Alright.

I didn't get a chance to look into Venezuela. But as for the rest:

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

Wonderful things of course, but would not reduce smuggling in a setting in which the price of refined petroleum had remained the same.

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.

My point is, how much of the 6 of 7 billion actually reaches the common man? We can all point to individuals who benefited. But if we sum up their total benefit over the course of the year, how much does it actually end up being?

As I said, it may have been as little as 20% of the amount spent.

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?

If this is to add to your point that the government is untrustworthy, I am not claiming that it is a good government in general. But I believe that the fuel subsidy is sufficiently bad as a policy that it makes sense to at least explore another solution.

Katsumoto:

Demand will not disappear without the presence of a superior product or substitute. In this scenario, other west Africans may be priced out of petroleum products coming from Nigeria but will not stop demanding it. In the economic equilibrium of the demand/supply curve, supply will reduce with demand remaining constant resulting in lower quantity and higher prices in the countries relying on products from Nigeria.

With higher prices in other countries, Nigerian marketers will simply seize on the porous Nigerian borders and divert products to other countries causing shortages in Nigeria. This scenario is all too familiar.

The price of Nigerian refined petrol products has increased substantially. The demand of a Ghanaian or man from Cameroon must diminish from whatever it once was, due to this higher price point.

I am not claiming that it now demand =0, but my point is that demand_new < demand_old.

Jenifa_:

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.

I have never understood this argument. I guess it is marginally cheaper to transport crude oil to a refinery in Nigeria if your target is the Nigerian market.

But taking the crude, shipping it abroad and refining it there probably isn't much more expensive.

Stated differently, one shouldn't expect that the price of producing refined oil will be much cheaper in Nigeria than elsewhere. Marginally yes, but not much.

Assuming that there aren't some subsidies along the way.

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.

I don't think border security is cheap. And if you are spending $2 billion a year to prevent smuggling out the $7 or 8 billion a year or so you spend on subsidy, somehow that seems wasteful as a policy. . .

@Topic

and part of these bloody rip off is those who are not producing oil dying to have it for free. Funny country and people. Bloody ingrates.

ekt_bear:

I have never understood this argument. I guess it is marginally cheaper to transport crude oil to a refinery in Nigeria if your target is the Nigerian market.

But taking the crude, shipping it abroad and refining it there probably isn't much more expensive.

Stated differently, one shouldn't expect that the price of producing refined oil will be much cheaper in Nigeria than elsewhere. Marginally yes, but not much.

Assuming that there aren't some subsidies.

What don't you understand? That transportation is costly? Or that importation is costly (import duties)? If you think transportation of oil from Nigeria to the US will only make it marginally costly, can you then explain why cars shipped in from the US usually cost double the price of the same car in the US? Or you think it's just the greedy Nigerian at work again?

logica:

What don't you understand? That transportation is costly?

I don't think transportation is costly, as a percentage of the value of the good. What can it cost to transport say a barrel's worth of crude out of Nigeria. 1 or 2% of the roughly ~$100 per barrel?

These are not small boys doing the transportation, they are huge corporations with tons of money who have refined the logistics down to a science.

If transportation were the dominant cost, then China would not be the factory of the world. . .

Or that importation is costly (import duties)?

Are there import duties on refined fuel?

If you think transportation of oil from Nigeria to the US will only make it marginally costly, can you then explain why cars shipped in from the US usually cost double the price of the same car in the US? Or you think it's just the greedy Nigerian at work again?

Eh. . . mostly duties. If those were eliminated, the cost would be quite a bit less. Then you could fill several containers worth of cars and reduce your cost per car to something fairly negligible.

One other thing.

Why do we care if smuggling continues or not once the subsidy is removed?

Who cares? It won't be costing Nigeria any money, at that point.

I don't think we are on the same page. I only tried to show you that your suggestion of a marginal price differential on importation is incorrect. For a proper analysis check Prof Tam David-West's analysis which showed that even @ 65/liter there was no subsidy; rather there was price inflation.

I don't need to read his analysis to know that he is clearly mistaken, if he thinks that N65/liter doesn't represent a subsidy.

Anyway, as I said, marginal price differential is true. . . transporting goods by sea is cheap.

ekt_bear:

I don't need to read his analysis to know that he is clearly mistaken, if he thinks that N65/liter doesn't represent a subsidy.

And you think you know more than a former Petroleum Minister?

I am not one for whom appeal to authority generally works.

Regardless of his previous jobs, titles or positions, he is either wrong or he is right on this issue.

His claim that oil at N65/liter doesn't represent a subsidy is simply wrong.

Lol. He's either right or wrong; but he's more likely correct than you. You are making pronouncements on a sector you barely know compared to the man, yet you declared he's wrong (even without seeing his analysis). Is that logical? Have you ever worked in the sector or even NNPC? The man made his analysis pretty public yet I don't see NNPC refuting it. They have been mute, yet you think you know better.

I doubt it is possible to even buy a liter of crude for N65 anywhere at market rates, let alone a liter of refined.

It probably would not take too long to debunk this particular assertion of his. . . I guess you should probably just google around a bit for yourself to see that he is wrong.

Alright. . . so about 30 seconds of googling produces this: http://energyalmanac.ca.gov/gasoline/margins/index.php

Go ahead and run through the #s yourself, you'll get the obvious answer

You are a funny guy. What does the state of California have to do with NNPC? It appears you don't even know what the real crux of the matter is.

sigh

Do the calculation I suggested, then do a bit of thinking

Otherwise there isn't much point in continuing this discussion.

ekt_bear:

sigh

^
Now you see that its emotions not logic that drives the sentiments involved.