gohome:


Corruption doesn't go away by wishing it. It goes by creating policies which in turn creates a system where corruption would not thrive

jpphilips:


you make me repeat myself, once you deregulate, you have lost the power to make anybody do anything.
You said they won't hoard? oh! yea! where did all the AGO in the country disappear to last week? where did Jet A1 disappear to? or you think the planes use PMS too? wetin concern AGo with unpaid PMS subsidy? are you not seeing them again after the strike?
you seem not to have any idea what is going on.
Remove subsidy and witness the annihilation of the middle class.

According to the 2012 Report of the Petroleum Refineries Special Task force headed by Dr. Kalu Idika Kalu, former Minister of Finance in the Ibrahim Babangida’s administration, during the early 1990’s, the refineries produced enough petroleum products to satisfy the national demand and exported the excess production. In fact the refineries were so successful that for two consecutive years, 1991 and 1992, Nigeria earned US$124million and US$156million respectively from the export of petroleum products.

OK noted. Let me believe that what I wrote was misinformation. However I am still curious. Can you explain why a marketer will import AGO that has much less demand and no subsidy payment instead of using his capital to import PMS? If the demand for AGO is high like PMS and you have a deregulated market open to all investors including refiners, do you think they can still gang up and form a cabal and fix the price? I believe some

investors will rather take their chances and sell lower than the cabal to increase their turnover.
A

gain I stand to be corrected. These are my thoughts. In Enugu where PMS price is not fixed, you choose where to buy petrol and at whatever price you can afford. The marketers have never been able to fix the price. Sometimes a few have been known to sell at 64.50; when the price was 65 to attract customers. JUHEL in New Haven had done that in the past.

TheGoodJoe:
I saw the caption of the Federal Government telling marketers not to sell above N87 and I laughed. This are the same people that want the same marketers to control the market.

The same marketers GEJ said scammed him.

Esdb3:


Don't you wonder why they are still in that state? Paying a lot when they don't have money. You want us to be like that? You seem heartless.

Esdb3:


Don't you wonder why they are still in that state? Paying a lot when they don't have money. You want us to be like that? You seem heartless.

jpphilips:


If NNPC had the "importation capacity" let me borrow your phrase, why do we need the cabal?
When the cabal is holding us to ransom, why does the NNPC not bail us out? well, you conveniently forgot that NNPC workers are union members too aka Cabals

989900:


Go thru the below at your leisure, not perfect (slight adjustments here and there could be made for exchange rates and the like), it will help your perspective.

December 10, 2011, if you stopped at the Mobil filling station on Old Aba Road in Port Harcourt , you would be able to buy a litre of petrol for 65 naira or $1.66 per gallon at an exchange rate of $1/N157 and 4 litres per gallon. This is the official price. The government claims that this price would have been subsidized at N73/litre and that the true price of a litre of petrol in Port Harcourt is N138/litre or $3.52 per gallon.

They are therefore determined to remove their subsidy and sell the gallon at $3.52. But, On December 10, 2011, if you stopped at the Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, you would be a able to buy a gallon of petrol for $3.52/gallon. Both gallons of petrol would have been refined from Nigerian crude oil. The only difference would be that the gallon in New York was refined in a US North East refinery from Nigerian crude exported from the Qua Iboe Crude Terminal in Nigeria while the Port Harcourt gallon was either refined in Port Harcourt or imported. The idea that a gallon of petrol from Nigerian crude oil cost the same in New York as in Port Harcourt runs against basic economic logic. Hence, Nigerians suspect that there is something irrational and fishy about such pricing. What they would like to know is the exact cost of 1 litre of petrol in Nigeria .

We will answer this question in the simplest economic terms despite the attempts of the Nigerian government to muddle up the issue. What is the true cost of a litre of petrol in Nigeria ? The Nigerian government has earmarked 445000 barrel per day throughput for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. We will limit our analysis to this volume of crude oil. At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding /development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel.

Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 168 litres. The price of 1 barrel of petrol at the Depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution cost are $1.50 per barrel. The Distribution Margins (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges etc) are N15.49/litre or $16.58 per barrel. The true cost of 1 litre of petrol at the Mobil filling station in Port Harcourt or anywhere else in Nigeria is therefore ($5 +$12.6+$1.5+$16.6) or $35.7 per barrel . This is equal to N33.36 per litre compared to the official price of N65 per litre. Prof. Tam David West is right. There is no petrol subsidy in Nigeria . Rather the current official prices are too high. Let us continue with some basic energy economics.

The government claims we are currently operating our refineries at 38.2% efficiency. When we refine a barrel of crude oil, we get more than just petrol. If we refine 1 barrel (42 gallons) of crude oil, we will get 45 gallons of petroleum products. The 45 gallons of petroleum products consist of 4 gallons of LPG, 19.5 gallons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet Fuel/Kerosene, 2.5 gallons of Fuel Oil and 5 gallons of Bottoms. Thus, at 38.2% of refining capacity, we have about 170000 bbls of throughput refined for about 13.26 million litres of petrol, 6.8 million litres of diesel and 2.72 million litres of kerosene/jet fuel.

This is not enough to meet internal national demand. So, we send the remaining of our non-export crude oil volume (275000 barrels per day) to be refined abroad and import the petroleum product back into the country. We will just pay for shipping and refining. The Nigerian government exchanges the 275000 barrels per day with commodity traders (90000 barrels per day to Duke Oil, 60000 barrels per day to Trafigura (Puma Energy), 60000 barrels per day to Societe Ivoirienne de Raffinage (SIR) in Abidjan, Ivory Coast and 65000 barrels per days to unknown sources) in a swap deal. The landing cost of a litre of petrol is N123.32 and the distribution margins are N15.49 according to the government. The cost of a litre is therefore (N123.32+N15.49) or N138.81 . This is equivalent to $3.54 per gallon or $148.54 per barrel. In technical terms, one barrel of Nigerian crude oil has a volume yield of 6.6% of AGO, 20.7% of Gasoline, 9.5% of Kerosene/Jet fuel, 30.6% of Diesel, 32.6% of Fuel oil / Bottoms when it is refined.

Using a netback calculation method, we can easily calculate the true cost of a litre of imported petrol from swapped oil. The gross product revenue of a refined barrel of crude oil is the sum of the volume of each refined product multiplied by its price. Domestic prices are $174.48/barrel for AGO, $69.55/barrel for Gasoline (PMS or petrol), $172.22/barrel for Diesel Oil, $53.5/barrel for Kerosene and $129.68/barrel for Fuel Oil. Let us substitute the government imported PMS price of $148.54 per barrel for the domestic price of petrol/gasoline. Our gross product revenue per swapped barrel would be (174.48*0.066 +148.54*0.207+172.22*0.306+ 53.5*0.095+129.68*0.326) or $142.32 per barrel. We have to remove the international cost of a barrel of Nigerian crude oil ($107 per barrel) from this to get the net cost of imported swapped petroleum products to Nigerian consumers. The net cost of swapped petroleum products would therefore be $142.32 -$107 or $35.32 per barrel of swapped crude oil. This comes out to be a net of $36.86 per barrel of petrol or N34.45 per litre.

This is the true cost of a litre of imported swapped petrol and not the landing cost of N138 per litre claimed by the government. The pro-subsidy Nigerian government pretends the price of swapped crude oil is $0 per barrel (N0 per litre) while the resulting petroleum products is $148.54 per barrel (N138 per litre). The government therefore argues that the “subsidy” is N138.81-N65 or N73.81 per litre. But, if landing cost of the petroleum products is at international price ($148.54 per barrel), then the take-off price of the swapped crude oil should be at international price ($107 per barrel). This is basic economic logic outside the ideological prisms of the World Bank. The traders/petroleum products importers and the Nigerian government are charging Nigerians for the crude oil while they are getting it free.

So let us conclude this basic economic exercise. If the true price of 38.2% of our petrol supply from our local refinery is N33.36/litre and the remaining 61.8% has a true price of N34.45 per litre, then the average true price is (0.382*33.36+0.618*34.45) or N34.03 per litre. The official price is N65 per litre and the true price with government figures is about N34 per litre (even with our moribund refineries).

There is therefore no petrol subsidy. Rather, there is a high sales tax of 91.2% at current prices of N65 per litre. The labor leaders meeting the President should go with their economists. They should send economists and political scientists as representatives to the Senate Committee investigating the petroleum subsidy issue. There are many expert economists and political scientists in ASUU who will gladly represent the view of the majority. The labor leaders should not let anyone get away with the economic fallacy that the swapped oil is free while its refined products must be sold at international prices in the Nigerian domestic market.

The government should explain at what price the swapped crude oil was sold and where the money accruing from these sales have been kept. We have done this simple economic analysis of the Nigerian petroleum products market to show that there is no petrol subsidy what so ever. In the end, this debate on petrol subsidy and the attempt of the government to transfer wealth from the Nigerian masses to a petrol cabal will be decided in the streets. Nigerian workers, farmers, students, market women, youths, unemployed, NGO and civil society as a whole should prepare for a long harmattan season of protracted struggle. They should not just embark on 3 days strike/protests after which the government reduces the hiked petroleum prices by a few Nairas. They must embark upon in a sustainable struggle that will lead to fundamental changes. Let us remove our entire political subsidy from the government and end this petroleum products subsidy debate once and for all. It is time to bring the Arab Spring south.

Izielen Agbon Izielen Agbon writes from Dallas, Texas. izielenagbon@yahoo.com

He is former HOD , Petroleum Eng Dept, former ASUU chairman University of Ibadan, trained many operators in nation's energy industry with pratical experience on our practices and policy focus in the last 20yrs

http://saharareporters.com/2011/12/15/real-cost-nigeria-petrol-dr-izielen-agbon

gohome:


What I meant is that all countries pay the international price of PMS. Poor, rich, no so rich etc. you seems to be the heartless one. Mortgaging your Kid future for a plate of yam. PMS at the international price would hurt no one. It's the panic and delusions that will hurt. The opportunities in a deregulated downstream sector is enormous. We just have to do it. If you do not do it, your government will have to borrow money to run your country. It is suicidal to run a country of 170 million with ll have to borrow money to run your country. It is suicidal to run a country of 170 million with 4 trillion Naira. You will be worse than Somalia in the future.

segiwest:
Can't we just use the money for subsidy to build our refineries and also make the power sector 100%. People are buying fuel @#500/ltr to run our gens and cars.
Agreed that not everybody can afford it, but this past one-two weeks shows that we have misplaced priorities.

gohome:


What I meant is that all countries pay the international price of PMS. Poor, rich, no so rich etc. you seems to be the heartless one. Mortgaging your Kid future for a plate of yam. PMS at the international price would hurt no one. It's the panic and delusions that will hurt. The opportunities in a deregulated downstream sector is enormous. We just have to do it. If you do not do it, your government will have to borrow money to run your country. It is suicidal to run a country of 170 million with ll have to borrow money to run your country. It is suicidal to run a country of 170 million with 4 trillion Naira. You will be worse than Somalia in the future.

9jatatafo:


I know 3 marketers but there are more. The ones I know are Oanda owned by Wale Tunubu, Capital Oil owned by Ifeanyi Ubah and Con Oil by Femi Otedola

gohome:


1. The Nigerian solution is to get rid of subsidies on PMS.

2. I have also told you why AGO was scarce. Can't you read?

3. They won't give you candies or pepper if your government learn how to regulate a free market

jpphilips:


I dont really know where your interest lie but you are no longer making sense, more than 3 depots had AGO last week in ph at the peak of this crisis, they just refused to load, why am I even wasting my time with you, believe whatever you like it is your right, e go clear you for eye very soon!!

tell us how you plan to checkmate the excesses of the cabal since you plan to deregulate fully?

Esdb3:


What you don't seem to understand is that if there is no CORRUPTION we won't need to borrow money at all!!! Obasanjo proved it and there was corruption in his regime..

It is like you don't know how they 'drink' money in guzzles in this country! Go out and find out.

trillville:


So there are no other ways to save cost but to remove fuel subsidy? If subsidies must be removed, they will be removed. What is important right now is the reduction of corruption, a reduction in the incomes of public servants and then a reduction in the number of civil servants we have.
After all these, we can now talk about removing subsidies.

Governance is not just about performance but also maintaining the perception of performance. If you are working hard for the people but all they see is the hardship you are imposing on them, they will hate you and kill your government.

Not everything is logic and economics. Governance is about handling people and you must handle people pragmatically taking the psychological impact of your action on them into account when making decisions.

We have 170 million Nigerians out of which 110 million live on less than two dollars a day. Democracy is government of the people for the people so any sensible government will focus on people oriented policies.

trillville:


From what I can gather from ur thread, you want the government to remove fuel subsidy as this will give the government more money to spend on infrastructure (basically bigger government) and take away money from the 110 million Nigerians that live on less than 2 dollars a day?

My barber was a strong supporter of GEJ, but had to start trekking to and fro from work everyday after the price of fuel was increased. He voted APC in the last elections.

Do you think fuel is a luxury for Nigerians or a means of livelihood?

My barber couldn't increase the price of haircuts at his shop because he found out that when he increased his price, people who used to cut their hair every week started cutting their hair every two weeks.

I used to give the yellow fever by my house 100 - 200 Naira every week before the increase in price. I had to completely stop this.

We are a very poor nation. We are a growing nation. Our policies must have a human face. We must think of the poorest in the land as the most important to be cared for.

We have difficult choices to make and as much understanding of how much is actually spent on fuel subsidy is necessary in evaluating our options.

Again, this is a case of big government vs the people. You are clearly for big government.

frehage:


You've got valid points there. Our "volume of production to population ratio" is way out in left field. But the bottom line is that our output though not all sufficient, is adequate for us to buy fuel at a rate far below that of non producers. Non oil producing countries of necessity buy crude at international price, pay for it's transportation and refining, all from their pockets. But we don't need to dip our hands into our "pockets" for any of the above. Our crude have got/should get us covered. And we don't need to buy crude at international price. NNPC have got crude allocation for that. So there is really no need for us to buy fuel at $1.1 or whatever.

trillville:
When the yaradua/gej administration came in, Naira to dollar was about 118. Today it is about 200.

The price of a barrel of crude was between 60 - 70 USD as it is today.

The op quotes a landing cost of about 1.1 USD. at 2007 the landing cost would have been about 130 Naira where as today it is about 220 naira.

Why has our currency fallen so badly? Is it the Nigerian public's fault or the government?

If it is the governments fault, should the Nigerian public suffer for the mismanagement of our economy by the government?

Should the Nigerian public trust the government that has failed to maintain the value of their currency that they will judiciously use funds from subsidy removal appropriately?

Granted, we have a new government, so we should be hopeful but shouldn't the individuals who's actions are causing us this pain be made to suffer too? Don't we deserve some justice?

Should we just keep suffering and smiling waiting for God to give us good leadership or should we demand for accountability?

adanny01:


I bet you dont own a car or probably dont travel or too rich to travel by road so petrol is pretty useless to you that only a petrol power generating set is worth mentioning. Gen set is the only machine you agree that uses pms abi? We should convert our cars and all those interstate buses, taxis etc which are the main consumers of petrol to diesel abi. The petrol generating set which has a very expensive big brother in the diesel gen set will now be the main power source abi?


How can you get this done with corruption that is in the subsidy regime still existing in the government? Is it not when the subsidy fraudstars are jailed and those in government are locked up that any government plan will work? Removing subsidy wont reduce corruption but just make Nigerians poorer and some corrupt Ministers and Perm secs richer.

The way to go is removing corruption bro.

TheGoodJoe:


GEJ is gone but his tentacles is alive. Until we curb corruption, we can not increase the suffering of the masses. Develop refineries. We do not need total subsidy removal to do that. Reduce the wastage in government, probe corrupt officials and recover stolen funds. Build the damn refinery if it means taking a loan like GEJ's Boko loan. Then kill subsidy with a boost in local petroleum products production.

gohome:


Removing subsidy is not taking away money from anybody. Your barber streaking to work is because of subsidy.

You are in a dire situation. The situation I gave on page one. Do you want to keep giving your children pocket money and fueling your generator while your roof is leaking? They can go to school, no health care, and you want to keep paying subsidy?

gohome:


What you don't seem to understand is that if they is no corruption you are still flat broke. 4 Trillion of 170 million people is suicidal

Whatever the pump price of PMS will be after the removal of subsidy, would be dependent on;

1. Exchange rate.

2. How much we are refining locally?

3. How much we consume locally?

4. Would we be importing refined fuel or not?

5. If we will, under what arrangements? In the 80s, we gave them crude in exchange for refined products; under special arrangements/calculations.

6. Price/barrel of crude at the time.

7.. Would there be waivers for imported refined products?

As at 2012, the figure was N147/litre, 'cause according to them, crude was around $115/barrel then. Though some believe the crude refined and brought in, in some cases, were part of the reported stolen/missing/unaccounted for 400,000 barrels of crude stolen every day in Nigeria.

If corruption is heavily reduced, we will see huge progress in our revenues.

The affluence of the U.S., should not be a yard stick for our wealthiness or lack of.

I listened to an honourable on Channels TV justifying their pay, 'cause congressmen in the US get over a $1m in constituency allowance . . .it saddened me to my marrows that the presenter couldn't ask him the simple question: 'if so, why can't we make minimum wage $1200 like the U.S.?

If California were a country, it will have the 8th or 9th highest GDP in the world.

The US' GDP is higher than the whole of the EU.

On the flip side, if Lagos were a state in the U.S. it will have the 44th-45th highest GDP of the 50 states. And if it were a country in Africa, it will have the 5-6th highest GDP.

South Africa has a population of over 50 million, GDP of about $350b, and revenue of over $100b.

Turkey has a population of about 80 million, GDP of about $800b, and revenue of over $200b.

Thailand has a population of about 70 million, GDP of about $400b, and revenue of roughly $200b.

Malaysia has a population of about 30 million, GDP of a little less than $400b, and revenue of roughly $60b.

Brazil has a population of about 200 million, GDP of about $2trillion, and revenue of about $1trillion.

NIGERIA HAS A POPULATION OF ABOUT 170 MILLION, GDP $500-$600B (EXCHANGE RATE EPILEPTIC), AND REVENUE OF ABOUT $30-$40B!

Even when you factor in PPP, it is still not good enough.

I chose the above countries to compare in-lieu of countries like Germany, UK, Canada, US, Japan, 'cause we have more in common.
Basically, the above countries all battle their relative share of corruption.
However, the level of corruption in Nigeria is on a whole 'nother level!

Thailand with all the political instability and all, garner over $5b dollars from tourism alone, and make huge revenues from exports (rice, fisheries, textiles and e.t.c.), we are their very good customers

Malaysia makes little from crude, but Petronas is 10 times the company NNPC is, even though NNPC sells 4 times more crude, has a potential of over 300 million people market it is not harnessing, by selling petroleum products across west Africa.
They got their first palm trees from us, now they export palm oil -- and we buy some of it . . .lol#crazystoopid

All the above countries have stable power supply. We don't, due to corruption!
And stable electricity is the number one reason why our revenues are so low=fewerrrr industries, no will to think or innovate -- it kills the spirit. It destroys the country; why are we importing the huge amount of diesel, petrol, kero? We don't need to own generators or fuel them -- that alone kills your pocket. No industries no jobs. No electricity=fewer investors.

We do not have a steel manufacturing industry, or we killed it #corruption.

Our ports lose billions of dollars to corruption.

How do individuals/companies pay taxes, when there are no substantial infrastructure to point to as benefits; more so, corruption they believe will make sure it (taxes) only feed their leaders.

Our mining is only crude oil focused.

Even the developed countries are moving from basic manufacturing industry economies to service driven economies, that's the future, that's where the money is. That is where your 170m population comes to your rescue!

A well networked train system alone will fetch this country billions of dollars. I could go on and on . . .

The sad part is, you don't need to have the funds to have most of these things in place, just provide the right environment for would be investors.

We have corrupt leaders who lack vision and focus, because of corruption, you listen to some of them on TV and you almost wanna puke.
Yet, Nigerian-Americans, Nigerian-Britons, are the averagely most educated in those countries.

If we had a leader like Lim Kuan Yew of Singapore, since 1979, we would not be talking about $600b GDP, more like $2-3trillion, we would not be haggling over $25b thereabout budget, more like $1-1.5trillion budget. We will be better than Brazil today (a less corrupt Brazil could do far better too).

trillville:


Ok, I am in a dire situation. Should I just take my children's pocket money away without evaluating all of my options?

What if I can fix my roof at no cost whereas my child would be forced to prostitute her body to lecturers if I do not give her the pocket money?

The first step to solving a problem is to define it, simplify it, a provide an appropriate scope for it.

We have a major problem that is not going to go away anytime soon. Oil prices may remain at these rates for the next 3-5 years.

We have a number of different cost saving measures to take and everything should be on the table to be discussed from corruption, cost of governance to fuel subsidy.

Which of these three should a responsible government tackle first and why?

Even though fighting corruption is a difficult task, the government must be perceived to be doing its best to fight it, because corruption is morally wrong.

Again, a reduction in the cost of governance may not be sufficient to balance our budget, but the government cannot be seen to be asking Nigerians to make sacrifices without making deep sacrifices itself.

I hope you understand my point on perception now? I used to think just like you do a few years ago. I am a bit wiser now.

Esdb3:


You are following influenced figures you really do believe nigeria makes just 4 trillion?

And Not all 170million people will depend on the government. We have other sources that we make wealth from that we are not tapping into. see we are blessed just take away corruption and we will even agree to pay tax then.

gohome:


Pocket money and you cannot pay school fees? You simply cannot fix your roof with no cost. Unless you are a magician. New York City is a city with massive infrastructure but needs 15 million to run it. You want to use 4 Trillion to run a country that not only have a population 20 times bigger than NYC but also a country that has a military immigration customs, etc. smh. My brother you simply can not fix your roof at no cost. Nigeria at this rate can not fix its roof at with even 100 trillion Naira. You want to buy a roll Royce or a Ferrari for a price of Toyota. Keeping dreaming. Give them pocket money and let them no go to school. You will even pray they are prostitute. Your kids will be Boko Haram.

Unlocking new potential is the only way. We have not be able to unlock new potential because of mismanagement. The major mismanagement is the payment of subsidy. Removal of PMS subsidy won't not affect anybody. Instead it will drive a boom in that sector. You can unlock 200K jobs and 5 million indirect Jobs in the first 3 years. Do you know the savings in foreign exchange? It's going to be 2 billion dollars a year. Exportation of pet products will earn us 1 billion a year. In all the government will home to add another 2 trillion to its budget. Which of course is not enough but a step forward not backwards.

You are actually making deep sacrifice by allowing your government to pay for something you can afford. Your government has devalued your naira by 25%. You are paying for petroleum at a price 25% more. Don't be deceived. It is an illusion that removal of PMS will kill is. It won't.

In the next four years, always look at your budget. Most Nigerians don't care about budget, but will want to have fantastic airports, power, refinery and roads. I laugh. Are we going to see 15 Trillion Naira in our budget after fighting corruption? We have to know.

jpphilips:


you make me repeat myself, once you deregulate, you have lost the power to make anybody do anything.
You said they won't hoard? oh! yea! where did all the AGO in the country disappear to last week? where did Jet A1 disappear to? or you think the planes use PMS too? wetin concern AGo with unpaid PMS subsidy? are you not seeing them again after the strike?
you seem not to have any idea what is going on.
Remove subsidy and witness the annihilation of the middle class.