Knight1:

i don't buy into addict's calculation
REASON: according to the indices he used in arriving at those figures, all countries in the world should sell at above N65 or it's equivalent because those indices are common to all the countries.
yet fuel is faaaaaaaaaaaaaaaaaaaaaaaaaaaaar less than N65 or it's equivalent in countries such as venezuela et al. are you saying those countries are also subsidising that much?

Those countries have lower populations than Nigeria.

Seun:

Those countries have lower populations than Nigeria.

lower population? how does that factor into this?
[b]
Current price of crude oil per barrel= $90 USD. Let us assume that as a producing nation, we buy at $65 per barrel. A barrel equals 159 litres. This means that our cost of crude oil per litre in naira =(65X160)/159= N65 per litre (assuming that $1 USD = N160)

So our cost of raw material alone is already N65 per liter. Which also douubles as the cost of finished goods. Speaking reallistically by the time we add the cost of energy to refine, cost of remuneration of the workers, distribution and marketing cost, tax and profit, we will have as our cost of finished goods which is petrol, a price that should be way higher than N65/litre.

So the solution is not just to build more refineries as this analysis has shown. If the government builds more refineries, they will still continue to subsidise the cost of refinning. The only difference is that we may not be importing then. The ultimate solution therfore is to first eliminate corruption in the system and we all know that this is a near impossible feat. Second, we can deregulate fully. If we deregulate fully, private investors will come and build refineries themselves and refine crude for our consumption but then the pump price of petrol will be more than N65/litre. It will hover between N120-N150 naira/litre[/b]

@Seun
population has nothing to do with it.

fuel subsidy is fictional

When in Nigeria's history has the level of subsidy ever been quantified?

Did Obasanjo was supposed to have removed the "subsidy" (of course he was deceiving us) when he hiked prices several hundred percent.

In which budget has a subisdy ever been quantified?

Nigerian fuel is not subsidised, it is a scam to squander the extra revenue raised with out having to explain what it is to be spent on.
Buhari has said it is sheer corruption.

@ GenBuhari, your position is understandable. However it could do the man whose name you adopted a lot more good if you deploy sound argument and real stats in place of emotions. Kindly see the sense in my advice and don't take this as an attack in need of response.

@ Seun's point of the population diff btw Nigeria & say S/Arabia, UAE & Libya is on point. Libya for e.g. has almost the same quantum of production as Nigeria (roughly 2mbpd of crude) and pop of 6million people compared to Nigeria's 167million (as of this week's NPC update). Warri Refinery alone, at full capacity, can serve that entire nation!

Now as for subsidized pump price, we consume 30m litres of PMS daily in Nigeria. With an average Over-Recovery (subsidy) payment of roughly N80/L since January, DMO/MOF/CBN have paid out at least N730billion to importers so far this year!! You really don't need a degree in rocket science to see how it will be way less cheaper for Libya to subsidize 6m people in comparism to ours.

Again guys, don't mix up your maths in this industry. 1 barrel of crude is not equal to 1 barrel of petrol! At best, a barrel of Forcados or Bonny crude can only yield 25% PMS in any of our refineries. That's a little over 30 litres of PMS from each barrel of crude.

GenBuhari:


@kj_hova
Most of the countries you are comparing their fuel prices with Nigeria are not net exporters of oil This means that our fuel prices should be approx only about 20% of the price of those countries that are non-exporters of oil.
You need to compare like with like , if you want to do a meaningful analysis.

Even so Ghana and Egypt have lower fuel prices than Nigeria.

Egypt, i can tell you for sure subsidises their fuel. I cant tell about Ghana. But then oil discovery in Ghana is a recent occurrence and i dont expect their government to immediately deregulate the sector. They will let the masses enjot their new found wealth for a while and this may mean many many years to come. So my guess is Ghana also subsidises their fuel.

GenBuhari:

@fork adict
What qualifies Buhari as an expert?

Buhari has been a:

Head of State
Governor of North East Region of Nigeria
Petroleum Minister
Chairman of Nigerian National Petroleum Corporation
Chairman of the now defunct Petroleum Trust Fund

Now tell me a greater expert of the Nigerian Oil Industry than Buhari.

I knew you were going to come up with this. FYI, Buhari acted in all those positions you mentioned in supervisory capacity guy. Dont make me laugh. When you act in those positions, all you do is oversee people's activities and anyone with lots of common sense and also with a flair for making things run the way they should will perform quite well in all those positions also, and that doesnt make them experts. To further burtress my claim, Bola Ige was minister of Power in Obasanjo's first democratic tenure. Will you call him an expert?Buhari might be considered an expert in warfare, or security issues. I wont contest that. But an expert in oil the oil industry?

Knight1:

i don't buy into addict's calculation
REASON: according to the indices he used in arriving at those figures, all countries in the world should sell at above N65 or it's equivalent because those indices are common to all the countries.
yet fuel is faaaaaaaaaaaaaaaaaaaaaaaaaaaaar less than N65 or it's equivalent in countries such as venezuela et al. are you saying those countries are also subsidising that much?

Yes. That is what i am saying. Go figure!

Also note that many of those countries that subsidise do not have a population as large as ours. As Kjhova has rightly pointed out, population is a factor to reckon with when discussing issues like these.

kj_hova:

@ GenBuhari, your position is understandable. However it could do the man whose name you adopted a lot more good if you deploy sound argument and real stats in place of emotions. Kindly see the sense in my advice and don't take this as an attack in need of response.

Dont mind both of them. The real gen Buhari and the fake. As for the real general, all he made was a statement. No analysis, no figures, no stats to back up his claim and he expects someone like me, as educated as i am to just accept whatever he says? What then differentiates me from an illiterate? The question here is, if it is possible to refine crude oil and incure all the associated costs in full, add your margin, sell at N65 per litre and still make a profit. Not whether some corrupt politicains are enbezzelling the fuel subsidy. You can only agrgue for or against this topic with facts and not by using broad, ambiguous statements.

As for the fake general buhari, if i may ask you, what is your level of education? Pls take no offense. If its SSCE, then i can understand. But if you hold a minimum of bachelor's degree, then i SMH for you.

kj_hova:

@ Seun's point of the population diff btw Nigeria & say S/Arabia, UAE & Libya is on point. Libya for e.g. has almost the same quantum of production as Nigeria (roughly 2mbpd of crude) and pop of 6million people compared to Nigeria's 167million (as of this week's NPC update). Warri Refinery alone, at full capacity, can serve that entire nation!

Thanks guy.

Imagine someone boldly saying that population isn't a factor? imagine kuwait with a daily production capacity of roughly the same amount as nigeria's but with about 4 million people max. Their government can of course subsidise not only their fuel but every other primary aspect of their lives till thy kingdom come. I dont even know of any state in naija with a population of less than 4 million. And you dare say that population isnt a factor Na wa for some people sha

kj_hova:

Again guys, don't mix up your maths in this industry. 1 barrel of crude is not equal to 1 barrel of petrol! At best, a barrel of Forcados or Bonny crude can only yield 25% PMS in any of our refineries. That's a little over 30 litres of PMS from each barrel of crude.

This only worsens the issue. By Using the assumption that 159 litres of crude yields 159 litres of petrol, not adding the cost of refining, distribution and marketing costs, tax, margin, etc and one still could not arrive at a pump price of less than N65 per liter. Now imagine if one does the same analysis with the assumption that 159 litres of crude oil yields only 30 liters of petrol, now add the refinning cost, distribution and marketing cost, tax and margin. Is the final result (which is the pump price pf petrol) not going to be way higher than N65?

Not only Buhari but Tam David West a former Petroleum Minister also asserted that the subsidy is fictional, petrol price rises is a type of stealth tax because the government is being deceitful about it.
They are calling it subsidy removal because they want to squander and looted the revenue earned from the price rises, with out having to justify how they are going to spend it.

In which annual budget has any  government ever quantified the level of this fictitious subsidy.

Nigerians, abeg shine your eyes well well!

Knight1:

lower population? how does that factor into this?
[b]
Current price of crude oil per barrel= $90 USD. Let us assume that as a producing nation, we buy at $65 per barrel. A barrel equals 159 litres. This means that our cost of crude oil per litre in naira =(65X160)/159= N65 per litre (assuming that $1 USD = N160)

So our cost of raw material alone is already N65 per liter. Which also douubles as the cost of finished goods. Speaking reallistically by the time we add the cost of energy to refine, cost of remuneration of the workers, distribution and marketing cost, tax and profit, we will have as our cost of finished goods which is petrol, a price that should be  way higher than N65/litre.

So the solution is not just to build more refineries as this analysis has shown. If the government builds more refineries, they will still continue to subsidise the cost of refinning. The only difference is that we may not be importing then. The ultimate solution therfore  is to first eliminate corruption in the system and we all know that this  is a near impossible feat. Second, we can deregulate fully. If we deregulate fully, private investors will come and build refineries themselves and refine crude for our consumption but then the pump price of petrol will be more than N65/litre. It will hover between N120-N150 naira/litre[/b]

The cost of production of crude oil in Nigeria hovers btw $15 - $40 depending on location onshore or offshore never the $65 you quoted. Some analysts even quote as low as $5 per barrel as cost when you consider that it is 'sweet' crude we have

www.ogbus.ru/eng/authors/Odularo/Odularo_1.pdf

@ Ovamboland,
Dude your attachment backing the claims of a $5 is a bit lenghty. I didn't see such claims in the attachment. It will be nice of you to state the exact page.
Let me assure you in the meantime, hewever, that the fact that our crude is "sweet" has nothing to do with the cost of production. Do you know that an increased amount of our crude is mined offshore these days? Cost of that is killing!
From an economic point also, is it normal econs that the crude currently selling at about $90/barrel in the global market can have cost of production as low as $5
Come on mate, even you wouldn't believe that.

kj_hova:

@ Ovamboland,
Dude your attachment backing the claims of a $5 is a bit lenghty. I didn't see such claims in the attachment. It will be nice of you to state the exact page.
Let me assure you in the meantime, hewever, that the fact that our crude is "sweet" has nothing to do with the cost of production. Do you know that an increased amount of our crude is mined offshore these days? Cost of that is killing!
From an economic point also, is it normal econs that the crude currently selling at about $90/barrel in the global market can have cost of production as low as $5
Come on mate, even you wouldn't believe that.

@Kj_hova,

Sorry for that link it does not discuss cost of production in clear details but go through the links below

http://www.supanigeria.org/index.php?option=com_content&task=view&id=21&Itemid=35

and this one

[url=http://www.nba-sbl.org/, /MR%20BONIFACE%20IGWE'S%20PAPER.pdf]www.nba-sbl.org/, /MR%20BONIFACE%20IGWE'S%20PAPER.pdf[/url]

Perhaps you don't understand that oil exploration business is a highly profitable one that is if you have the technology and can raise the huge capital cost required. That is why the government can collect a large portion as petroleum profits tax.

BTW i work in the oil & gas service industry and was involved in the development of Chevron's Agbami FPSO. Search for the total development cost add estimate something for the Operating cost and compare to the proven recoverable reserve. That should give you an idea of the cost per barrel.

Drilling and Production

With the advent of state-of-the-art exploration techniques, the average exploration success rate has moved from cumulative of about 11% to over 60% presently. This is among the best in the world. To date, some 5,284 wells have been drilled in the predominantly Niger Delta region of Nigeria; of these some 603 are discovery wells.

Current emphasis is on increasing the number of high performance wells capable of producing 20,000 bopd, and above. The average production costs per barrel are $3.5 and $5.0 onshore and offshore respectively. It is not surprising, therefore, that Nigeria continues to offer one of the most profitable investment climates, and a central pull to foreign investments.

http://www.napims.com/crude.html

And that is it from NNPC-NAPIMS website still entertaining any doubts?


The government can sell at about $20 to local refineries, still make a profit and keep the the cost of living and doing business low.
We got a lot of dumbasses in government.

as i said earlier, the cost of producing a litre of oil cannot be over N65; maybe the cost of processing one barrel may be though, which cost is respectively shared by DPK, diesel et al.
if you are arguing for subsidy for venezuela where petrol sells for about N3.68 (http://en.wikipedia.org/wiki/Gasoline_and_diesel_usage_and_pricing#Typical_gasoline_prices_around_the_world), as against about N150. means the govt is paying 146 bucks as subsidy per litre.(that almost cancels out our own subsidy) that for me is impossible to believe!!!!

Ovamboland:


The cost of production of crude oil in Nigeria hovers btw $15 - $40 depending on location onshore or offshore never the $65 you quoted. Some analysts even quote as low as $5 per barrel as cost when you consider that it is 'sweet' crude we have

www.ogbus.ru/eng/authors/Odularo/Odularo_1.pdf

i ddnt quote it. i simply lifted it from another person's post here.

fork adict:

Yes. That is what i am saying. Go figure!

Also note that many of those countries that subsidise do not have a population as large as ours. As Kjhova has rightly pointed out, population is a factor to reckon with when discussing issues like these.

Knight1:

as i said earlier, the cost of producing a litre of oil cannot be over N65; maybe the cost of processing one barrel may be though, which cost is respectively shared by DPK, diesel et al.
if you are arguing for subsidy for venezuela where petrol sells for about N3.68 (http://en.wikipedia.org/wiki/Gasoline_and_diesel_usage_and_pricing#Typical_gasoline_prices_around_the_world), as against about N150. means the govt is paying 146 bucks as subsidy per litre.(that almost cancels out our own subsidy) that for me is impossible to believe!!!!i ddnt quote it. i simply lifted it from another person's post here.

No sir, the cost of producing a liter of crude oil is more like 5 Naira in Nigerian fields.

The fact is a serious government will not discountenance the importance of employment and local production over other considerations. Go and find out, the Chinese government kept on subsidizing the cost of textile and plastic products to make it cheaper when exported to consuming nations like ours. At least until they have a foothold on foreign markets.

There is nothing wrong in our government keeping the price of fuel low with deft policies to reduce cost of living and doing business in a depressed economy like ours.
BTW we have no excuse in the world for our government run refineries to be out of service. If common militants can successfully run shadowy refineries in the creeks and cash-strapped Biafra can run and maintain a refinery through-out the Civil war th

While I'd like to thank every contributor so far.
Certain issues stands out. Namely
1, MONUMENTAL CORRUPTION in High Places
2,GLARING INEFICIENCIES & Obviously weak but overwhelmed leadership who appears to be a puppet in d hands of the Cabals who seem to have donated towards electionb and have to recover their "investment" one way or d other.
For me therefore, with or without d subsidy, nothing will change for the better except we can get rid of these present crops of leaders who do not seem to give a hoot about Nigerians.

@Ovamboland
i am equally against fuel subsidy. i suggest you read the whole thread; everytime i have even remotely sounded otherwise, it's cos i quoted another nairalander's comment on this thread!

@ Ovamboland.

I may be wrong and i stand corrected just in case. In my limited understanding of this topic, i assume fuel subsidy removal= FULL DEREGULATION of all the costs attached to drilling, refining, distribution and marketing of petroleum and petroleum products thereby making it commercially viable for private investors (local and international) to come invest in the industry. The above definition also presupposes that government WILL NOT fix costs in any aspect of endeavour in the oil industry either by fiat or otherwise but will let market forces dictate same. So if that be the case i herby state that crude oil will be sold to refineries at prevailing world market price at any point in time and not the ridiculous $5 per barrel that you stated earlier.

I can't agree less with ur view, but I dont think GEJ understand this because this decision will not
go well with his transformation agenda for Nigerians.

I hope he realizes this soon, the better for him.

this whole fuel subsidy removal thing is just fraud and it doesnt take serious arithmetic to detect it
PPPRA has said NIgerians consume between 32-35 million litres daily
http://www.nigerianbestforum.com/generaltopics/?p=54187

however dezianni claims we have spent 1.4 trillion on subsidy this year
divide 1.4tn by the N80 paid per litre, we get 17.5billion. divide that by (365-30 days of december)335 days,
means NIgeria pays for 52.2million litres per day!!!!

Where does the ( 52.2-35 =)17.2 million litres per day go?
that is the question our NASS should be asking!!!!!!!!!!!!

And nobody has responded to my question:

In which budgets has any government ever quantified this subsidy?