I agree with Lanre and will repost my reply to a previous thread. I won't keep re-typing responses to this subsidy issue.


Below is my response to the following thread

Nigeria Spends N72.8bn Monthly On Fuel Subsidy
https://www.nairaland.com/nigeria/topic-746266.0.html#msg9024300


I agree with Kobojunkie and strongly disagree with ekt_bear and friends.


This is all basic mathematics. Anyone who went to school will work out that this fuel subsidy noise is a LIE or at best gross exaggeration.

FIRST OF ALL, ANYONE WHO TELLS YOU THAT NIGERIA SPENDS $500 million ON FUEL SUBSIDIES MONTHLY IS A THIEF.

This is basic mathematics and a fact.
They can claim that the give out $500 million in subsidy money monthly. That is between them and their thieving companies and friends.

Let's break it down:

Nigeria produces crude oil. Other countries produce crude oil.
Nigeria has 4 refineries with total installed capacity of 445,000 barrels per day (or whatever the NNPC claims nowadays).
Nigeria's refineries are not working at full capacity.
Crude oil is refined to PMS (Premium Motor Spirit) aka Petrol.
Nigerians use PMS to fuel vehicles, generators and other things.
PMS is traded internationally at a particular rate that varies.
Other countries that produce Crude oil refine it and sell to their citizens at whatever rate they please (irrespective of international rates).
Nigeria monthly PMS consumption = Locally refined + Imported refined (at International Rates)
Nigeria sells PMS to citizens for N65/litre
Subsidy = Amount paid to PMS importers for difference between International Rates for Imported Refined and N65/litre.

Example = Importers buy fuel internationally today from Venezuela at N120/ litre for example, they bring into Nigeria and sell for N65/litre. In order for said Importers not to lose N55/litre, the Nigerian Government pays N55/litre balance. This balance is the SUBSIDY.

Problem 1: Due to corruption, Nigerian officials collude with Government officials and claim to have imported more fuel than they actually bring in.

Example: Mr. Otedola's company may only bring in 1 million litres per day but claim to bring in 2 million litres per day. And like in previous example, The Government officials will pay N110 million per day (N 55/litre subisdy x 2 million litres) instead of N55 million (N55/litre subsidy x 1 million litres).

Problem 2: Due to corruption, Fuel importers collude with Nigerian National Petroleum Corporation (who by the way are in charge of the locally refined) and Government officials to buy the Locally refined and claim that the said quantities of petroleum where in fact imported into the country at international rates.

Example: Ms. Deziani's accomplices may buy 1 million litres per day of petroleum from the NNPC for N65 million and then claim that this quantity was bought at N120 million internationally (N120/litre international rate x 1 million) . They would then proceed to collect N55 million (N120 milion - N65 million) from the Nigerian Government as subsidy payment.

Problem 3:Due to corruption and inadequate monitoring, Fuel importers collude with Nigerian National Petroleum Corporation (who by the way are in charge of the locally refined) and Government officials to fraudulently under-report the quantities of locally refined PMS so they can purchase the more from the local refineries and claim to have imported said quantities (problem 2)

Example: The NNPC may claim to refine only 2 million litres per day when it in fact refines 4 million litres per day. The remaining 2 million litres would then be sold to their partners in crime at N65/ litre. These partners will proceed to sell these quantities to the Nigerian populace while demanding N55 subsidy per litre from the Nigerian Government after claiming that this 2 million litres/day were imported from Venezuela or other country. This example is highlighted by the inability of the NNPC to give account of the actual quantities it refines daily.


Therefore taking into consideration that

Subsidy = Amount paid to PMS importers for difference between International Rates for Imported Refined and N65/litre.

and the extent of problems 1, 2, and 3, it becomes easy to see why the true cost to Nigeria of the fuel subsidy may not exceed $100 -$150 million/ month.

Once again, I put forward that

ANYONE WHO CLAIMS THAT NIGERIA TRULY SPENDS $500 million ON FUEL SUBSIDIES MONTHLY IS A THIEF.


Why do Nigerians need a fuel subsidy??

Do average Nigerians really benefit from a fuel subsidy??

Interesting questions. Let me rephrase that.

Do average Nigerians benefit from buying PMS at N65/litre instead of N120, N130, or N140/litre
I think a monkey can answer that.

1. The average Nigerian buys PMS to fuel his/her car i.e N500 daily.
2. The average Nigerian takes public transport in vehicles that use PMS at certain amount i.e N50 per trip.
3. The average Nigerian buys PMS to fuel his generator i.e N1000 daily.
4. The average Nigerian buys food (bread, vegetables, fish) which is transported across the country in Vehicles that use fuel.

No subsidy equals

1. The average Nigerian needs PMS worth N1000 for his/her car daily.
2. The average Nigerian takes public transport at a new amount i.e N80 per trip.
3. The average Nigerian buys PMS to fuel his generator i.e N2000 daily
4. The average Nigerian buys food (bread, vegetables, fish) at a much higher price.

it doesn't take a genius to figure out that the average Nigerian benefits significantly from the lower cost of PMS.

It would be hard to find a Nigerian in Nigeria who wants the price of PMS to rise. It is a slap in the face of average Nigerians for ekt-bear and friends to claim that removing the subsidy will not have a tremendous negative impact on Nigerians. It is easy to sit in the U.S.A and claim that doubling the price of PMS in Nigeria will have no impact on the populace. Akin to saying an increase in gasoline prices in the U.S.A to $7/gallon today will have no significant effect on the populace.

Does corruption allow unscrupulous individuals to benefit from the subsidization of PMS?? Yes.
But why does the average Nigerian have to get shafted for this?? Why not tackle corruption instead??

Solutions.

A. Ascertain the true quantities of PMS locally produced daily.
B. Ascertain the true total quantities of PMS consumed daily nationwide.

Subract A from B and arrive at the true quantity of PMS imported at international rates (This value will then be subsidized)

By tackling corruption, the cost of subsidization can be brought down to no more than $100 million per month.


Solution Part 2 - By bringing refineries to optimum operating capacity and building new refineries.
Locally refined PMS can exceed Locally consumed PMS.

Mythical Solution= Remove the subsidy and hope that the supposed $500 million/ month that is currently being used to compensate corrupt entities will translate into development and improvement for the average Nigerian.

The question now remains, does increasing the burden on the average Nigerian guarantee the resolution of the problem??


PS: Problem 4: Overestimating the total nationwide PMS consumption allows fuel importers and the NNPC to further perpetrate fraud.


Also, please note that selling locally refined PMS at N65/litre is still a profitable venture for the NNPC.

interesting. . .

It's like the devil's mess don pollute our fresh air.

GEJ, is wicked. See person wey no get shoes before, now he don get extra. All what he could was to send us to poverty level.

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wasolad01:

Nigerian leaders are trespassing beyond their boundary! We are running out of patience everyday but they don't know. Revolution might start anytime in this country because of their greed.

As a  matter of fact, REVOLUTION IS THE ONLY SOLUTION to stop the rulers of this nation.

ogundokun:

GEJ, is wicked. See person wey no get shoes before, now he don get extra. All what he could was to send us to poverty level.

so dat his generation to come will have abundant shoes

GenBuhari:

Our country was taken other by crooks and thieves after they poisoned Abacha who was the last patriotic leader we had.

Review Nigeria's history and you would realise where things began to go wrong

https://www.nairaland.com/nigeria/topic-693700.0.html


Abacha increased fuel prices slightly and used the proceeds to fund the PTF, Obasanjo abolished PTF and increased fuel 5 fold and used the proceeds to loot.

Are the military not now better than so called DemoCrazy.

We need REVOLUTION

Let all unemployed adults be paid certain amount every two weeks. Reduce the fat monies going to executive and legislative arms of government.
Individuals stash billions of Naira abroad, let such be retrieved & used to build infrastructures.

Tahrir Square is coming to Nigeria, the quest is “where will it be?” or we will see many branches of Tahrir Square

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