₦airaland Forum

People canvassing for the efficient operation of the refinery before subsidy phase off are being delusional. How is this option going to benefit the masses?

These refineries will get their crude oil at the international prices which constitutes about 65-70% of the cost. We have to understand that our government does not own the oil blocks where these crude oil comes from 100%. They are binded by the joint venture stipulations that determine how to market these products. Therefore, they cannot just make a decision to give them away at sub-par prices.

The country currently has the capacity to refine 445 kbbl/d of crude oil. We all know that current capacity (@ full capacity) will not supply enough products for general consumption. The install capacity can only supply about 50-60 % of Nigerian consumption. This implies that we still have to import enough to cushion the shortfalls. We should also not forget that these refineries are old. They require newer technology to maintain their complex and very complex functionality. Even with these newer technologies, it’s going to be difficult to get them to function at least 80-85% of their installed capacity. Lest not forget impact of vandalism to crude oil pipelines and its effect, plus we don’t have the operating experience to maintain, turnaround, manage such highly sophisticated equipments. This will further reduce expected local supply and increases product importation.

The question remains, how would this be different from the current system? Why delay the judgement day, if we're still going to result into the same solution?

PapaBrowne:
To those saying Government should build new refineries,I think: Sanusi gave an excellent answer!

If you know any industry Government has built that is currently working properly, please mention. Government would never succeed in running any private enterprise so why should we encourage Government to spend 20Billion Dollars building new refineries.
Asides, where is the money to build new refineries going to come from. It costs over $4Billion dollars to build one 100,000 barrel refinery.
The other fact is that it would take at least 4 years to build a new refinery.

For those that want the current refinery running at full capacity, I think we are not been reasonable enough. Can a sick old man churn out the same quantum of activity like a young energetic man?

Those refineries are dead sick so any more money being churned in there would only serve to futher erode our scarce resources.

The only soltion is to create an enabling environment for private sector investors to build refineries and I think deregulation ala subsidy removal is the way to go!!

Spot on man.

Hopefully, some of these policies can see the light of the day. I have to say that these are very good policies, but our problem has never been shortfalls of ideas but implementation. I pray that we have the political muscles, perserverence to implement and achieve benefits of these proposed reforms.

The Federal Government has said that it has concluded plans to establish Trade and Investment Councils with six advanced countries across the world.


This, government disclosed, was part of renewed efforts to make Nigeria the preferred investment and manufacturing hub of sub-Saharan Africa.


The Minister of Trade and Investment, Olusegun Aganga, disclosed this at the weekend during the Rivers State Investors' Forum tagged ‘Change That Works.’


He said that the new initiative would act as a vehicle to channel big, transformative investments into Nigeria and strengthen the country's balance of payment position in the global market place.


He said, “To enhance the level and quality of foreign direct investment, we have created trade and investment desks in Nigeria’s main embassies across the globe. We have also agreed with the relevant authorities to make it possible for genuine investors to get multiple entry visas in their home countries or visas at the point of entry.


“Our strategy is to make Nigeria the hub of investments in Africa. And to be able to fast-track this process, we have started with the inauguration of the Australia-Nigeria Trade and Investment Council in Australia during the Commonwealth Heads of Government Meeting in Australia last month.


“The Ministry of Trade and Investment is looking at replicating this for six other advanced economies. This vehicle will channel big, transformative investments into Nigeria and strengthen our balance of payment position,” he said.


He added, “I was in China last week on the invitation of China’s Minister of Commerce. And from our discussions, the Chinese companies are excited about the investment opportunities in Nigeria.


“We have also been able to secure firm commitments from the Chinese government to make Nigeria a preferred manufacturing hub for Africa”, he added.


Aganga stated that the FG had already embarked on a holistic, investment climate reform programme to remove the barriers to Foreign Direct Investment in Nigeria.


He said, “The Federal Government has identified the holes to be plugged in the quest for an investor-friendly environment.


“To this end, the Federal Ministry of Trade and Investment has, therefore, commenced an investment climate reform programme, working with the Department for International Development (DfID) and the World Bank to create an investment ecosystem that will match that of the top economies globally.


“To pave the way for easy implementation, the reforms have been broken into the following subgroups: Business Environment Reform, Review of Trade, Industrial and Investment laws, policies and incentives; creation of a competitiveness council to drive and coordinate the efforts of the public and private sectors aimed at improving our competitiveness


The minister also identified review of tariffs to protect and promote local industries; Customs, Ports and Immigration reforms; and addressing issues raised in the Ease of Doing Business Survey conducted by DfID and the World Bank.


These include: the implementation of a National values re-orientation programme; civil service reform; and improving public and private governance, security reforms; job creation through Train to Work programme; rural industrialisation programme; cottage mining industry, and development of a social security (safety net) programme, among others.


“The long-term targets of the investment climate reform programme are: to increase Nigeria’s creditworthiness by 10 places in the next 10 years; increase investment level by 300 per cent by 2015 (increase of $8.9 billion); and reduce the level of poverty in Nigeria through the creation of more jobs.


“Others are to increase global competitiveness ranking by 75 points in 2015; and improve Nigeria’s Ease of Doing Business ranking and match South Africa’s ranking in the next 5 years and to be in the top 5 in sub-Saharan Africa by 2015”, he added.


He stated that the reforms were also targeted at value re-orientation and elimination of perception of corruption by the year 2015.


In addition to the investment climate reform programme, Aganga said that the ministry had also commenced the review of major industrial policies which focus on areas where Nigeria had comparative and competitive advantage.


He said, “With regard to the country’s resource advantage, the policies will focus on the oil and gas, petrochemicals, solid minerals and the agricultural sectors of the economy, among others.


“Already, the cement industry reform is yielding good fruits for the economy. As a result of the enforcement of the backward integration policy in the cement sector, Nigeria has moved from a heavy importer of cement into a country that will become a net exporter by 2012. We are working with the Federal Ministry of Agriculture to replicate this for rice and sugar.


“Mr. President has made it absolutely clear that he wants the country to be self-sufficient in respect of rice during the tenure of this administration, and I have no doubt that this will be achieved”, he added.


In order to key into the Federal Government's new investment initiatives, Aganga however noted that there was need for the Rivers State Government to develop a business and investment-friendly environment by reducing the number of procedures for starting a business.


These, he said, would make the registration of businesses faster and put structures in place to enforce contract, respect its terms and give genuine investors easy access to land.


He said, “It takes 38 days to register a business in Rivers State, 37 days in sub-Saharan Africa and 13 days in the OECD countries. Dealing with construction permit, registering property and enforcing contract, among others, also need to be improved further to attract the necessary investments for growth.”

http://www.proshareng.com/news/15553

Supreme Court To Decide If 1789 Law Applies To Shell in 2012

For nearly 200 years, the Alien Tort Claims Act lay dormant, a one-sentence law passed by the first Congress that gave federal courts jurisdiction to hear any lawsuit brought by "an alien" for torts committed "in violation of the law of nations." Then around 1980 inventive lawyers rediscovered it as a tool for international human-rights enforcement. One judge dubbed the long-neglected law a "legal Lohengrin," after the knight in the Richard Wagner opera who magically appears in a boat drawn by a swan.

Early next year the Supreme Court will decide whether this law can be the legal vehicle for pressing multibillion-d0llar claims against corporations that lawyers believe are responsible for human-rights violations. One case, Kiobel v. Royal Dutch Petroleum, asks whether Nigerian villagers can sue the oil giant in U.S. court over the actions of government troops they say were acting on Shell's orders to protect its valuable installations in Nigeria. It is paired with another case involving the 1993 Torture Victims Protection Act. In both, the court is being asked to sort out a dispute among the federal districts about whether these laws apply to individuals only, or can be extended to organizations like Shell and the Palistinian Liberation Organization. They're scheduled to be argued Feb. 28.
The stakes are huge for corporations, which theoretically could be held liable for any actions of the government in nations where they do business, pay taxes, and rely on local forces to protect their


http://news.yahoo.com/supreme-court-decide-1789-law-applies-shell-today-152020277.html

GenBuhari:
correct the idea of fuel subsidy is a scam and I believe it is because the government wants to be deceptive about the real reasons for the price hikes.

I believe it is due to the devaluation of the Naira and if you noticed talk of fuel subsidy removal has gone hand in hand with devaluation of our currency.

I thought subsidy removal has been around for a while now. This was documented in the PIB about 2-3 years ago. Devaluation of our currency just happened recently. Can you please educate me on how subsidy removal impacts the devaluation of our currency?

I never supported goodluck's presidency at all because of his antecendents as a deputy governor of Bayelsa, governor, vice president, and president with no tangible result to show for overseeing all these positions. As a matter of fact, I supported Buhari during the last election because I believe he’s the best person to tackle corruption head on. However, we should not allow political, religious, ethnic, sectional sentiments to cloud our judgement in supporting progressive policies that are meant to grow our economy. The man is there now, and he’s going to be there for another 4-8 years, therefore I might as well support his policies constructively for the progress of Nigeria. Some of the people canvassing for the removal of subsidy today are only doing so because of political, religious or sectional sentiment and not because they don’t believe in the benefits. Why don't we all analyse the subsidy removal from a cost benefit stand point and decide from that angle, rather than follow the media hype blindly.

I support the subsidy removal because of the expected accrued economic benefits. I believe keeping the subsidy for a very long time is recipe for disaster. I also believe the time to remove the subsidy was yesterday, waiting a little longer will continue to stagnate our economy in terms of expected accrued benefits including tax revenue, innovation, research and development, export, job creation, paid subsidy that could have gone to developing other area in the economy and other benefits. The subsidy removal holds its pros and cons. I believe the benefits outweigh the cost, and most importantly the costs are short term. We all have to understand, “no pain no gain”. We have to sacrifice today for tomorrow. Without the sacrifice of today, there may not be tomorrow or it may be too expensive.

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

The author fails to acknowledge the true cost of developing a field, from exploration to production. The cost of developing dry holes, equipment malfunction, and those other risks you have to contend with when developing a field. The marginal cost of production for MNC such as Exxon Mobil in a country with reduced political and economic risk is between $12 – 20. I used Exxon in this context because they have the experience, technology, people and others to achieve that cost. To speculate $3.5/bbl in Nigeria clearly shows the author lack upstream economics knowledge or he’s purposely trying to prey on the collective intelligent of average gullible Nigerians.

Also, he fails to make clarification between what we currently have in place in terms of developed assets and who owns them, to what the government should have done in terms of investment (by owning their own field 100%). Socialism can be applied to government own producing ventures, but when you have other vested interest in the mix, different equation applies. Contracts to take specific product on a continuous basis after production have to be signed to secure funding for developing the asset. Sometimes upstream asset has to pledge as collaterals to secure funding. These dynamics sometimes determine where products go most of the time, even before the field gets developed. These reasons might affect expected supply to our local refinery if that decision were to be made today. The co-owners also have their agenda as well, which is to maximize profit. Would they want to sell at subpar price to our local refineries on the pretend of social /corporate responsibility or would they allow economic principles to take precedents. The author fails to mention these dynamics and other factors that play into developing an upstream asset.

What we all need to understand is that; once upstream assets are monetized, they are subjected to global prices, because that’s how they (owners) can maximize their profit as an investor. We should not in any way, make the mistake as a country of subjecting expected price of petrol, diesel or kerosene to how much it cost to produce Forcados or bonny light just because they are produce in our backyard, or because they are Nigerian products. That basis is a total misconception, warp economic practice and a disaster in the waiting.

Simple assumption.

My analysis is assumming for every 1 barrel of crude oil refine = 1 barrel of petrol.

Although, this is reality at all. The dynamics that plays into refining crude oil depends on a lot of factors including; type of crude (light, heavy), characteristics of the crude (sweet, sour, PONA classification etc), crude assay (amount of crude you can actually convert to gas, petrol, kerosenes, other distillates, cokes and others), type of refinery you're running (simple refinery, complex refinery or very complex refinery), and your mode of operation (selectivity-what is driving your production in terms of market) and other factors

Global Price of crude oil ~ $95 / barrel ( todays global price)
Cost of refining the crude @ 20% ($95) = $19
Logistic, tarrif, taxes @ ~ 12% (95+19)= $15.32
marketing profit margin @ 15% (95+19+15) = $22 / barrel
Selling price / gallon = $147 / 42 = $3.50 (assuming 42 gallons /barrel)
Selling price / litre = $3.5 / 3.8 = $0.92 (assuming 3.78 litre/gallon)
Selling price of petrol after deregulation (N) = ($0.92*(N160/$1)) = ~N147

I hope this gives you a feel for what to expect after deregulation.

International price of petrol differs per country, depending on each country's objective towards consummation of petroleum products, regulation structure, tariff system, taxes and others. Hence, you cannot use international barometer to gauge what Nigerian petroleum products prices should be.

shadrach77:
a yoruba man for a change

How does this translate to development? We should not allow tribal sentiments, sectionalism, religious speculation and others to cloud our judgement in terms appointment. Competency based on antecendents should be the yardstick for appointment.

Canvassing for same sex marriage does not warrant efcc or icpc investigation. Everyone is entitled to their own opinion. Speculation of "devil - worse crimes" without specific crimes and facts does not call for reprimand as well.

[size=3pt]Niger people, when are we going to learn. [/size]

Heavy D

why do we have to play politricks with everything. The PIB is essential to our economy, the senate still have to get kickbacks before they can pass it. This is ridiculous

Every Nigerian will pray to see this manifest for the growth of our fatherland, but we all know that this proposition is dead on arrival. I will support Col. Abubakar Umar

Those of you clamoring for the status quo to remain, albeit keeping current N150/$1. Would you rather he continues to use our reserve to defend the naira? Don't forget that we've expended billions of dollars in our reserves in his attempt to defend naira. Was that a good move at all? While i'm not a supporter of devaluation, i think the man has been pushed to the limit and he has no other option but to devalue.

GenBuhari:
Who owns Orient Petroleum Resource Ltd?

Why does this matter?

This is a good idea and it should be encouraged. I ready yesterday where the government touted the idea of doing "whatever necessary" to make the environment conducive enough to attract and retain foreign investment. This idea should automatically attract the governments attention. We need to understand their needs "not their want", dialogue with them to ensure their business stays in Nigeria before they get hijacked by Ghana.

Relax101:
The building of this refinery didnt start ytday.

Spot on. They've been at this for a while now. I believe funding has been one of the major hurdle stalling the project. I remembered when they came to market about 2-3 years ago to raise money. I guess the private placement fall short of expectation, or else the project would have been near completion by now. Hopefully, they have enough funding now to complete the project.

Come to think of it, can they achieve the commissioning within a year? Hopefully they've completed all the design phases already. Fabrication of all long lead items like compressors, towers, reactors, turbine for plant electricity, into Nigeria will be one tough cookie to crack. Hopefully their project managers are well prepared for the dynamics of Nigerian factors and have already instituted measures to cushion that shortfall.

cjfavour:
Sanusi used to be my man bt his stand on the islamic banking have exposed him for who he really is. An extremist. beware of him. He can kill for his religion.

Sorry to derail the thread.

Why do we always try demonize anybody, organization that carries the placard of anything islamic without looking at the situation objectively. Majority of people here in Nigeria and on NL see non-interest banking (sharia banking) as militants/rebels banking, only muslim banking, and as an avenue to siphon funds to fund terrorist organization. These people allow these believes to cloud their judgement, their ability to reason objectively on the merits of sharia banking principles.

The responsibility lies on us to research properly what Sharia Banking truly represents instead of spreading media hyped, half baked and speculative information.

MY DAD - THE GREATEST MAN I KNOW
OBAFEMI AWOLOWO
ADEOLA ODUTOLA
SANUSI LAMIDO SANUSI
BABATUNDE FASHOLA
MUHAMMAD BUHARI
DANGOTE
ADENUGA
WALE TINUBU

Misplaced priority

Nice initiatives and very well timed. I hope when we're copying policies from US, UK and all these other countries, we're copying policies that benefit common citizens and not the policies that continues to reward poor result, laziness, no plan.  If we're to go by the US standard, its been shown time and time that their system at times rewards mediocrity. Typical example is the HP CEO, Leo Apothecker that got millions for implementing bad strategy that takes the company further into the hole.  I hope this policy and structure will focus on rewarding vision, strategy, implementation, and most importantly excellent result, and penalize no vision, wrong direction, poor judgement, lazy attitude and performance, embezzlement and other elements of mediocrity.

FG to publish audit of ministers’ performance

The Federal Government in its determination to ensure greater performance from cabinet ministers, has asked them to sign performance contracts. A performance contract is an agreement between government and a public agency which establishes specific goals for the agency, sets benchmarks for measuring performance and provides incentives for achieving the targets.

Sylvester Monye, Special Adviser to the President on Performance Monitoring and Evaluation, who disclosed this in Abuja at a high level conference on Nigeria ’s economic transformation agenda, blamed the failure of governments in the past on lack of efficient machineries to implement programmes.

The performance contracts to be signed by the ministers, would be backed up with performance contracts policies and was adopted from countries like the United States, United Kingdom, Malaysia, New Zealand, India, Ghana and Kenya, where government officials are held accountable for what they do, and what they fail to do while in office.

Monye who was speaking at the forum put together by the African Institute for Applied Economies, stressed that a set of main outcome indicators would be determined by the Presidency, on which basis the ministers would be assessed.
He hinted that the assessment of ministries would be made available to the public, so as to carry people along, so that they would be aware of the progress government makes and the challenges it faces in implementing its programmes.

Speaking further on the performance contracts, Monye said: “Given the enormity of the responsibilities placed on the shoulders of government by the electorate, it can no longer be business as usual. Government priorities therefore, are to strengthen and stimulate the performance of government machinery in a relentless effort to ensure that its programmes yield the desired outcome. This will necessitate that we change the way government works by consistently assessing the performance for our initiatives in all spheres of government. It means also that government must continuously improve its service delivery capacity, while promoting accountability on the part of those charged with the responsibility to deliver.

“There is no doubt that over the years, successive governments in the country have not been lacking in rolling out policies, programmes and initiatives. The problem, as has been noted in various quarters and at various times, is implementation. As a result, we are determined to improve the quality and standards of the services government deliveres to the people. This can only be successful if we have an effective performance management system and efficient monitoring and evaluation machinery within government, to assess the progress made in the key priority areas.”

Describing performance as the bottom-line of people’s expectations of government, the former secretary of the National Planning Commission, noted that Nigeria ’s performance contract, would primarily outline the required performance of concerned ministries, departments and agencies in two to three policy outcome areas, and indicate per outcome, the measurement of success.

“The rationale for the performance contracts policy is the failure of government to deliver on the expectations of the people, using the old system of management in the public service, which focuses on compliance with processes rather than results. Under the old scenario, government officials are confronted with multiple principles with multiple goals. Therefore, in essence they do not know what is really expected of them. In many cases, government officials feel they are not responsible for results and thus do not accept responsibility…

“Performance contract will promote transparency, as it will be put on the internet so that all can see and hold concerned agencies accountable.”
Eric Eboh, Executive Director of the African Institute for Applied Economics says achieving better service delivery is fundamentally linked to public service and institutional reforms that are designed to deliver improved public service performance, effectiveness and efficiency.

Eboh identified fiscal consolidation, business environment and service delivery, as critical signposts of Nigeria’s economic transformation, stressing “how the country deals with the decision, challenges and associated policy trade-offs will shape the success of the economic transformation agenda and the prospects of economic prosperity in the medium-to long –term”.

I think marketing will do the trick. Not too much calculation involved and it will help with your business

Never give up on your dream. Some people just don't know how close they were to achiveing their dream when they gave up.

So, go for the goal even if it kills you.

Beaf:
It seems that kerosene is the only thing that will remain subsidised as part of the palliative package for the poor. [/b]I lean in the direction of subsidy removal, but want to hear the full package for the poor first. We should all be ready to scrutinise it to make sure its properly targetted and executed.[b]
As for riots, there will be none; the labour people don't have a hard stance already seem to be buying in, everyone wants to see the full palliative package before making a position.

Best statement I have ever read from you on this forum, Instead of just following the bandwaggon of the presidency blindly.

I use Terre D'hermes and Declaration by Cartier.

Is the money going to government or private company?

Sun of god:
Another $1.5 billion about to go down the drain.

. . . .And why do we need to borrow, borrow, borrow like there was no tomorrow.

I guess the bank doesn't care if the money is 'pilfered' in the normal Nigerian manner - as long as they are paid back with interest.

Has GEJ blown all the foreign reserves?

Kudos to this decision. Lets get the SWF ball rolling.

Rather than focus on "Nigeria Infrastructure Fund, the Future Generations Fund and the Stabilization Fund" alone, part of the proceeds can also be used to finance other natural resources that requires different financial instruments with longer tenors and lower interest rates, through public private partnership. I believe finacing is part of the missing link why other natural resources such as Coal, Tin, Copper,  are not getting indegineous attention. With proper regulatory reform, economic structure, and financing we can revive these industries and SWF might just provide that means.

I agree that nothing in life happens by accident. Its possible that God can lead you to marry someone you don't love, if they are going to play a significant role in your life.