@Subsidywise18 this post is created for you and other well informed and knowledgeable people about how subsidy works.
I do enjoy your posts on matters related to petrol subsidy and the ginormous effect it had on the nation's economy, I will like to extensively know how the system works

1. You do say Nigeria use to take Crude oil to refine outside at a so so price......
a) From my knowledge, the crude oil is embedded in the riverine areas of the country like Niger Delta and needs to be separated to different part through the refinery.
Why taken it outside again for what?

More questions to follow as we proceed...
I'll be glad to have you on this thread.
Thanks.

subsidywise18:
No time to talk. Got to do some other things.

But ye can read these articles

1Fuel subsidy and fake subsidy (2011, but still relevant)

2.The fuel subsidy dilemma (2021)

3.Fuel subsidies in Nigeria: they are bad for the economy, but the lifeblood of politicians.

4.Explainer : How fuel subsidy is impacting Nigeria's economy

5.Academic paper on the matter



In breif, it costs N330 as at April to bring in one liter of fuel into Nigeria. In March 2021 it cost N231, by June 2021, it was N261. However the cost of fuel at the pump is N165. Subsidy has increased from 66 naira per liter in March 2021 to 165 naira per liter in April this year. Cummulatively, we paid 2 trillion naira last year to subsidise fuel, this year we are paying at least N5 TRILLION naira.


Also, subsidies make refining fuel at home not profitable. As we have been subsidisng fuel since 1973, (initally, NNPC was allowed to set prices above the production cost, from the late 1980's NNPC was forced to set prices below the production cost....which forced it to operate at a loss. Subsidy was what was paid to cover the loss, but because NNPC could not make enough of a profit to pay for repairing refineries, and building new ones, the old refineries broke down. And NNPC became dependent on government allocations, which led to corruption and stealing...since government money is comming in regardless of performance.

That's it.

YoobaNesan:

Why are we bringing fuel into Nigeria? Didn't we have it embedded in Niger Delta?

subsidywise18:


Petrol is refined from crude oil. It does not occur naturally

YoobaNesan:
Sure, one of its product.
So because we don't have a functioning refinery to separate/refine crude oil into its various constituents, we have to take it outside (to those with a functioning refinery) to refine at a particular amount per litre? and import the petrol(which is a bye-product). What of other bye-products?
Is that it?

subsidywise18:


Yes.

And if we remove subsidy, it would make refining petrol and the other by products profitable to refine here.


Read my first post again for why refining has broken down here in Nigeria

YoobaNesan:
Ok. Thanks I'm enjoying this.
Is it safe to say we couldn't have Quality Education, Incessant strikes, Poor health facilities due to this subsidy.
All these have their effect on the nation's well being.