Subsidy is only a slang used by government officials to divert and embezzle money.

Please read article on

http://www.nigerdeltacongress.com/oarticles/on_fuel_scarcity_politics_and_nn.htm

i think it all depends on the sincerity of our government to make life better for us,nigerians.we dont need a selfish IMF to tell us that our government needs to make power available,we already know that! Its however an hypocritical statement by the so call IMF to say that making our refinery work isnt gona solve our oil problem,while all other oil producing countries always ensure the efficiency of their refineries. RUBBISH!

I don't really understand Etk.

He says he pays heavily for what he enjoys in America. Is it not because he's gainfully employed? If you were on 18,00 minimum wage would you be able to?
And, who told you that you pay enough to cover what you enjoy? Minus taxes from big MNCs (who make their money from countries like Naija), do you you think your taxes are enough to give you paved, clean roads, electricity, street lights, high-speed trains, 21st century education, clean water, etc?

No economy, I repeat, no govt allows the Invisible Hand (which means a hands-off approach to running the economy) without public-oriented regulation/subsidy. It also means demand and supply/market economy.

Tell me a major oil-producing country without subsidies? Without benefits like subsidy, what else do you want to give to my people? Free housing, Freedom Pass to the elderly, free school meals to children? What do you get for being a Naija man then?


Let Jonathan, through that  i.diot called Aganga, try it. Go ahead, GEJ, I say, remove it! And you are a goner!

The ripple effect of it (its removal) will consume his presidency. Inflation will spiral. I hope Beaf is listening.

Hehehee, remove the subsidy in order to share the money, abi? Ole leaders.
Try it!

Besides, scarcity will persist. And, the price will be more that 130 naira when shady businessmen create their usual artificial scarcity.

And, the purported 4 billion dollars will end up in private pockets.

So?

I say they should remove the subsidy and government get out of the industry NOW!!! not tomorrow. Do we know how much petrol used to cost when this IMF debate started in the eighties N4.00 a litre. Now its N65.00. Has the heavens fallen. No. Instead of properly administering this subsidy wahala Nigerians have resisted proper pricing and the government has resisted proper investment, yet the price has crept up. Whether we like it or not if crude prices remain north of 100 dollars the price we pay for petrol will get to that much feared N100 per litre sooner or later. Our oil industry is on life support and we keep postponing urgent surgery for short term palliatives. Nigeria needs the private sector. That is the future. Let's stop kidding. Government cannot handle this thing.

Its time we hold them to account. Yes we will pay more for fuel if NNPC and all its assets are sold but the rewards are clear. Efficiently run refineries and distribution by the likes of Shell and AGIP. Then if government wants subsidies it will be paper for paper. You tender your poverty card and get stamps. For those who say crude oil is cheap or free so petrol should I simply laugh. If a river runs through your backyard does that equate to the whole town lining at your door steps day and night for free water. It will cost you something to serve them. The Niger-Delta has paid a higher price than we care to admit. We should pay properly to have their environment put right and the peoples properly compensated.

Once it was said private telecoms will kill us all. We know better today. We pay our bills without subsidy. If we cannot afford cards we do without it. So is electricity, fuel, food or anything else. I refuse to accept electricity or petrol is any different. Nothing is compulsory in the quantities we wish. Crude oil is not oxygen. It is not free. Use what you can afford and run your life according to your abilities.

I will also liken the call of some for the present subsidy to exist while the same government builds new refineries as a family that cooks and eats out regularly. Collosal waste. If you can buy and sell refined products at any price like Saudi Arabia, then why bother refine. Refineries like home cooking are for those who have the basic economic sense, desire independence and have an eye for quality. The IMF is not asking us not to refine. It did not tell us to import. It is we Nigerians out of greed and profiteering that ended up like this so why blame IMF for telling us the truth. Dear forumites if we are going to spend $350 million a month on subsidies and $5 billion dollars a year on new refineries at the same time then when the next thread on power supply, education and roads comes let us ask where we expect the government to get all this money simultaneously and spend it without causing the inflation we are so worried about particularly when we don't want to pay for it.

Let us start a culture of paying properly for what we use whether rich or poor. There are poor people in every nation as there are subsidies in every nation as there are proper businesses controlling economies in every nation. There is in the US too the rain of $4.00 dollar petrol with some not covered by social security. Are all our fellow forumites out there in Yankee covered by US subsidy too. If we don't learn how to develop our economic muscles by taking the horns of tough financial decisions now, the day this crude oil will finish, hmmmm,

This IMF people are making me sick. Who cares what the bloody bagger thinks. Assuming the subsidy still stays and the refineries are operational here, let me list the benefits here

1. Doesn't that reduce the purchase price thereby reducing the subsidy?
2. Doesn't it spread the wealth around as compared to it being in few hands?
3. Increased employment.
4. All Nigerians get to share in the National cake.
5. Assuming the subsidies are removed then imagine the skyrocketing inflation that will follow.
6. A reduction of pressure on the Naira by the US Dollar due to importation costs for finished oil products.

That guy should just do and sit down and shut up otherwise.

ola olabiy:

I don't really understand Etk.

He says he pays heavily for what he enjoys in America. Is it not because he's gainfully employed? If you were on 18,00 minimum wage would you be able to?
And, who told you that you pay enough to cover what you enjoy? Minus taxes from big MNCs (who make their money from countries like Naija), do you you think your taxes are enough to give you paved, clean roads, electricity, street lights, high-speed trains, 21st century education, clean water, etc?

No economy, I repeat, no govt allows the Invisible Hand (which means a hands-off approach to running the economy/demand and supply/market economy) wthout public-oriented regulation/subsidy.

Tell me a major oil-producing country without subsidies? Without benefits like subsidy, what else do you want to give to my people? Free housing, Freedom Pass to the elderly, free school meals to children? What do you get for being a Naija man then?


Let Jonathan, through that  i.diot called Aganga, try it. Go ahead, GEJ, I say, remove it! And you are a goner!

The ripple effect of it (its removal) will consume his presidency. Inflation will spiral. I hope Beaf is listening.

Hehehee, remove the subsidy in order to share the money, abi? Ole leaders.
Try it!

To add to this; a lot of people do not know that the arab crisis was started by increases in the price of foodstuffs. If you remove the subsidy, the price of foodstuffs will increase astronomically in Nigeria that the normally peaceable Nigerian people will revolt. As it is many are struggling to feed their kids and will do anything. No doubt before the revolt, crime will increase dramatically.

If the Nigerian govt wants to remove/reduce the subsidy, then it must increase the standard of living of the average Nigerian first. The much spoken about 7% growth rate must be felt by most Nigerians as much of China is feeling the 9% growth rate there. Ever since Aganga got appointed, the IMF has been more vocal on Nigerian matters; no doubt there is a game plan.

Reference:

I say they should remove the subsidy and government get out of the industry NOW!!! not tomorrow. Do we know how much petrol used to cost when this IMF debate started in the eighties N4.00 a litre. Now its N65.00.

Not entirely correct. I hope you can tell us your salary in the 80s. Probably 200 naira.

This is a typical apples and oranges comparison, mate. But, I get your point.

Every economic decision has a plus & negative effect.
My anger with d Nig'n Gov. is they don't critically evaluate options b4 swallowing it hook, line & sinker.
True, d amount of subsidy is a drain on our purse, knowing fully well d rogue MNCs & politicians it benefit ( thru d pet. equalisation fund), but some subsidy level is needed & new refineries 2 b run by d private sector.

Prices of goods are directly related to that of petrol.

If there is a marginal increase in what you pay for petrol, the exponential effect of that on the economy will be so telling on everyone.

Foodstuff prices will rise at an  exponential rate.

If I may ask Ekt, why does he think the US govt likes to put pressure on OPEC to regulate prices of crude oil? Because it negatively affects their economy anytime there is a marginal increase.

Why do they work so hard to ensure stable supply, as well?

If you intend to remove this subsidy, how do you lessen the sudden shock of it in a country like Nigeria where they don't have social security?

I think I need to supply Eku articles on the effects of any marginal increase in the price of fuel on their economy across the pond.

Reference:

I say they should remove the subsidy and government get out of the industry NOW!!! not tomorrow. 
Whether we like it or not if crude prices remain north of 100 dollars the price we pay for petrol will get to that much feared N100 per litre sooner or later. Our oil industry is on life support and we keep postponing urgent surgery for short term palliatives. Nigeria needs the private sector. That is the future. Let's stop kidding. Government cannot handle this thing.

With a population of approximately 80% living on less than $2 a day, what you are suggest there will likely be disastrous, not just to our local economy, but the poorest of the poor in our society.

Reference:

Once it was said private telecoms will kill us all. We know better today. We pay our bills without subsidy. If we cannot afford cards we do without it. So is electricity, fuel, food or anything else. I refuse to accept electricity or petrol is any different. Nothing is compulsory in the quantities we wish. Crude oil is not oxygen. It is not free. Use what you can afford and run your life according to your abilities.

Not entirely being honest there. Nigerians currently pay some of the highest fees for telecomm service in the world today. Even with the massive subscription numbers, we still pay through the teeth for service and so it is what you would consider luxury at this point. I am not certain that adding more of such will HELP the situation. That some people can afford to spend their money on cards does not mean it then makes sense to add such things as fuel(since the higher the cost of fuel, the cost of food and other necessities will follow), and eventually food to the list of LUXURY items for the individual.

Kobojunkie:

With a population of approximately 80% living on less than $2 a day, what you are suggest there will likely be disastrous, not just to our local economy, but the poorest of the poor in our society.

Some don't seem to understand that and can't seem to articulate what good can come from the subsidy removal.

ola olabiy:

Prices of goods are directly related to that of petrol.

If there is a marginal increase in what you pay for petrol, the exponential effect of that on the economy will be so telling on everyone.


Foodstuff prices will rise at an  exponential rate.

Eh. Is that how the economy works? 1% increase in price of oil => exponential effect elsewhere in the economy? I've not read anything supporting this idea before in my life. . . is a new concept to me. I sort of imagined 1% increase in price of oil => linear effects elsewhere. If 20% of my costs of producing good X are oil related, and oil increases in price by 10%, then my total cost of producing good X has gone up by 2%. . . something linear in that marginal increase, not exponential.

If I may ask Ekt, why does he think the US govt likes to put pressure on OPEC to regulate prices of crude oil? Because it negatively affects their economy anytime there is a marginal increase.

Why do they work so hard to ensure stable supply, as well?

Primary beneficiaries of OPEC are the members, I thought? If they just competed against each other rather than acting as a monopoly, much higher oil supply and thus lower oil prices, no? So OPEC wins, US and other oil-consuming countries lose. Is this wrong?

If you intend to remove this subsidy, how do you lessen the sudden shock of it in a country like Nigeria where they don't have social security?

I've already talked pretty extensively about what I'd do with the $4.2 billion, no? I think more value to the poor can be provided than what it is currently being spent on.

Kobojunkie:


Not entirely being honest there. Nigerians current pay some of the highest fees for telecomm service in the world today. I am not certain that adding more of such will HELP the situation. That some people can afford to spend their money on cards does not mean it then makes sense to add such things as fuel(since the higher the cost of fuel, the cost of food and other necessities will follow), and eventually food to the list of LUXURY items for the individual.

Thanks.
Fuel is NOT a luxury and it isn't telecoms. I am not saying telecom is.

A marginal increase in fuel will affect all facets of life; whether you are rich or not. In fact, the rich will not suffer its effect. They will simply shift its effect on.
But the man on the street will bear the brunt. And, in a country without benefits, bear it alone.

ekt_bear:

Eh. Is that how the economy works? 1% increase in price of oil => exponential effect elsewhere in the economy? I've not read anything supporting this idea before in my life. . . is a new concept to me. I sort of imagined 1% increase in price of oil => linear effects elsewhere. If 20% of my costs of producing good X are oil related, and oil increases in price by 10%, then my total cost of producing good X has gone up by 2%. . . something linear in that marginal increase, not exponential.

Primary beneficiaries of OPEC are the members, I thought? If they just competed against each other rather than acting as a monopoly, much higher oil supply and thus lower oil prices, no? So OPEC wins, US and other oil-consuming countries lose. Is this wrong?
I've already talked pretty extensively about what I'd do with the $4.2 billion, no? I think more value to the poor can be provided than what it is currently being spent on.

Yeah, Eku. Have you lived in Nigeria before? Ask those who witnessed this in the 90s. Move it from 65 to 75 and see what happens. Nigeria isn't a regulated economy, you know.

ekt_bear:

If 20% of my costs of producing good X are oil related, and oil increases in price by 10%, then my total cost of producing good X has gone up by 2%. . . something linear in that marginal increase, not exponential.

We have told you before. Nigeria isn't a structured economy. The unRegulated part of it is large, may be 80%. Would you help to determine what a bus driver, plying Lagos-Ibadan route, charges?

He go hala u ooo

N65->N75 petrol is roughly 15% increase.

Even if 95% of the cost of making bread were petrol-related, presumably its price cannot increase by more than 15% either.

And I doubt that even up to 30% of the cost of making bread is petrol related, let alone 95%.

So I guess for some reason I don't understand, you are saying N65->N75 petrol might lead to price of bread doubling? Or increasing by 50%? Or some number well above 15%?

I don't understand at all what is going on, then.

ROFLMAO!!

ekt_bear:


Primary beneficiaries of OPEC are the members, I thought? If they just competed against each other rather than acting as a monopoly, much higher oil supply and thus lower oil prices, no? So OPEC wins, US and other oil-consuming countries lose. Is this wrong?

The main reason is the economy of the US. Higher prices put pressure on everything. So, why are they in Iraq, etc?

ekt_bear:


I've already talked pretty extensively about what I'd do with the $4.2 billion, no? I think more value to the poor can be provided than what it is currently being spent on.

Why are they not doing that with the remainder. Why wait for a paltry 4 billion to do these things. what you can't with times 10 of it?

ekt_bear:

N65->N75 petrol is roughly 15% increase.

Even if 95% of the cost of making bread were petrol-related, presumably its price cannot increase by more than 15% either.

And I doubt that even up to 30% of the cost of making bread is petrol related, let alone 95%.

So I guess for some reason I don't understand, you are saying N65->N75 petrol might lead to price of bread doubling? Or increasing by 50%? Or some number well above 15%?

I don't understand at all what is going on, then.

Presumably? Why use that word? I thought you were so sure? You have lived all your life in a structured economy. So, you are forgiven. After you might have spent 15 months in Naija, come back here and offer your analysis of things.

The subsidy is even more than 100%.

Hehe heee. Remove it and there will be paralysis of everything.

Exponential is an understatement

^-- Alright. Maybe you are right.

It just doesn't make sense to me. I don't see how something (bread in this case) can increase more in price than the thing that caused the price to change (petrol.)

How can petrol increase by 10% and bread increase by more than that? Even if bread were made 100% out of oil ("bread" were just another name for petrol, let's say), then it cannot increase by more than this 10%. At least, that is the way I think about things.

But maybe Nigeria doesn't work like that.

ola olabiy:

Presumably? Why use that word? I thought you were so sure? You have lived all your life in a structured economy. So, you are forgiven. After you might have spent 15 months in Naija, come back here and offer your analysis of things.

Wetin be 15 months. 2 months sef(when all the spending money don they tighten). When Garri goes from Naira 300 for the local measure to Naira 600 over night(No national disaster or global crisis, or even change in situation), na then im eye go open well well. lol

Kobojunkie:

Wetin be 15 months. 2 months sef(when all the spending money don they tighten). When Garri goes from Naira 300 for the local measure to Naira 600 over night(No national disaster or global crisis, or even change in situation), na then im eye go open well well. lol

Many things don't make sense in Nigeria, Ektbear. That's the way it is.

Kobojunkie:

Wetin be 15 months. 2 months sef(when all the spending money don they tighten). When Garri goes from Naira 300 for the local measure to Naira 600 over night(No national disaster or global crisis, or even change in situation), na then im eye go open well well. lol

Abi, ask him what happened to that ordinary Alubosa (onion) some months ago. That one sef pass exponential.

Naija no send, I tell ya.

interesting topic and great contributions on the five pages thus far. However some pples analysis have been very poor probably due to lack of information on their part.

Its simple 'remove subsidy and failing to have local alternative refined petrol products, make common man suffer the more

The conditions of the masses in Nigeria is already pathetic and complicated, u'll only make it worse by removing subsidy and thereby enriching the corrupt politicians the more. If the refineries are working or more refineries are built to either supplement existing onces or for total replacement, we wouldn't have to be buying a litre of PMS for as high as N65/litre on probability. Presently the take home pay of Nigerians is nothing to write home about. Many state government said they wouldn't be able to afford N18,000 minimum wage which means at the moment an average worker in the public sector earns monthly an amount less than N18,000.

For instance assuming a man earns N15,000 and lives in Ikorodu Lagos and works on the Island. He would be spending more than half of his salary on transportation when the commercial bus drivers buys fuel at N65/litre. As we speak from the island to Ikorudu Lagos is about N200 for a commercial bus ride. Something that costs less than that when the price of a litre was N50. Imaging removing subsidy and commercial bus drivers buys fuel at over a N100, how much will it cost from Island to Ikorodu for a common man? Yet the same government is not ready to increase workers salaries.

Take a look at Ago(diesel) Kerosene and Aviation fuel jet A1. These products have no subsides and we all know what their prices are in the market.

I am not too rich nor too poor but my work allows me travel to Abuja every week. A flight for 1hour to Abuja with Arik air costs me weekly N18,000 and a return is another N18,000=N36,000 for two hours. I recently heard that the price of Jet A1 has risen from N80 in December 2010 to N170/litre in May 2011 since the product is not refined local its also being imported. The Airline operators said if Government doesn't come to their rescue the consumers/customers will suffer as they might increase air fare by between 50 to 100%.


Diesel is also not being refined local as at yesterday 13th may 2011 i bought a litre for N178 at Zenon oil. They said its not subsidized. Electricity is not stable we have to run our firm on Gen 24/7 thereby our cost of production is high and of course we need to survive we are left with no option than to shift the burden to our clients or customers.


I saw on AIT pple crying that they buy a litre of Kerosene for over a N100. The common pple are begging the government to come to their aid. Kerosene too is also imported and not refined. Who bears the burden? the rich or the poor.

I have brought the above scenario to show that at the long run its the poor pple that suffers. The situations of Nigerians are already pathetic and sorrowful. Why compound it?

The only genre of crude oil in Nigeria that enjoys subsidy is PMS(petrol) which i can say that either directly or indirectly its the only commodity that over half of the Nigerian population use. i.e we have cars or board buses or cars that runs on fuel and most generators in the house of commoners uses petrol and not diesel.


The solution is for their to be a local production which will reduce cost and if at all the government will subsidize, it wouldnt be has much as the alleged N4billion they claim they spend annually. Theres always a multiplier effect of a marginal increase in prices of petrol product that will be felt on other product. If fuel price is increased by N1, price of pepper will go up on the claim that the transport cost has increased. All in all the masses will suffer.

Solution is allow private sector/government sector build as many refineries as possible in Nigeria

If the International price of crude oil is $100/barrel, sell to local refiners at a subsidized rate of 30 to 40% lesser and make sure no diversion takes places.


Cos if our govt hide under the guise that the savings from non subsidy will be used to provide infrastructure i can tell u that one na big big big lie. The money will end up with the national assembly and more corruption will be encouraged. Even as they claim they spend so much on subsidy yet theres still corruption.

What did Dimeji bankole do with N10billion naira? I heard Goodluck jonathan will spend N500 million naira on his inauguration on May 29.

I[b]f we allow these criminals more savings, they will use it for themselves. House of rep members that does nothing takes home close to N45m per Quarter. If u allow them to save money from subsidy they will increase their allocation to N50million or more per quarter.[/b]

I rest my case

^^^No, they only want a hike in petrol prices and, pronto, Nigeria would become an Eldorado.


This IMF guy, SMH.
I am sure he knows how much the UK govt alone spends on Housing benefits.

Health service budget in the UK is more than 100 billion pounds. I mean just to give free healthcare to their people. Imagine. He has not offered his advice to the UK govt to stop this, has he?

There is a saying here that if any govt tried it, the said govt would lose general elections. And, that is it.

Obasanjo spent billions on power. Are you telling me that with just 4 billion more, electricity would have been stable and the effect conspicuous? Uhn?


What sector do they intend to develop that requires just extra 4 billion to achieve efficiency?

In a country where fuel has a link with everything. No trains; waterways are not developed. The only means of transportation is ROAD. Road or nothing. No canals. Local flights are out of reach of most Nigerians. No electricity and people rely on generators that use fuel. No gas.

In Nigeria where all businesses rely on petrol for power generation? They want to remove this subsidy in order to spend it on say, hospital? Roads? Education?

Isn't that counter-intuitive?

Let's face it, USD 350m/month on fuel subsidy is unsustainable in the long run.

Here in Europe, a liter of petrol cost as much as EUR 1.74, about 60% of that sum is tax.

Meanwhile, car owners still have to pay road tax, which goes from a couple of hundred to thousands euro, depending on the country.

Moreover, the public transportation is not any cheaper, a bus ride of less than km cost as much as EUR 2.00 in sum countries.

However, most people in Europe still earn less than EUR1500.00/month.

If Nigerians are really serious about, developing infrastructure, they have to be ready to pay for it, good things don't come cheap.

sweet9ja:

If Nigerians are really serious about, developing infrastructure, they have to be ready to pay for it, good things don't come cheap.

Whenever I read something along the lines of what you have above, I LAUGH!!! Because such posts make it clearly obvious the poster is DISCONNECTED from the reality of the Nigerian situation.

Wake up  . . .   Nigerians ALREADY PAY THE HIGHEST FOR MOST EVERYTHING, when compared to the rest of the world, and minimum wage is still barely $50 a month(the new $150 a month minimum wage has yet to kick in for majority -- even states complain they cannot afford it). With that, we have about 80% of our population in dire straits. You remove subsidies and you potentially create a disaster because millions will be completely unable to afford more than 75% of what they even need. We do not have a functional welfare system of any kind. Why would any reasonable person, anyone who even understands how economies are built, suggest that RAISING THE COST EVEN HIGHER is the way to go, if we want development in that country?? ROFLMAO!!!

I mean I am not an economists but that suggestion comes off as seriously lame-brained each and everytime it is produced.

sweet9ja:

s.

However, most people in Europe still earn less than EUR1500.00/month.

If Nigerians are really serious about, developing infrastructure, they have to be ready to pay for it, good things don't come cheap.

You can come back here with your analysis when the least paid person in Nigeria is on 215,000 naira (about eur1,500). Before that time, don't lump your apples and oranges comparison down our throat.

Okay?