oyb:

think israelis and their security fence. think the berlin wall. i remeber in some

Lol. You expect the ruthless efficiency of the Israelis and Germans from naija?

go easy on the conspiracy theories , u're supposed to pass it not hold onto it

OK, so the former I'm pretty sure is accepted, that Abacha was non-native. Kashamu is more conspiracy theory.

Majority agree that life long subsidy is bad for one's country health but it is common sense to soften the landing before removing subsidy. In Nigerian context GEJ or adminstration can not trusted to manage the phantom savings. I have no faith in GEJ because he has no track record of achievements as an assistant or governor of one of the highest receipts of federal allocations with a population of under 1 million to manage.

what is going to happen to Inflation?. If we are believe that refineries are going to be built, it is going to take at least 4 years. which might be too late.

Katsumoto:

The US example you gave is different because the US isn't losing money across the border. US assets are not smuggled over the border into Mexico. It is the responsibility of the government with rare commodities/assets to prevent it being smuggled across the border.

The example I think is a pretty good one.

The commonality is not "rare assets smuggled across the border" or "losing money across the border", but a common inability to control what enters or leaves.

In that respect, both the US and Nigeria have failed, due to the efforts of enterprising smugglers who in both cases profit from the bans.

Is Libyan oil smuggled into Egypt/chad in huge quantities? Is Venezuelan oil smuggled into Colombia/Guyana in huge quantities.

Is it not? How do you know? Provide evidence of this assertion. A priori I would assume that whenever a price/wealth differential exists, people will act to reduce it. I haven't looked into the case of Venezuela at all, but I would be surprised if there wasn't massive smuggling.

Let me give another example; P&G products are cheaper in Poland than in Russia. On the Russian border to get into Belarus, the guards don't check for such consumer goods but on the same border to get into Russia, Guards check for cheap consumer goods coming from Poland because they are significantly cheaper in Poland and the Russian Government together with the cartels in Russia try to limit the flow of Polish goods getting into Russia.

And how effective is the Russian government in preventing this smuggling? That they attempt to do so doesn't mean they are any more effective than the Americans or we Nigerians have been.

Again, provide evidence.

Similarly, US customs don't check your goods when driving into the US from Canada but Canadian customs will search your car for cheaper goods from the US.

Again, see above.

I understand that it is impossible to completely eliminate smuggling but the Nigerian government is not even attempting to prevent/reduce smuggling.

So you consider their current efforts insufficient. How would you propose substantially improving it? While presumably not spending billions of dollars a year doing so?

I maintain, the Nigerian people shouldn't suffer for their government's inability to maintain its borders. There are quite a few policies that the government could have pursued to reduce smuggling before it chose to remove the subsidy.

Kindly list a few of them.

Secondly, this $6/7 billion subsidy removal is capable of contracting the Nigerian economy leading to job losses, wealth destruction, and an unbalanced income distribution. In plain language, money will be taken from the people and embezzled by government officials.

We discussed this several months ago, and further media reports that have come out only confirmed my suspicions. How much of this $6/7 billion actually goes to the common man?

10%? 20%? So let's suppose they remove the subsidy and embezzle 50% of it, but the remaining 50% actually goes for good purposes.

Does this not represent an improvement over the previous situation?

What difference does it make if Nigerian government officials steal 50% of the money intended for oil subsidy, or Benin Republic, Niger Republic, Cameroon steal 50%? Or the oil marketers steal it? In all three cases, minimal impact on the common man.

ekt_bear:


Lol. You expect the ruthless efficiency of the Israelis and Germans from naija?  

did gej not promise us transformation?  

blacksta:

Majority agree that life long subsidy is bad for one's country health but it is common sense to soften the landing before removing subsidy.

When we first discussed this topic 8-9 months ago, I suggested slowly phasing it out over time rather than removing it all at once.

I think it is less politically costly to do this, while having the same positive long-run impact.

oyb:

did gej not promise us transformation?  

Q: How can you tell when a politician is lying?

A: When his lips are moving.

Finally, if the removal of this subsidy means the success of this Chinese refinery in Lagos and other such foreign investment, then I am very glad that it is gone.

ekt_bear:

When we first discussed t[b]his topic 8-9 months ago[/b], I suggested slowly phasing it out over time rather than removing it all at once.

I think it is less politically costly to do this, while having the same positive long-run impact.

Is this a contradiction-  Your argument favors subsidy removal with the condition that government put in measures to soften the landing.  The question is what has the government done in last  8 to 9 months to reduce the suffering  - absolute nada. I hear GEj has set up committees to manage the phantom savings. Why wait till now.   THe utlimate issue here is " TRust" .  Nothing will change and inflation will sky rocket.

ekt_bear:

Finally, if the removal of this subsidy means the success of this Chinese refinery in Lagos and other such foreign investment, then I am very glad that it is gone.

I dont think so - the notation that private individuals will be failing over themselves to build refineries in Nigeria is not correct.

this band aid cure makes absolutely no sense whatsoever. once people get adjusted to the new price hike, smuggling will go on as usual.
aren't they supposed to control the borders to solve the problem?

I predict there will be more more oil thefts in the months to come. If we can't protect our borders, how can we protect our pipelines.
http://fuelfix.com/blog/2011/11/02/shell-says-unprecedented-oil-thefts-target-nigeria/

ekt_bear:

The example I think is a pretty good one.

The commonality is not "rare assets smuggled across the border" or "losing money across the border", but a common inability to control what enters or leaves.

In that respect, both the US and Nigeria have failed, due to the efforts of enterprising smugglers who in both cases profit from the bans.

I agree with your points with regards to the existence of a porous  border but still maintain that people squatting on your ranch is not the same thing as your workers stealing your livestock and selling it to others without your consent.

ekt_bear:


Is it not? How do you know? Provide evidence of this assertion. A priori I would assume that whenever a price/wealth differential exists, people will act to reduce it. I haven't looked into the case of Venezuela at all, but I would be surprised if there wasn't massive smuggling.
And how effective is the Russian government in preventing this smuggling? That they attempt to do so doesn't mean they are any more effective than the Americans or we Nigerians have been.

Again, provide evidence.

Again, see above.

I provided an assertion in the above examples; I think the onus is on you to prove that I am wrong. I stated that I didn't kill a man; regardless of whether the man is actually dead, you have to prove that I actually killed him.  

ekt_bear:


So you consider their current efforts insufficient. How would you propose substantially improving it? While presumably not spending billions of dollars a year doing so?

For one, I would attempt to tackle the HUGE elephant in the room - corruption. You know my views on corruption in Nigeria.

ekt_bear:


Kindly list a few of them.

1. Trimming the cost of government e.g No Nigerian senator deserves to earn $1.2million annually. That is the times what the US President earns.
2. Ensuring that revenue is not only accounted for but judiciously spent
3. Promulgating policies that ensure wealth is created
4. Tackling wastage/inflated contracts for government projects
5. Fix the bloody existing refineries; Nigeria should not be importing petroleum products

ekt_bear:



We discussed this several months ago, and further media reports that have come out only confirmed my suspicions. How much of this $6/7 billion actually goes to the common man?

10%? 20%? So let's suppose they remove the subsidy and embezzle 50% of it, but the remaining 50% actually goes for good purposes.

Does this not represent an improvement over the previous situation?

What difference does it make if Nigerian government officials steal 50% of the money intended for oil subsidy, or Benin Republic, Niger Republic, Cameroon steal 50%? Or the oil marketers steal it? In all three cases, minimal impact on the common man.

This is very easy. A man put gas in his car on the 31st of December at 65Naira/Litre and the following day, he has to spend 141Naira/Litre. That is a clear and quantifiable benefit. Another example, a woman takes a bus from Ikeja to CMS on the 31st of December paying 110Naira but pays 270Naira the following day. That is the real benefit; having money to spend on other things that the Nigerian government does not provide like health, education, cable TV, recharge cards, a meal at a Bukka. With the removal of the subsidy, he has less to spend on these things.

The Nigerian government has a poor record in terms of judicious spending. You will struggle to justify government spending in the last 25 -35years. What did the Nigerian government spend $60 Billion on last year that benefited the average Nigerian?


BTW, I will be back later to continue the debate.

There is a rumour that Wale Tinubu has been arrested for protesting the subsidy.

People like that only protest things that are not in their favour, Oando had no principles when it came to buying shares in Abacha's private refinery in Sierra Leone that was built specifically to milk Nigeria off through so-called subsidies.

Those venting off anger like baby volcanoes are really only slaves fighting to keep their enslavers.

Beaf:

There is a rumour that Wale Tinubu has been arrested for protesting the subsidy.

People like that only protest things that are not in their favour, Oando had no principles when it came to buying shares in Abacha's private refinery in Sierra Leone that was built specifically to milk Nigeria off through so-called subsidies.

Those venting off anger like baby volcanoes are really only slaves fighting to keep their enslavers.

Firstly, like you said, it is a rumour

Secondly, Wale Tinubu protesting and being arrested does not prove the merits/demerits of subsidy removal. That could be a plain gimmick.

Jenifa_:

this band aid cure makes absolutely no sense whatsoever. once people get adjusted to the new price hike, smuggling will go on as usual.
aren't they supposed to control the borders to solve the problem?

I predict there will be more more oil thefts in the months to come. If we can't protect our borders, how can we protect our pipelines.
http://fuelfix.com/blog/2011/11/02/shell-says-unprecedented-oil-thefts-target-nigeria/

If the prices of oil isn't cheaper in Nigeria than its neighbors, then there is zero profit in smuggling. Hence no incentive for anyone to do so.

If the prices at the McDonald's in my town are higher than that of the next town, nobody will trek over from there to here when they want a Big Mac.

You are taking that post by Obiagu1 serious or just being mischievious?

In any case, GEJ is wasting time not coming out with measures to help Nigerian cope with this obviously people-damaging, perhaps fiscally-necessary, policy.

He cannot afford to wait 6 months to address this - more like a couple of weeks.

So, better relay that back to him through your channels.

Beaf:

There is a rumour that Wale Tinubu has been arrested for protesting the subsidy.

People like that only protest things that are not in their favour, Oando had no principles when it came to buying shares in Abacha's private refinery in Sierra Leone that was built specifically to milk Nigeria off through so-called subsidies.

Those venting off anger like baby volcanoes are really only slaves fighting to keep their enslavers.

Ekt bear, the Nigerian govt has no integrity to stake anything on.

The new body (SURE) appointed to manage the subsidy money will do nada without the political will to fight runaway massive corruption. I'm yet to see that will.

I must say though, GEJ did not bring corruption to Nigeria, just that he's shown no evidence to convince me he can tackle foundational corruption problems.

Comparing Nigerian border and custom control to America's is just not worth discussing.

ekt_bear:


If the prices of oil isn't cheaper in Nigeria than its neighbors, then there is zero profit in smuggling. Hence no incentive for anyone to do so.

If the prices at the McDonald's in my town are higher than that of the next town, nobody will trek over from there to here when they want a Big Mac.

The demand in the neighboring countries will not disappear; what stops marketers from causing petrol shortages in Nigeria so as to sell at a higher price in neighboring countries if smuggling is not reduced/eliminated?

Katsumoto:

I agree with your points with regards to the existence of a porous  border but still maintain that people squatting on your ranch is not the same thing as your workers stealing your livestock and selling it to others without your consent.

Heh. Squatting on your ranch? If it only it were that pleasant.

The impact in some cases is pretty damn negative. For example, look into how illegal immigrants place stress on the public school and health systems (an illegal Mexican woman deciding to give birth at the emergency room and not paying the hospital a dime for the tens of thousands of $$$ she incurs in bills., or a guy who sends his illegal son to public school for his K-12 education.)

For an even sharper example, read a bit about the Mexican drug trade.

I provided an assertion in the above examples; I think the onus is on you to prove that I am wrong. I stated that I didn't kill a man; regardless of whether the man is actually dead, you have to prove that I actually killed him.  

Any claim requires proof. This is not a court of law, I am not a prosecutor and you are not a defendant, so your analogy doesn't quite work.

If you claim that the man is a pretty good mechanic (or at least, not a bad one), then it is up to you to provide evidence for this.

However, I don't think it will take too much effort to show that you are wrong in the case of Venezuela, for example. I'll take a look at it later in the evening and post.

For one, I would attempt to tackle the HUGE elephant in the room - corruption. You know my views on corruption in Nigeria.

1. Trimming the cost of government e.g No Nigerian senator deserves to earn $1.2million annually. That is the times what the US President earns.
2. Ensuring that revenue is not only accounted for but judiciously spent
3. Promulgating policies that ensure wealth is created
4. Tackling wastage/inflated contracts for government projects
5. Fix the bloody existing refineries; Nigeria should not be importing petroleum products

This is very easy. A man put gas in his car on the 31st of December at 65Naira/Litre and the following day, he has to spend 141Naira/Litre. That is a clear and quantifiable benefit. Another example, a woman takes a bus from Ikeja to CMS on the 31st of December paying 110Naira but pays 270Naira the following day. That is the real benefit; having money to spend on other things that the Nigerian government does not provide like health, education, cable TV, recharge cards, a meal at a Bukka. With the removal of the subsidy, he has less to spend on these things.

The Nigerian government has a poor record in terms of judicious spending. You will struggle to justify government spending in the last 25 -35years. What did the Nigerian government spend $60 Billion on last year that benefited the average Nigerian?


BTW, I will be back later to continue the debate.  

I'll return to the above text in the evening. Have some errands to run for now.

Kilode?!:

Comparing Nigerian border and custom control to America's is just not worth discussing.

In the context of what I have said in this thread, I think it is highly relevant.

If one does not see the connection between the two situations, then they should probably put in their contacts or wear their reading glasses

If it is so clear to you why the analogy is bad, kindly say why.

Katsumoto:

The demand in the neighboring countries will not disappear; what stops marketers from causing petrol shortages in Nigeria so as to sell at a higher price in neighboring countries if smuggling is not reduced/eliminated?

I am not claiming that it will disappear entirely. It cannot, while Nigerian refined petrol products are cheaper.

However, clearly the demand will diminish substantially, and cannot remain constant.

Lol. The post above by Beaf is exactly why I am second-guessing myself a bit regarding this policy.

No matter how good an idea seems to you, if you look up and see that the people also agreeing with you are scumbags, then you sort of pause and reassess.

Anyway, with all that said, I am cautiously optimistic.

Katsumoto:

The demand in the neighboring countries will not disappear; what stops marketers from causing petrol shortages in Nigeria so as to sell at a higher price in neighboring countries if smuggling is not reduced/eliminated?

Exactly. That is the reason why there is no comparison. We do nada to fight lawbreakers and cheaters.

There is no point comparing a country that proactively fights smuggling to one that sits back and take whatever comes up the a**.

Read the story below about honey smuggling in the US, I can provide scores of examples and stories about smuggling prevention in serious societies. What we do in Nigeria is rent collection by a few corrupt custom and govt officials not smuggling prevention.

Our Govt give corrupt people no pain, they lack the will to punish cheaters and lawbreakers, but quick to squeeze life out of poor folks.

Story--> http://m.npr.org/story/142903171?url=/blogs/thesalt/2011/12/13/142903171/funny-honey-bringing-trust-to-a-sweet-sector-fraught-with-suspicion



From the link posted, it's obvious to see that smuggling is an issue in America, afterall, it's part of our human economic interactions but the prevention efforts are not the same at all. In Nigeria we make little to no effort.

But we are quick to remove subsidy with no cushion for our suffering masses. Ok then.

@ekt_bear
Only a thorough reform of the system is going to work, and that is not going to be achieved by this jack-up in prices alone.

The main benefit of this removal is that it liberates the government from spending N1.3trillion on subsidy in 2012. Beyond that it does nothing else that is positive including:

1. We already have three refineries that are not running. It is not as if the fuel coming out of those refineries did not benefit from the subsidies. Still, they couldn't be kept running. You mentioned the Chinese refinery's success. Unless it is already built there is no relationship between this action and its success. This was the exact argument in 2008 when the FG jacked up the price of electricity saying it will lead to increased production. We all know how well that has worked out.

2. For the forseeable future Nigeria is going to be importing fuel. That means nothing would change on the external end - in that our foreign exchange earnings would still be used for that purpose. This nullifies SLS suggestion that removing subsidies will prevent loss of foreign exchange. Most of the reduction in fuel consumption would not be due to curtailing smuggling activities, but from reductions in demand, which eventually translates into lower economic performance. This will slow down the growth of the economy from the 7% that GEJ is so proud of to between 4 & 5% in 2012.

3. The only potential savings, which I believe is magnified way beyond its size is smuggling and some marketers that, with the collusion of NNPC, simply import nothing but collect subsidies. This savings will be swamped by the negative economic and political fallout. GEJ said he was battle-ready for this, but if his handling of BH is anything to go by he is just bragging.

4. The FG already budgeted all the potential revenue estimated for 2012. There are no extra funds coming in from removing the subsidies - nothing extra to distribute or share with states or spend on promised projects. It is merely the negative side of the ledger that is in play here. In other words, if the subsidy had been kept the expenditures currently before the NA would have to be scaled down by 25%.

5. Lastly, 25% of the current budget is probably going to end up in corrupt hands - that would have been the place to start for a responsible government. In addition, the illegal refining of stolen crude just became more lucrative - look for oil theft from Nigeria to increase both at the small and ship scale.


Although GEJ has refused to address these issues one thing he cannot afford to ignore is the impact on the average Nigerian, which is a real and immediate effect.

HE MUST PROVIDE DIRECT AND SIGNIFICANT PALLIATIVES IN A TIMELY MANNER.

ekt_bear:


If the prices of oil isn't cheaper in Nigeria than its neighbors, then there is zero profit in smuggling. Hence no incentive for anyone to do so.

If the prices at the McDonald's in my town are higher than that of the next town, nobody will trek over from there to here when they want a Big Mac.

He he he!!! It makes u feel worried when Beaf suddenly turns around to support what you post here on NL - the same feeling yesterday when he 100% endorsed the post on "Removal of Subsidy: The Game Plan".

GEJ has turned Nigeria into a true animal farm, and Beaf his squealer-in-chief.

Look for him to return to his old ways, if this subsidy episode is resolved - this was the exact pattern of his b4 and after GEJ election behavior.

ekt_bear:

Lol. The post above by Beaf is exactly why I am second-guessing myself a bit regarding this policy.

No matter how good an idea seems to you, if you look up and see that the people also agreeing with you are scumbags, then you sort of pause and reassess.

Anyway, with all that said, I am cautiously optimistic.

ekt_bear:

In the context of what I have said in this thread, I think it is highly relevant.

If one does not see the connection between the two situations, then they should probably put in their contacts or wear their reading glasses

If it is so clear to you why the analogy is bad, kindly say why.

Hehe my contacts are on, they might need some lubrication though.  


I was referring to your statement here:

Honestly I'm not even sure it is that easy in general, when you have the existing wealth/cost gradient between Nigeria and its neighbors.

Hell, how effective is the US at patrolling its border with Mexico? That border is basically wide open as far as drugs go, and pretty permeable as far as human beings go

Here you are comparing US border control efforts with Nigeria's

I don't think that is a good analogy for this discussion.

1. You referred to immigration, here we are taking about commodity.

2. They actually police their border well and make visible efforts to prevent smuggling, not same here.

3. US custom is more efficient, can't be compared with our custom with their 10000 ghost workers as at 2009, creating overnight millionaires out of ordinary civil servants.

I can go on, but the point is that the efforts towards addressing smuggling and economic sabotage are not the same at all.

I don't believe removal of fuel subsidies will substantially reduce smuggling to neigbhouring countries.

@65/litre , it was smuggled to countries to be sold at higher prices (say 120/litre)

Now @ 141/litre , those neigbhoring countries still have the same or higher demand, market forces will only make it attractive for fuel to be sold at a new higher price in those countries (say N200/litre).

The smuggler still has a market. Nothing really changes, Purpose defeated !

Well, this is not really a valid argument. They can import their own fuel from legitimate places, just like we will be doing in Nigeria - at the same price.

The real worry is that illegal refining of stolen crude is now more lucrative, and would likely increase several fold.

emiye:

I don't believe removal of fuel subsidies will substantially reduce smuggling to neigbhouring countries.

@65/litre , it was smuggled to countries to be sold at higher prices (say 120/litre)

Now @ 141/litre , those neigbhoring countries still have the same or higher demand, market forces will only make it attractive for fuel to be sold at a new higher price in those countries (say N200/litre).

The smuggler still has a market. Nothing really changes, Purpose defeated !

ekt_bear:


If the prices of oil isn't cheaper in Nigeria than its neighbors, then there is zero profit in smuggling. Hence no incentive for anyone to do so.

If the prices at the McDonald's in my town are higher than that of the next town, nobody will trek over from there to here when they want a Big Mac.

of course price of oil will be naturally cheaper in Nigeria because we are a major oil producing country. subsidy or no subsidy.
there is no reason that the price of oil should be more expensive in Nigeria than in benin or togo. If that is the case then what we have in our hands is an unfair price hike.

it's cheaper and more efficient to monitor the borders. keeping in mind, it's not only oil that's being smuggled from the country.
besides raising fuel price will reduce domestic demand and affect the economy worse than smuggling does.
or is there something i'm not seeing or understanding? I don't get it.

the funny thing is that in the past few years, we have been having surplus accounts due to high price of crude oil. and this has account still gets wiped out due to corruption. we can't save money for nothing. what makes me believe that the so called "subsidy" exists or that we will manage the money well?

koruji:

Well, this is not really a valid argument. They can import their own fuel from legitimate places, just like we will be doing in Nigeria - at the same price.

The real worry is that illegal refining of stolen crude is now more lucrative, and would likely increase several fold.

hmmm OK, but something is puzzling, how come ghana now sell petrol @ 187/litre?

why have they not imported from the same legitimate place @141/litre?

emiye:

hmmm OK, but something is puzzling, how come ghana now sell petrol @ 187/litre?

why have they not imported from the same legitimate place @141/litre?

is ghana using naira or cedes ?

alj_harem:

is ghana using naira or cedes ?

Ofcourse Naira,
and since Naira is stronger than the currencies of those countries the fuel is smuggled to, dont you think it still creates lots of room for the smuggling to thrive ?

emiye, you have not answered me. Is ghana using Naira or cedes ?

because I would not lie to you, it is VERY annoying the way people use other countires with higher value in currency and convert it to naira or dollars then use it as[b] A COMPARISON[/b] to Nigeria fuel price.

1. Each country have different minimum wage

2. each country have different standard of living

3. each country have different exchange rate and as such there is NO COMPARISON