the Pms supply chain You'll be scared for Nigeria.

Most of them import the cheapest fuel, and over value their oil,
A lot of the so called subsidised oils are refined in the refineries owned by our former leaders and business moguls in Trinidad and tobago, guinea, etc.
a lot of the subsidised fuel ends up in neighbouring African countries such as TOGO, BENIN, GHANA ETC,

SOLUTION
BUHARI SHOULD CANCEL PAYMENT OF SUBSIDY AND REVAMP OUR REFINERIES AND GIVE IT TO A PRIVATE COMPANY TO MANAGE.

989900:


Go thru the below at your leisure, not perfect (slight adjustments here and there could be made for exchange rates and the like), it will help your perspective.

December 10, 2011, if you stopped at the Mobil filling station on Old Aba Road in Port Harcourt , you would be able to buy a litre of petrol for 65 naira or $1.66 per gallon at an exchange rate of $1/N157 and 4 litres per gallon. This is the official price. The government claims that this price would have been subsidized at N73/litre and that the true price of a litre of petrol in Port Harcourt is N138/litre or $3.52 per gallon.

They are therefore determined to remove their subsidy and sell the gallon at $3.52. But, On December 10, 2011, if you stopped at the Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, you would be a able to buy a gallon of petrol for $3.52/gallon. Both gallons of petrol would have been refined from Nigerian crude oil. The only difference would be that the gallon in New York was refined in a US North East refinery from Nigerian crude exported from the Qua Iboe Crude Terminal in Nigeria while the Port Harcourt gallon was either refined in Port Harcourt or imported. The idea that a gallon of petrol from Nigerian crude oil cost the same in New York as in Port Harcourt runs against basic economic logic. Hence, Nigerians suspect that there is something irrational and fishy about such pricing. What they would like to know is the exact cost of 1 litre of petrol in Nigeria .

We will answer this question in the simplest economic terms despite the attempts of the Nigerian government to muddle up the issue. What is the true cost of a litre of petrol in Nigeria ? The Nigerian government has earmarked 445000 barrel per day throughput for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. We will limit our analysis to this volume of crude oil. At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding /development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel.

Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 168 litres. The price of 1 barrel of petrol at the Depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution cost are $1.50 per barrel. The Distribution Margins (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges etc) are N15.49/litre or $16.58 per barrel. The true cost of 1 litre of petrol at the Mobil filling station in Port Harcourt or anywhere else in Nigeria is therefore ($5 +$12.6+$1.5+$16.6) or $35.7 per barrel . This is equal to N33.36 per litre compared to the official price of N65 per litre. Prof. Tam David West is right. There is no petrol subsidy in Nigeria . Rather the current official prices are too high. Let us continue with some basic energy economics.

The government claims we are currently operating our refineries at 38.2% efficiency. When we refine a barrel of crude oil, we get more than just petrol. If we refine 1 barrel (42 gallons) of crude oil, we will get 45 gallons of petroleum products. The 45 gallons of petroleum products consist of 4 gallons of LPG, 19.5 gallons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet Fuel/Kerosene, 2.5 gallons of Fuel Oil and 5 gallons of Bottoms. Thus, at 38.2% of refining capacity, we have about 170000 bbls of throughput refined for about 13.26 million litres of petrol, 6.8 million litres of diesel and 2.72 million litres of kerosene/jet fuel.

This is not enough to meet internal national demand. So, we send the remaining of our non-export crude oil volume (275000 barrels per day) to be refined abroad and import the petroleum product back into the country. We will just pay for shipping and refining. The Nigerian government exchanges the 275000 barrels per day with commodity traders (90000 barrels per day to Duke Oil, 60000 barrels per day to Trafigura (Puma Energy), 60000 barrels per day to Societe Ivoirienne de Raffinage (SIR) in Abidjan, Ivory Coast and 65000 barrels per days to unknown sources) in a swap deal. The landing cost of a litre of petrol is N123.32 and the distribution margins are N15.49 according to the government. The cost of a litre is therefore (N123.32+N15.49) or N138.81 . This is equivalent to $3.54 per gallon or $148.54 per barrel. In technical terms, one barrel of Nigerian crude oil has a volume yield of 6.6% of AGO, 20.7% of Gasoline, 9.5% of Kerosene/Jet fuel, 30.6% of Diesel, 32.6% of Fuel oil / Bottoms when it is refined.

Using a netback calculation method, we can easily calculate the true cost of a litre of imported petrol from swapped oil. The gross product revenue of a refined barrel of crude oil is the sum of the volume of each refined product multiplied by its price. Domestic prices are $174.48/barrel for AGO, $69.55/barrel for Gasoline (PMS or petrol), $172.22/barrel for Diesel Oil, $53.5/barrel for Kerosene and $129.68/barrel for Fuel Oil. Let us substitute the government imported PMS price of $148.54 per barrel for the domestic price of petrol/gasoline. Our gross product revenue per swapped barrel would be (174.48*0.066 +148.54*0.207+172.22*0.306+ 53.5*0.095+129.68*0.326) or $142.32 per barrel. We have to remove the international cost of a barrel of Nigerian crude oil ($107 per barrel) from this to get the net cost of imported swapped petroleum products to Nigerian consumers. The net cost of swapped petroleum products would therefore be $142.32 -$107 or $35.32 per barrel of swapped crude oil. This comes out to be a net of $36.86 per barrel of petrol or N34.45 per litre.

This is the true cost of a litre of imported swapped petrol and not the landing cost of N138 per litre claimed by the government. The pro-subsidy Nigerian government pretends the price of swapped crude oil is $0 per barrel (N0 per litre) while the resulting petroleum products is $148.54 per barrel (N138 per litre). The government therefore argues that the “subsidy” is N138.81-N65 or N73.81 per litre. But, if landing cost of the petroleum products is at international price ($148.54 per barrel), then the take-off price of the swapped crude oil should be at international price ($107 per barrel). This is basic economic logic outside the ideological prisms of the World Bank. The traders/petroleum products importers and the Nigerian government are charging Nigerians for the crude oil while they are getting it free.

So let us conclude this basic economic exercise. If the true price of 38.2% of our petrol supply from our local refinery is N33.36/litre and the remaining 61.8% has a true price of N34.45 per litre, then the average true price is (0.382*33.36+0.618*34.45) or N34.03 per litre. The official price is N65 per litre and the true price with government figures is about N34 per litre (even with our moribund refineries).

There is therefore no petrol subsidy. Rather, there is a high sales tax of 91.2% at current prices of N65 per litre. The labor leaders meeting the President should go with their economists. They should send economists and political scientists as representatives to the Senate Committee investigating the petroleum subsidy issue. There are many expert economists and political scientists in ASUU who will gladly represent the view of the majority. The labor leaders should not let anyone get away with the economic fallacy that the swapped oil is free while its refined products must be sold at international prices in the Nigerian domestic market.

The government should explain at what price the swapped crude oil was sold and where the money accruing from these sales have been kept. We have done this simple economic analysis of the Nigerian petroleum products market to show that there is no petrol subsidy what so ever. In the end, this debate on petrol subsidy and the attempt of the government to transfer wealth from the Nigerian masses to a petrol cabal will be decided in the streets. Nigerian workers, farmers, students, market women, youths, unemployed, NGO and civil society as a whole should prepare for a long harmattan season of protracted struggle. They should not just embark on 3 days strike/protests after which the government reduces the hiked petroleum prices by a few Nairas. They must embark upon in a sustainable struggle that will lead to fundamental changes. Let us remove our entire political subsidy from the government and end this petroleum products subsidy debate once and for all. It is time to bring the Arab Spring south.

Izielen Agbon Izielen Agbon writes from Dallas, Texas. izielenagbon@yahoo.com

He is former HOD , Petroleum Eng Dept, former ASUU chairman University of Ibadan, trained many operators in nation's energy industry with pratical experience on our practices and policy focus in the last 20yrs

http://saharareporters.com/2011/12/15/real-cost-nigeria-petrol-dr-izielen-agbon

KriTic24A:



This thread is highly informative!!!!
I appreciate all contributors either for or against.
I'm the one being lectured by YOU All.....
I have read all comments.
I say Thank YOU...

kinibigdeal:




Your comment are too loopsided. The fact that you said you were against it in 2012 due to your unfounded fact speaks alot about your personality and you supporting it now enapse my conclusion. The protest against subsidy in 2012 was highly political and not for the interest of the nation, the calculation was to render this present administration ungovernable in lieu of their interest in 2015 which really work for them perfectly. Majority of the policy GEJ administration had then was strongly opposed through press and whatever platform because of their political calculation of 2015. The effect was, the more you oppose a beneficial policy, the more the aesthetic decay compiled and remain unsolved. Now the consequence of their unfounded critics is what they want to carry now which is almost impossible to solve in 8years. The problem we have as a nation is that our critics are never issue based but political gain

gohome:


It is mathematically impossible to buy PMS below 1 dollar per litre at the current crudeoil price without some form of subsidy