AGAINST claims by the Federal Government that it was subsidizing fuel with over N1.3 trillion, it has been revealed  that Nigerians were already over-paying for fuel, as the actual cost of a litre of petrol ought to be N39.50k.
This was disclosed in Benin, Edo State, yesterday, in a communiqué at the end of a Town Hall Meeting organised by a Coalition to Save Nigeria, CSN, made up of Nigeria Labour Congress, NLC; Nigerian Bar Association, NBA; Nigerian Medical Association, NMA, civil society organisations, professional bodies, students, market women and artisans.
According to the communiqué, “Nigerians are prepared to resist the decimation of their lives by mobilising professional organisations, labour and the great people to resist fuel price increase that has been tagged subsidy removal.”
The communiqué further said if the government could not check corruption in various ministries, departments and agencies, it should admit it and quit for those who have the capacity to do so.
While saying the government could no longer be trusted, participants at the Town Hall meeting called for downward review of pump price of fuel to N39.50k per litre, just as it called on government to account for the excess money for fuel price increase since June 1999.
“Ngozi Okonjo-Iweala, having demonstrated lack of adequate knowledge of the working of the Nigerian economy, and being the eye of the World Bank ‘policy trinity’ of the elimination of the public sphere, total liberation for corporations and skeletal social spending, therefore should be removed as minister,” the communiqué said.
Former Academic Staff Union of Universities, ASUU, President, Prof. Festus Iyayi, in his speech on the occasion advanced reasons why Nigerians should not accept fuel price increase, insisting that the petroleum products market has since been fully deregulated.
http://www.vanguardngr.com/2011/12/actual-cost-of-petrol-is-n39-50-per-litre-coalition/
http://thejuristlaws..com/2011/12/actual-cost-of-petrol-is-n3950-per.html

How do they arrive at the cost of 39.50

They should organise their own Town Hall meeting in Lagos and enlighten us

To know how the price was arrived at, please read this article http://saharareporters.com/article/real-cost-nigeria-petrol-dr-izielen-agbon

interesting how come 39?

Can we have the breakdown as to how the actual cost of petrol is 39.50? There resides in the piece elements of truth.

Ishanorun:

To know how the price was arrived at, please read this article http://saharareporters.com/article/real-cost-nigeria-petrol-dr-izielen-agbon

Immediately I saw the Sahara reporters link, I lost interest! Next,

It should be cheaper than that.

The Internet makes it simple.

http://www.nationmaster.com/graph/ene_gas_pri-energy-gasoline-prices


http://www.kiplinger.com/features/archives/gas-prices-around-the-world.html

Below are prices for 2005 so you can also compare:

http://money.cnn.com/pf/features/lists/global_gasprices/

free2ryhme:

Can we have the breakdown as to how the actual cost of petrol is 39.50? There resides in the piece elements of truth.

So if I just cook up something now that Nigeria has invaded Cameroun, you will say there must be an element of truth in it? We live in an evil world. People lie and deceive when they want to. It is not rocket science. If you really think guys in Saharareporters cars about you or Nigeria, you must be deluding yourself. Nigerian politicians are very bad but what really irks me is that the people that should provide the checks and balance are even the most corrupt. Including, the judiciary, press and civil society groups. I have worked with many civil society groups and they are nothing but Ghana must go groups. Its sickening.


Saharareporters are a soft sell and gossip online magazine.

^^^ The March 2005 link has gas price listed for  Nigeria, Lagos at $0.38. In 2005, the exchange rate was at about Naira 100/$1. So, the Naira 39.50 amount reported does seem to work, to an extent, when you consider the 2005 figures then, and also assume the number was for cost/litre.

http://money.cnn.com/pf/features/lists/global_gasprices/

The NationMaster link has the price at $0.44, which happens to be about Naira 60

http://www.nationmaster.com/graph/ene_gas_pri-energy-gasoline-prices

free2ryhme:

Can we have the breakdown as to how the actual cost of petrol is 39.50?  There resides in the piece elements of truth.

So if I just cook up something now that Nigeria has invaded Cameroun, you will say there must be an element of truth in it? We live in an evil world. People lie and deceive when they want to. It is not rocket science. If you really think guys in Saharareporters cares about you or Nigeria, you must be deluding yourself. Nigerian politicians are very bad but what really irks me is that the people that should provide the checks and balance are even the most corrupt. Including, the judiciary, press and civil society groups. I have worked with many civil society groups and they are nothing but Ghana must go groups. Its sickening.


Saharareporters are a soft sell and gossip online magazine.

Kobojunkie:

^^^ The March 2005 link has gas price listed for  Nigeria, Lagos at $0.38. In 2005, the exchange rate was at about Naira 100/$1. So, the Naira 39.50 amount reported does seem to work, to an extent, when you consider the 2005 figures then, and also assume the number was for cost/litre.

http://money.cnn.com/pf/features/lists/global_gasprices/

The exchange rate was between 132 to 136 in 2005. In 2005, petrol sold at N51 per litre. OBJ increased the price at the end of that year. You do the maths.

The countries that sell fuel very cheap are countries like Saudi, Lybia and Venezuela. The advantage those have are low population, full working refineries.

You can check out the facts on wikipedia:

http://en.wikipedia.org/wiki/Nigerian_naira

If you multiply $0.38 by 136, you get 51.68 which was the price of petrol as at 2005 before OBJ increased it at the end of the year.

Leave Saharareporters alone and face the topic.

On 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

The actual cost of petrol would depend on how much NNPC decides to sell the crude used for local consumption, either refined locally or by foreign refineries. If it is sold at the current $105 - $108, then the price should be about N160. But if it is sold at about $50 then the price should be around the N65 mark.

So we need NNPC to tell us how much they produce one barrel of oil and how much we Nigerians should buy it.

Petrol should not sell for more than what it sells for now in Nigeria.

dmainboss:

The exchange rate was between 132 to 136 in 2005. In 2005, petrol sold at N51 per litre. OBJ increased the price at the end of that year. You do the maths.
The countries that sell fuel very cheap are countries like Saudi, Lybia and Venezuela. The advantage those have are low population, full working refineries.
You can check out the facts on wikipedia:
http://en.wikipedia.org/wiki/Nigerian_naira
If you multiply $0.38 by 136, you get 51.68 which was the price of petrol as at 2005 before OBJ increased it at the end of the year.

Before Obasanjo's deregulation in 2005, the price of petrol was less than Naira 40 per litre.

http://www.socialistworld.net/doc/1913

I still think the 0.38 cents per gallon figure is not far-fetched.

So how come Ghana's price went up?

I really don't understand what the subsidy is really for, if our refineries are working @ 32% capacity as we know, it means nigerians only pay for cost of crude + refining cost which is not up to N40, now the remaining crude is now refined abroad, is it that we pay for the cost of refining abroad? That should be the only logical way to do things as that would only add a little extra cost to it, do we sell to countries that refine & buy back @ international price?, that should just be a straight swap. I really need a full explanation on how NNPC arrived at their N138 per litre cuz it looks as though they sell the crude @ N0 & buy @ international prices

How some of you can choose to believe a social critic or party official over actual facts is funny. The facts are there as I have posted above. So it doesnt matter what someone here in Nigeria says, they are just trying to score cheap political points and get cheap recognition. World prices for commodities aint going down, they are going up for all products including fuel. Nigeria even stands a far greater risk because our population is expanding astronomically, we have a lot of redundant population and we have no other major source of income.

@Kobojunkie

Kobojunkie:

Before Obasanjo's deregulation in 2005, the price of petrol was less than Naira 40 per litre.

http://www.socialistworld.net/doc/1913

I posted the link before. Please check it out. As at January 2005, it was N51 per litre. OBJ increased it at end of that year. So do the maths again.

I still think the 0.38 cents per gallon figure is not far-fetched.

Sahara mattaz arising!

As you said everybody is in involved with the art of lying including the vanguard write up you quoted. There is no way coconut oil would be cheaper than fossil fuel as an alternative oil. The cost of land acquisition, growing of coconut, harvesting, processing and extraction of the coconut oil would be huge. If our petroleum engineer is so good at extracting coconut oil, he should sell it at international price. I can imagine what a litre of coconut oil will cost. Besides you would need external energy to process the coconut and extract the oil.

Although I do not subscribe to nigerians having crude at N0, I also do not subscribe to it being sold at international prices. At international prices no private refinery located in Nigeria would be able to compete with those located abroad, because of gross inefficiencies in the nigerian environment and the all mighty Nigerian factor. Marketers would still be forced to import, with serious consequences on our exchange rate and inflation. I would recommend government sell crude for domestic consumption at the same price we use for our benchmark in the budget which is about $70.

otokx:

So how come Ghana's price went up?

I don't know why nigerians are so unbelievably intellectually lazy, why do you keep comparing yourself with a country that JUST STARTED PUMPING OIL LAST YEAR- WHAT ABOUT OUR 40 YEAR HEADSTART ON THEM? Does common sense not indicate to you that having just started pumping oil they should not have as much infrastructural capacity as one who has been doing it for 40 years+? Or did your own history books indicate to you that Nigeria started pumping 2 million barrels per day immediately we found oil in the 60s??!! What is wrong with us gan sef.

^^^My broda, we all know Naija is having serious problems but it is sad that people politicize the issues for their own personal interest and then tell us they are doing it for the good of Nigeria. Imagine Akande saying that BOKO ARAM is silent revolution.

There is fuel subsidy all right and Nigeria does not produce fuel at N39. The key issues are:

1. All our refineries were built during the Gowon regime. So they are all over 30 years old. The turn around maintainance over the years has been terrible. Now we have reached a very very sorry state. Going forward, we must build new refineries. But that requires private participation as government is surely going to be able to do it.
2. To allow for private participation, subsidy has to go and market forces must dictate what happens. Truth is we will suffer from it for a while but it is still the best thing to do else the future will be worse than Greece

samstradam:


I don't know why nigerians are so unbelievably intellectually lazy, why do you keep comparing yourself with a country that JUST STARTED PUMPING OIL LAST YEAR- WHAT ABOUT OUR 40 YEAR HEADSTART ON THEM? Does common sense not indicate to you that having just started pumping oil they should not have as much infrastructural capacity as one who has been doing it for 40 years+? Or did your own history books indicate to you that Nigeria started pumping 2 million barrels per day immediately we found oil in the 60s??!! What is wrong with us gan sef.

You are a funny guy, really! What 40 head start? Have you been living in Ukraine? We are on minus headstart! With refineries nearing 40 years and no proper turn around for same period, you say we have a headstart? You must be in dreamland. The truth is, it might be cheaper to actually start from scrath right now than to rely on the stupid infrastructure we have! Haba!!

To all those quoting Ghana.

(1) Does Ghana produce or import fuel?
(2) Does Ghana provide her citizens with 24hrs electricity supply for her manufacturing sectors and domestic use unlike Nigeria or not?
(3) Does Ghana have sound education system unlike Nigeria or not?
(4) Does Ghana have sound,truthful,trusting  and working leadership unlike Nigeria or not?
Kindly clarify b4 u ask Nigeria do jump because Ghana has jumped.

Kx:

To all those quoting Ghana.

(1) Does Ghana produce or import fuel?
(2) Does Ghana provide her citizens with 24hrs electricity supply for her manufacturing sectors and domestic use unlike Nigeria or not?
(3) Does Ghana have sound education system unlike Nigeria or not?
(4) Does Ghana have sound,truthful,trusting  and working leadership unlike Nigeria or not?
Kindly clarify b4 u ask Nigeria do jump because Ghana has jumped.

All these stuff you quoted actually supports the argument why fuel subsidy must go, because Ghana actually stands in a better position to subsidize fuel since they have all these facilities in place. If they refuse to subsidize with all these facilities they have, how do you want Nigeria, in her sorry state, to subsidize. They do not need major funding for infrastructural development since they have developed considerably.

dmainboss:

All these stuff you quoted actually supports the argument why fuel subsidy must go, because Ghana actually stands in a better position to subsidize fuel since they have all these facilities in place. If they refuse to subsidize with all these facilities they have, how do you want Nigeria, in her sorry state, to subsidize.

Did they remove subsidy b4 they did all that as your govt has preached to high heavens that the proceeds from subsidy removal will be used to provide some of those basic needs?

Kx:

Dis they remove subsidy b4 they did all that as your govt has preached to high heavens that the proceeds from subsidy removal will be used to provide some of those basic needs?

Did the current government put Nigeria in this predicament? We got where we are under military rule. Just like Ghana found themselves before democracy took over. So whats your point? The present government inherited the mess. Do you think if Ghana had been producing oil during their military era and subsidizing fuel, they would not have removed it after the civilians took over?

Just to correct that it is not only about building infrastructure. The subsidy right now is actually being funded from borrowed funds. that is living dangerously. Nigeria is spending money it doesnt have.