jp philips:
lets talk about this present day subsidy
regime, the Cbn gov has already confessed
he has evidence of round tripping , he said
he paid subsidy on 15 fake vessels
approved by customs.
what did madueke do? nothing
the reasons investors did not build
refineries over the years was lack of cheap
crude but the biggest reason is corruption
how?
licences were given to companies without
the financial muscle to build refineries also
part b of the license clearly states that
these armed robbers have oil lifting license
embedded in their refining license,
tell me who will choose refining over lifting
where he makes instant profit and inflated
subsidy
what did madueke do? nothing as usual
do you know that NNPC does not have
storage facilities for all those millions of
products they are quoting and importing.
how exactly does Nnpc wish to store
30million litres of pms?
do you know that these fg goons went
ahead to licence importers without storage
facilities leading to the govt paying extra
for storage on a product they are paying
over 70 naira as subsidy can u beat this
stup1dity and incompetence?
what did iweala and madueke do? nothing,
do you know that these leppers in Nnpc
have no grading structure for imported
pms low grade,mid grade and high grade
all are pms same subsidy, same price even
ethanol blends have subsidy paid on them,
can you beat that?
even abroad where the products come
from have different prices. some are far
cheaper than others which ordinarily
should attract low subsidy
what did madueke do? nothing.
do you know that these bingos at Nnpc
dont maintain their pipeline networks
which ordinarily should link one depot to
the other,
they have to pay extra for tankers
transporting these products all are
subsidies.
eventhough their foreign jv partners are
maintaining over 1000 pipeline networks in
Nigeria.
what did madueke do?
nothing.
do you know that under madueke's watch
demurrage is paid as subsidy to these
importers .
how cant they be reponsible for their
import schedule?
is it not commonsensical for madueke to
prioritize the discharge of those vessels
quickly in tank farms as not to attract
demurrage for a product you are
subsidizing?
and they want us to tighten for a better
future? which future ? can iweala,Sls and
madueke plan for a sustainable future if
given the task?
dead failures.
for every extra kobo you pay on pms you
paid for madueke's incompetence.
now they can see high expenditure but
cant see how their incompetence is
inflating the subsidy regime.
Do u seriously think iweala will see it
comming if it was true that economy will
crash?
Let us analyze the genere and politics of
these issues
There are more misnomers than facts
surrounding this subsidy brouhaha.
First,
the Govt said the economy will collapse,
ridiculous indeed
secondly,
the Govt said
oil importers are a 'cabal', nearly fell off
my seat.
Comrades, there are no cabals, in 2009 the
scarcity of petroleum products became
intense and the Govt admitted that Nnpc
through its subsidiary PPMC has failed
Nigerians by their inability to meet up with
the supply of pet. Products and that
phenomenon gave rise to licensing of
some people to 'assist' the Nnpc in doing
their job for which they are paid for.
Please don't forget that hitherto, Nnpc has
been doing the importation and refining
themselves before corruption eroded their
common sense.
These importers went abroad and came
back with a price Nnpc is already aware of
comprising of logistics, storage and
administrative costs, these were quantified
before they arrived at a price.
The FG now fixed a price tag of 65naira on
Pms and agreed to be reimbursing the
importers the balance not oblivious of the
fact that the landing cost is higher than
the stipulated price
To my greatest chagrin, the Jonathan’s
administration woke up and termed them
'cabals' who are fleecing the nation.
Assuming Ruben Abati goes abroad to buy
a TM underwear for 1k and decides to sell
it 1.5k adding purchase price plus logistics
plus profit and the Govt tells him to sell at
900 naira, wont he ask for the 600naira
balance? When the incompetent NNPC
agrees to reimburse him, then he has
become a cabal stealing from the GOvt?
We are not docile, If Nnpc lived up to their
responsibility, we won’t have need for the
importers in the first place.There is no
doubt that the subsidy regime is met with
corrupt practices, is it not the
responsibility of the govt to clamp down on
those malfeasance?
the Governor of central bank confessed
during the town hall meeting that he paid
subsidy to 15 fake vessels who connived
with customs to falsify their papers.
is this not fierce corruption?
and we have a shameless commander in
chief? by the way, how many naval officers
patrol our waters on tax payers account?
efcc,icpc etc
The only solution that came to the minds
of this disgruntled PDP administration is to
remove subsidy into-to not minding its
inflationary consequences.
This is the si1liest approach any human
being with brain if they have one can
summon.
Thirdly,
Jonathan insulted the intelligence of
Nigerians telling us that we don't benefit
from this subsidy except for the importers
and he had the unbridled temerity to be
advertising it on NTA saying the rich are
getting richer.
This people are demons.
When Ruben abiati's mother goes to the
market to buy vegetable at a price, does he
not know that the seller included cost of
transportation to that price?
So when the transporter buys PMS @
65naira and fixes his price based on that,
he says his mother did not benefit from
the subsidy that guaranteed the price in
the first place?
In a generator driven economy like ours?
It is either Ruben Abiati and his employers
are drunks or they think that Nigerians are
m0rons.
I feel sorry for people that think that
competition will crash the deregulated
price erroneously juxtaposing it with GSM.
Do you know that the price of crude being
the raw material for refined pet. Products
are sold at the same price world overl?
If you agree to this, then, even if you
deregulate and license 5million importers
the product will still be expensive because
crude itself is expensive.
You will still need to subsidize it to
65naira, exactly why deregulation of diesel
in part did not work.The only reason you
have not bought diesel @ 200naira is
because there are so many illegal
refineries who bunker crude, settle JTF and
refine diesel at a lower price.
This people still pose a great threat to the
importers who buy at a higher price that is
why you get diesel @ 140naira elsewhere
but in the delta i buy as low as 70naira. At
this verge you will not over rule the fact
that these unscrupulous elements
contribute to the availability of diesel, if
you are in doubt, anywhere you see cheap
diesel, ask the dealer the source of his
consignment If he is honest he will tell you
the truth, when i was told, i took an hr
20mins boat ride to a remote village in the
delta between Belema and Kola
communities and i saw the local refinery
myself.
Conduct a chemical test on those cheap
diesels if you are not convinced and you
will realize a lot of additives are
missing.Sounds incredible but those are
the realities on ground.You now know why
many importers in the delta hardly have
diesel.
I still feel sorry for those who think the
Govt should build more refineries, that will
not solve the problem either because there
is no cheap crude to supply these
refineries.
Do you know that even the petroleum
products from our present refineries at a
disappointing capacity attract subsidy?
that is what Sanusi is not telling Nigerians.
This Sanusi's buisness model of increasing
local price to attract investors is
misleading.
He should ask himself why so
many buisnesses left the USA for Asia and
Arrica between 1998 till 2008.
The reason was because cost of doing
buisness in America was high so there was
need to tap into Africa's cheap land and
asia's cheap labour.
If you increase the pump price the spiral
inflation will discourage investors, you pay
high for land,labour, enegy etc.
A brief insight in Nigeria's oil and gas
model gives us a better outlook
The oil production of Nigeria stands at
2.37 million barrels of crude daily. Nigeria
get this crude in a JV (joint venture) with
IOC's (international oil companies) and the
Nigeria's cut stand btw 55% to 60% of the
lot, if we go by 60% then, that gives a
total of 1.4m barrels daily.If we average
the crude price from 2009 till date, the
price falls close to 100usd/bbl.In that case,
Nigeria makes 140,000,000usd daily from
this JV.
Nigeria has a policy called DSO (domestic
supply obligation) which mandates
250,000bbl/d of this crude to be refined
and consumed locally,In monetary terms,
the Nigerian govt is giving us
25,000,000usd worth of crude to refine.
Our three refineries at optimum capacity
utilizes about 450,000bbl/d which gives
45,000,000usd in monetary terms in other
words, the price of raw material in this
case, crude, accrued to our refineries
comes at 45m usd per day
, if you add refining cost and profit of 6usd
per bbl,The total cost becomes
270,000,000usd per day.There is no way
you can refine that crude at that price and
sell it 65naira/ l and make profit.
Meanwhile, once we mark out that 45m
usd worth of crude for our refineries
(assuming they are working at optimum
capacity), the govt has already lost 45m
usd from their 140m usd daily earnings
(which will affect budget implementation)
and after refining will still spend more
money to subsidize it to 65naira/ l
(you now understand why NNPC subsidizes
the products from our refineries)
With this analogy, you will agree with me
that if all our refineries are working
optimally, the govt will spend 3times our
present day subsidy to bring the pump
price down to 65naira/l .
So, for those of you clamoring for
refineries should be careful what you wish
for because there is no cheap crude for
you to refine.
I have argued abinitio that the sales of
other derivatives of crude will bring down
the cost of most sort PMS,DPK etc but
after doing some feasibility studies, i
realized i was dead wrong.
I further argued that to make cheaper
crude available for our refineries, the Govt
should reduce the price at which it is
supplied unfortunately, the senate
mandated the then GMD of Nnpc that the
DSO must be sold at international crude
price.
This i believe was proposed for the
following reasons:
1 the refineries are working below capacity
so what the heck does Nnpc use the crude
for?
2, there is a benchmark on crude price for
budget implementation.With these
reasons, any existing or yet to exist
refinery in Nigeria will get crude at a high
price and must need subsidy to sell at
65naira/ l, at this cross road, the then
GMD of Nnpc decided that all crude
should be exported and subsidy be paid on
imported products.
At this verge, i must reiterate here that
competition amongst importers will only
crash the profit margin but not cost
price.Even if every Nigerian becomes an
importer of pet. Prods, we can never
change the fact that crude in the int l
market is already expensive before thinking
of refined prod. So we must need subsidy
to make profit.
Before this issue of subsidizing petroleum
products can be addressed,You must have
the following at the back of your minds:
1, Nigeria pegs a benchmark on crude
prices to enable it implement budget. This
stands at 75usd/bbl. And this crude is sort
from the JV
.2, if crude price exceed the benchmark
above, Nigeria makes excess crude revenue
(ECR) 3, conversely, if we make excess
crude revenue, the price of subsidy on
refined products shoot up.With the above
analogy,
One can argue that the ECR be used to
subsidize imported petroleum products
since both are a function of each other
unfortunately in Nigeria, it comes with its
own challenges.
By law, the constitution clearly states that
all revenue accrued to the FG be shared
amongst the three tiers of Govt.This alone
makes it illegal for the FG to keep the ECR
to itself for whatever reason.
This is where the wahala started, during
GEJ's campaign, he astronomically
increased workers salary without
consulting the state Governors,most
Governors have refused to pay on the
grounds that they cannot afford it.
On that grounds Taraba, jigawa and some
other states have a genuine case.With the
above development, the states started
scrambling for funds and remembered the
ECR and insisted it must be shared to
enable them pay the new wage and
develop infrastructures.
you now understand why all state
governors are for subsidy removal
including the literally "one of us" comrade
Adams oshiomole, because they know it
will be shared just like the ECR
The way forward:
In the short run:
All unions must ensure the FG, must
consider these options,
1, identify and tackle the corruption and
incompetence prevalent in the subsidy
regime above. That will push down the cost
of the subsidy in the first place.Like i said
in April, no matter how sincere GEJ think
his administration is, he cannot make any
reasonable progress in the face of
corruption,
2, the power projects must come upstream
before removing subsidy, this will reduce
the demand on pet. Products to a very
great extent.
3, Nigeria must accommodate Gas export,
port duties and other forms of revenue in
their budget implementation policies.
4, Govt must never invest an extra kobo in
our moribund refineries, by doing
otherwise, the cost price of the refineries
will rise to an extent that it will no longer
be attractive to investors or will prolong
their repayment plan.Thereby making it
very capital intensive.
5, Instead of deceiving Nigerians with their
cabal bullshit and deluding them that they
don't benefit from this subsidy, the FG
should channel that propaganda with
intense lobbying to the senate,NLC and
civil society organizations to stop the state
governors from demanding for the ECR,
this can be achieved by the FG asking the
state to pay whatever increment they can
afford for the workers that way the ECR
will be used for subsidizing pet. Products.
In the long run:
Nigeria must seek local production
capacity.It is no longer news that Nnpc
and its subsidiaries have failed woefully in
meeting the needs of the Nigerian people.
Nnpc through its subsidiaries Npdc and
Ngc are saddled with the responsibility of
the above for oil and gas production
respectively, but as i write, the current
production of NPDC stands at a paltry
90,000bbl/ day which is a huge failure for
an agency set up 23yrs ago,
The IOC's has made us believe that it will
cost less than 12usd to extract 1bbl of our
oil.
The Management of NPDC must be
reshuffled and if possible experts brought
in on contract basis to improve NPDC's
production.These experts must be placed
on targets appraised by milestones. in
ogoni land for instance, Anglo dutch has a
lot of abandoned production facilities and
marginal wells and others scattered all over
the country, these can be bought by NPDC
with the money FG want to waste on
refineries to improve production,
If NPDC can extract oil at 12usd/bbl and
make a little profit, with this cheap oil
available, Nigeria will have no reason going
to the JV.
This cheap crude is what will attract investors to build refineries and create jobs against sanusi's pump price increase to attract investors and create another monster called INFLATION,
A 250,000bbl/d refinery will cost a little
above 5b usd, dangote alone can afford
two of those only if NPDC can guarantee
cheap oil. This is why no investor is coming
to build refineries.
A crude price of 18usd/bbl from NPDC will
guarantee pump price of less than 22naira
per litre of pms from these refineries.With
this plan,By the end of this Administration,
NPDC will have robust production capacity
and the refineries will guarantee steady
refined products.
These refineries shouldn't be operated by
the Govt for any reason.The FG will
generate revenue from both ends, export
of crude and export refined products and
the production of NPDC must be
increasing periodically.
this is necessary because Nigeria as a
member of OPEC has a limit to crude
export but we can earn more revenue from
petroleum products export.
Once the above takes effect, there won’t
be any need to be paying subsidy because
pump price will be around 23naira/ l and
inflation will reduce by 40‰.
Now, how competent is Allison Madueke
and iweala if they can’t figure this out?
To think of removing subsidy at this stage
where there is no electricity and high
corruption rate will be tantamount to
economic suicide.
I cant believe iweala and sanusi are using
trial and error approach to economic
solutions please try the next country or
preferably Haiti.
What iweala forgot is that in the face of
inflation, the cost of running Govt projects
will be high, All Govt contractors will
definitely come back for contract variations
or Abandon those projects.
As a sound economist, she should tell
Nigerians the value of 1.3 trillion naira
( she intends to save on subsidy removal)
in the face of 60% inflation and how many
projects Nigerians will benefit from the
subsidy removal.If you remove subsidy and
the money disappears, then it is a NO NO
for Nigerians.
Now, let us analyze possible solutions to
this economic quagmire.
I have a deal for iweala.
fight corruption and inefficiencies in the
subsidy regime and bring it down to
300billion for this year.
The management of Npdc must have a
target
of 150,000bbl/d by dec 2012.
on january 2013 subsidy will go by 50%
and by dec 2013 Npdc should guarantee
200,000bbl/d on
1st january 2014 subsidy must go 100%.
with or without the refineries on ground,
then if Nigerians are sacrificing, they will
know it has a
limit pending when refineries that will
utilize the cheap oil on ground arrives.
tell me what WE are sacrifising for today?
eternal slavery?
I and my generations cannot and will not
sacrifice for Govt's incompetence.
All unions should never accept partial
deregulation, it is more dangerous than
total deregulation because Nigeria hasn't a
price regulatory agency who ordinarily
should put the markets and commuters on
check.
Deregulation in the down stream sector is
not same as telecoms, we need structures
to support it which Nigeria have not got
unlike the later.
God bless you as you fight this battle for
mankind
Written by;
concerned oil and gas activists
save for grammatical errors in a few places. this^^^^ has to be regarded as one of the most enlightening posts ever. Such depth of understanding. I wish the government stooges here in can take a queue and learn. woooow! |
