Kobojunkie:

I am sorry, but what you have above is not common sense but you trying to spin something out of nothing.

Again, much of the non-oil producing countries apply subsidies to HELP reduce cost for their own people, even as they already pay so much more than we do in Nigeria today. Claiming that that affects us is trying to weave some disconnected web there. 

Kobojunkie:

I am sorry, but what you have above is not common sense but you trying to spin something out of nothing.

Again, much of the non-oil producing countries apply subsidies to HELP reduce cost for their own people, even as they already pay so much more than we do in Nigeria today. Claiming that that affects us is trying to weave some disconnected web there.

birdman:

Like Katsumoto alluded to earlier, policy and its implementation are two different things. Bad implementation of a good policy falls short of the mark. Bad policy has no hope of hitting the mark, ever. I challenge you to name ONE country with a top 20 GDP that does not have significant subsidies. Just name one. My point? Subsidy is good policy always. Do as the Americans and Europeans do, not as they say

Katsumoto:

But the problem with those agitating for the removal of the subsidy is that they are not articulating the benefits of the removal; all they are saying is that the subsidy is unsustainable. That may be true but I can't accept it in light of endemic corruption in all industries.

No, my position is that the decision to remove/reduce the subsidy should be taken as part of a holistic fiscal and monetary policy. I stated this clearly when I joined this debate. Until that can be determined, I prefer for the subsidy to be spent on the Nigerian people rather than being embezzled.

birdman:

Lets simplify this: A company in Ekiti makes Adire attire and sells to different parts of the country. Factoring in transportation costs, she sells at N1000 a yard and makes N200 profit. A Chinese company does the same thing, except that his cost of transportation from China is being subsizided by his government, so he sells the same yard for N500 and makes N200 profit too. Who wins in the long run?

Hopefully this is connected enough for you. You can of course replace adire with plastic, cement, etc,

birdman:

Like Katsumoto alluded to earlier, policy and its implementation are two different things. Bad implementation of a good policy falls short of the mark. Bad policy has no hope of hitting the mark, ever. I challenge you to name ONE country with a top 20 GDP that does not have significant subsidies. Just name one. My point? Subsidy is good policy always. Do as the Americans and Europeans do, not as they say

Katsumoto:

Govts give subsidies to companies to keep them competitive. The EU gives grants to its farmers to keep them competitive. America gives subsidies to wheat farmers to compete with Asian and Russian farmers.

Katsumoto:

Govts give subsidies to companies to keep them competitive. The EU gives grants to its farmers to keep them competitive. America gives subsidies to wheat farmers to compete with Asian and Russian farmers.

debosky:

Are those counties top 20 GDPs because of preponderant social subsidies or because of economically beneficial subsidies?

If the benefit of petrol subsidy were kept inhouse as is being done by Saudi Arabia and Venezuela it would make sense. Instead the subsidies are going to foreign companies, not to Nigerian refiners. The policy of subsidy has little benefit to Nigeria economically.


I don't really follow - so you are against removal of subsidy because of endemic corruption in all industries?

That is not a complex analysis to make - we increased prices from 11 naira to 65 naira over a period without significant economic impact, while the benefits from the PTF was clearly seen.

debosky:

This goes to the crux of the matter - who is this subsidy benefiting? The few importers who don't even tell you the landing cost before claiming exorbitant subsidies?

Do the subsidies help Nigeria be economically competitive? I don't think so - those American and European subsidies are targeted at productive activity, not just blanket subsidy that encourages inefficient consumption and waste with little benefit.

Subsidies elsewhere encourage economic development, Nigeria's petrol subsidy does not.

Every factory using diesel to run its plants will tell you they will appreciate the government building a power plant instead that provides cheaper electricity that they can rely on, than supplying slightly cheaper petrol.

Katsumoto:

The fact that you can only point to the PTF has having done good in over 50 years of production is testament to the point some of us are making. When the subsidy is removed, how do you ensure that the funds are used judiciously? OBJ, GEJ's godfather, spent $16B on the power sector whith nothing to show for it.

Katsumoto:

Economic development is good; providing assistance to a people who live on meagre earning's is also a good thing. Not every decision made in the developed world aids economic development. The UK govt has been paying rent and providing free accommodation for those who cant afford it for generations; does that provide more economic development than helping people who spend a significant portion of their earnings on transport?

Katsumoto:

Economic development is good; providing assistance to a people who live on meagre earning's is also a good thing. Not every decision made in the developed world aids economic development. The UK govt has been paying rent and providing free accommodation for those who cant afford it for generations; does that provide more economic development than helping people who spend a significant portion of their earnings on transport?

debosky:

PTF had a direct linkage to a removal of subsidy - that is a clear example of the benefit that can arise from removing part of the subsidy. What is required is a direct linkage to what is being removed in subsidy by a separate fund. This has worked in the past and can be implemented again.

The wider expenditure failures in no way justify inefficient application of subsidy that is not even experienced by everyone in Nigeria.

Secondly, OBJ never spent $16bn on power, and there are at least4 new power plants on the ground at Olorunsogo, Papalanto, Omoku and Afam to show for it. Can we stop repeating the same stories over and over again?

debosky:

Not every decision I agree - but the quantity spent on infrastructural development far dwarfs the amount spent on social support programs, even in the UK.

In Nigeria, we spend more on subsidy spending than on health, spending over 1 trillion in three years - more than we spend on health.  How can that EVER be justifiable? 

Katsumoto:

The UK is spending £125B on healthcare this year for 60 million people while Nigeria is spending $4B on oil subsidy for 150million people. Please clarify that the 1 trillion is in Naira.

see below for UK spend on healthcare since 1985

http://www.ukpublicspending.co.uk/uk_health_care_chart_10.html

debosky:

Nigeria is spending more on subsidy than on health - that cannot be a reasonable outcome. over 1 trillion on subsidy over three years 2006-2009 -  in naira.

The headline figure comparison is not the aim, but the proportion of national income spent on an inefficient subsidy compared to healthcare.

ekt_bear:

I think we are dancing around in circles a bit. Here is what we know:

1) The $4.2 billion in subsidies is not the most efficient way to address whatever need it is meant to achieve (I guess helping out poor people.) There has to be at least one scheme on earth that achieves whatever goal this subsidy has more efficiently.

Here is what we don't know:
2) Is it possible realistically for the Nigerian FG to choose and implement one of those schemes? Again, not necessarily in a corruption-free way, but with more actual "bang for the buck" than (1)?

Katsumoto I guess believes the answer to (2) is no, it cannot. He think either a poor scheme will be chosen, or whatever scheme chosen will cause less value to be delivered than (1) due to corruption (though we must keep in mind that corruption already exists in (1)). Thus, to him, there is more of an economic impact in just keeping the subsidy than trying something new.

However, he has this belief without any sort of data about how effective (1) is (how much of this $4.2 billion is actually reaching the poor, if this is the goal?), and what exactly the replacement (2) is.

In my opinion, this attitude is wayyy too pessimistic. If this inefficient subsidy is the preferred way for Nigeria to spend $4.2 billion/year, then Nigeria is probably doomed.

ekt_bear:

In my opinion, this attitude is wayyy too pessimistic. If this inefficient subsidy is the preferred way for Nigeria to spend $4.2 billion/year, then Nigeria is probably doomed.

zstranger:

^^^

100, 000 and the govt is doing nothing.

Can you connect me with the people stealing our oil? I think they real the real patriots.  I'd rather do that for a year than work at a stupidddd bank in Lagos.

Between 1999 and 2007 about $250 billion revenue windfall accrued to the country from excess crude oil prices at the international spot markets, and this money was allegedly mismanaged and unaccounted for. The EFCC if it is serious with the anti-graft campaign should embark on thorough investigation and prosecution of the perpetrators of this executive stealing of money that belongs to all of us.