₦airaland Forum

oyel money sweet o

There is only one thing I'm trying to occupy.

Lol. The post above by Beaf is exactly why I am second-guessing myself a bit regarding this policy.

No matter how good an idea seems to you, if you look up and see that the people also agreeing with you are scumbags, then you sort of pause and reassess.

Anyway, with all that said, I am cautiously optimistic.

Katsumoto:
The demand in the neighboring countries will not disappear; what stops marketers from causing petrol shortages in Nigeria so as to sell at a higher price in neighboring countries if smuggling is not reduced/eliminated?

I am not claiming that it will disappear entirely. It cannot, while Nigerian refined petrol products are cheaper.

However, clearly the demand will diminish substantially, and cannot remain constant.

[quote author=Kilode?! link=topic=836855.msg9883026#msg9883026 date=1325540339]Comparing Nigerian border and custom control to America's is just not worth discussing.[/quote]In the context of what I have said in this thread, I think it is highly relevant.

If one does not see the connection between the two situations, then they should probably put in their contacts or wear their reading glasses

If it is so clear to you why the analogy is bad, kindly say why.

Katsumoto:
I agree with your points with regards to the existence of a porous  border but still maintain that people squatting on your ranch is not the same thing as your workers stealing your livestock and selling it to others without your consent.

Heh. Squatting on your ranch? If it only it were that pleasant.

The impact in some cases is pretty damn negative. For example, look into how illegal immigrants place stress on the public school and health systems (an illegal Mexican woman deciding to give birth at the emergency room and not paying the hospital a dime for the tens of thousands of $$$ she incurs in bills., or a guy who sends his illegal son to public school for his K-12 education.)

For an even sharper example, read a bit about the Mexican drug trade.

I provided an assertion in the above examples; I think the onus is on you to prove that I am wrong. I stated that I didn't kill a man; regardless of whether the man is actually dead, you have to prove that I actually killed him.  

Any claim requires proof. This is not a court of law, I am not a prosecutor and you are not a defendant, so your analogy doesn't quite work.

If you claim that the man is a pretty good mechanic (or at least, not a bad one), then it is up to you to provide evidence for this.

However, I don't think it will take too much effort to show that you are wrong in the case of Venezuela, for example. I'll take a look at it later in the evening and post.

For one, I would attempt to tackle the HUGE elephant in the room - corruption. You know my views on corruption in Nigeria.

1. Trimming the cost of government e.g No Nigerian senator deserves to earn $1.2million annually. That is the times what the US President earns.
2. Ensuring that revenue is not only accounted for but judiciously spent
3. Promulgating policies that ensure wealth is created
4. Tackling wastage/inflated contracts for government projects
5. Fix the bloody existing refineries; Nigeria should not be importing petroleum products

This is very easy. A man put gas in his car on the 31st of December at 65Naira/Litre and the following day, he has to spend 141Naira/Litre. That is a clear and quantifiable benefit. Another example, a woman takes a bus from Ikeja to CMS on the 31st of December paying 110Naira but pays 270Naira the following day. That is the real benefit; having money to spend on other things that the Nigerian government does not provide like health, education, cable TV, recharge cards, a meal at a Bukka. With the removal of the subsidy, he has less to spend on these things.

The Nigerian government has a poor record in terms of judicious spending. You will struggle to justify government spending in the last 25 -35years. What did the Nigerian government spend $60 Billion on last year that benefited the average Nigerian?


BTW, I will be back later to continue the debate.  

I'll return to the above text in the evening. Have some errands to run for now.

[quote author=Jenifa_ link=topic=836855.msg9882947#msg9882947 date=1325539459]this band aid cure makes absolutely no sense whatsoever. once people get adjusted to the new price hike, smuggling will go on as usual.
aren't they supposed to control the borders to solve the problem?

I predict there will be more more oil thefts in the months to come. If we can't protect our borders, how can we protect our pipelines.
http://fuelfix.com/blog/2011/11/02/shell-says-unprecedented-oil-thefts-target-nigeria/[/quote]If the prices of oil isn't cheaper in Nigeria than its neighbors, then there is zero profit in smuggling. Hence no incentive for anyone to do so.

If the prices at the McDonald's in my town are higher than that of the next town, nobody will trek over from there to here when they want a Big Mac.

Finally, if the removal of this subsidy means the success of this Chinese refinery in Lagos and other such foreign investment, then I am very glad that it is gone.

oyb:
did gej not promise us transformation?  

Q: How can you tell when a politician is lying?

A: When his lips are moving.

blacksta:
Majority agree that life long subsidy is bad for one's country health but it is common sense to soften the landing before removing subsidy.

When we first discussed this topic 8-9 months ago, I suggested slowly phasing it out over time rather than removing it all at once.

I think it is less politically costly to do this, while having the same positive long-run impact.

Katsumoto:
The US example you gave is different because the US isn't losing money across the border. US assets are not smuggled over the border into Mexico. It is the responsibility of the government with rare commodities/assets to prevent it being smuggled across the border.

The example I think is a pretty good one.

The commonality is not "rare assets smuggled across the border" or "losing money across the border", but a common inability to control what enters or leaves.

In that respect, both the US and Nigeria have failed, due to the efforts of enterprising smugglers who in both cases profit from the bans.

Is Libyan oil smuggled into Egypt/chad in huge quantities? Is Venezuelan oil smuggled into Colombia/Guyana in huge quantities.

Is it not? How do you know? Provide evidence of this assertion. A priori I would assume that whenever a price/wealth differential exists, people will act to reduce it. I haven't looked into the case of Venezuela at all, but I would be surprised if there wasn't massive smuggling.

Let me give another example; P&G products are cheaper in Poland than in Russia. On the Russian border to get into Belarus, the guards don't check for such consumer goods but on the same border to get into Russia, Guards check for cheap consumer goods coming from Poland because they are significantly cheaper in Poland and the Russian Government together with the cartels in Russia try to limit the flow of Polish goods getting into Russia.

And how effective is the Russian government in preventing this smuggling? That they attempt to do so doesn't mean they are any more effective than the Americans or we Nigerians have been.

Again, provide evidence.

Similarly, US customs don't check your goods when driving into the US from Canada but Canadian customs will search your car for cheaper goods from the US.

Again, see above.

I understand that it is impossible to completely eliminate smuggling but the Nigerian government is not even attempting to prevent/reduce smuggling.

So you consider their current efforts insufficient. How would you propose substantially improving it? While presumably not spending billions of dollars a year doing so?

I maintain, the Nigerian people shouldn't suffer for their government's inability to maintain its borders. There are quite a few policies that the government could have pursued to reduce smuggling before it chose to remove the subsidy.

Kindly list a few of them.

Secondly, this $6/7 billion subsidy removal is capable of contracting the Nigerian economy leading to job losses, wealth destruction, and an unbalanced income distribution. In plain language, money will be taken from the people and embezzled by government officials.

We discussed this several months ago, and further media reports that have come out only confirmed my suspicions. How much of this $6/7 billion actually goes to the common man?

10%? 20%? So let's suppose they remove the subsidy and embezzle 50% of it, but the remaining 50% actually goes for good purposes.

Does this not represent an improvement over the previous situation?

What difference does it make if Nigerian government officials steal 50% of the money intended for oil subsidy, or Benin Republic, Niger Republic, Cameroon steal 50%? Or the oil marketers steal it? In all three cases, minimal impact on the common man.

oyb:
think israelis and their security fence. think the berlin wall. i remeber in some

Lol. You expect the ruthless efficiency of the Israelis and Germans from naija?

go easy on the conspiracy theories , u're supposed to pass it not hold onto it

OK, so the former I'm pretty sure is accepted, that Abacha was non-native. Kashamu is more conspiracy theory.

Lol.

I doubt Boko Haram is that silly.

Unless they want the US to deal with Northern Nigeria like they dealt with Iraq and Afghanistan.

Wiser to attack softer and more vulnerable targets who will not retaliate. If you attract the attention of the big dog (US), it will crush you.

Also, the Nigerian government's inability to control its borders is nothing new.

Honestly I'm not even sure it is that easy in general, when you have the existing wealth/cost gradient between Nigeria and its neighbors.

Hell, how effective is the US at patrolling its border with Mexico? That border is basically wide open as far as drugs go, and pretty permeable as far as human beings go.

A policy (like the fuel subsidy) that implicitly depends on your ability to secure your border, in a country where:

a) the last military dictator (Abacha) was from Chad
b) and supposedly this Buruji Kashamu fellow in the Ogun PDP is from the Benin Republic

probably isn't going to work out too well, lol.

Katsumoto:
The key point here is the incompetence of the Nigerian government. Should the Nigerian people suffer because the Nigerian government looks the other way while petroleum products are smuggled out of the country? Shouldn't the government's first task be to end smuggling operations? I am not impressed with the smuggling angle because the government isn't even truthful enough to admit its incompetence/complicity in the smuggling shame.

As for economic benefits of subsidy removal, there are none because wealth is not created, it is merely transferred to the coffers of the Nigerian government which will be mis-managed and stolen as usual. Secondly, the disposable income of the average Nigerian will reduce considerably and consequently, hurting many non-essential industries such as telecomms, entertainment, hospitality.

The supposed benefits to the Nigerian people are lost on me; can you elaborate on the benefits of subsidy removal?

Heh, you missed @oyb and I's discussion. We were talking about the benefits to the Benin Republic of Nigeria keeping the subsidy in place.

Regarding Nigeria, I maintain the position I have always had. If the Nigerian government spends the money saved on the subsidy removal on meaningful infrastructure projects that benefit Nigerians, then you'll get a larger b[i]a[/i]ng for the buck than spending those dollars subsidizing fuel.

So really what it boils down to is, do you believe the Nigerian government will be earnest this time?

I don't blame anyone for being skeptical. I do see and understand that the Nigerian government has a credibility gap.

But I think that this step has potential, if they come up with good plans for the money and actually follow up reasonably well.

And the way GEJ has done this, he is risking his entire reputation and legacy on it. Okonjo-Iweala and the rest of them too. So again, it boils down to how much faith you have in them.

And of course I agree that the government doesn't benefit. But the people of the country benefit.

@oyb: I'm still not convinced. Yes, the legitimate marketers suffer slightly in that they have to compete against subsidized oil. Yes, the smugglers are criminals and probably have connections to unsavory elements.

However, if your neighbor is spending $7 billion a year, you would do well to vacuum as much of his money away as possible and bring it into your own economy

If the city next to me spend decided to subsidize McDonalds out of their pocket, the McDonald's in our town would suffer, but in the aggregate we would win. A huge win, not a small one either.

Anyway it is all speculation, we don't have #s to back it up. But I know which way I'd be betting, at least.

Eh, game recognizes game.

Giving someone praise (deserved) doesn't diminish you. . . if you think that makes someone somebody else's "b1tch", then something is wrong with you.

And as far as cvcksucking goes, you certainly are the one who gives off a gayish vibe, not I.

oyb:
http://lilandjohninafrica..com/2011/04/cotonou-benin.html

all beaf is saying is that the government in benin is as incompetent as that in nigeria, if they cannot take measures to protect those who would invest infrastructure in the nation.

I don't think the Benin government did badly. If your neighbor is dumb enough to subsidize a product and simultaneously cannot control his border, you take advantage of it.

Or is there something that I am missing?

Cotonou port in the Benin Republic (at least if you believe some of the studies done) also has benefited tremendously from bans by the Nigerian FG.

In both cases, BR gains.

djustice:
Sack Hussein Labo and all Fulanis from the Power Infrastructure setup in the country. They are working with Boko Haram to make the country ungovernable for Jonathan, and any little thing they can do to make him unpopular, they will do. That is the way they work. Sack them from Immigration, Customs, Police and the Army too. Don't wait until it is too late, and don't listen to those who will inevitably shout that it is tribalistic. The killings by "Fulani Herdsmen" all over Nigeria are no less tribalistic, and are a covert attempt to "gain" territory over which they can claim "indigeneship".

Force must be met with force, or Nigeria will be at war for decades! This is no time to be queasy! This is no time to be lily-livered. Hard decisions must be taken, and taken NOW!!!

What is your evidence for bolded?

I do agree with your overall point, though.

Koruji has said all that needs to be said.

RIP to the dead children and women.

Is this really about "who is Igbo" though, Abagworo?

Seems more like settler/indigene.

Probably the Ezillo only intended to have the Ezza as tenants on the land, but the Ezza wanted full land rights.

The more I read about this the more it seems basically like Ife/Modakeke.

@ak47mann: When did the Ezza migrate to Ebonyi?

Btw is this accurate:

But the Ezzas have dismissed the fears, alleging that the Ezillos had always wanted to force them out of the community, which became their home way back in the 1930s, when their great grand fathers were invited to help Ezillos fight their neighbours in the enduring struggle for land.

If so, where did they live before 1930?

jensinmi:
I beg to differ. On the contrary, for the small scale business man, illegal refining is the way to go.

OK, let's see.

Cost of PMS = Cost of crude + cost of refining + associated costs like transport.

Agreed.

The reason why international prices of crude are high are not because of the cost of refining. They are high because of the cost of buying crude oil at international prices.

Agreed (err, I'm interpreting this slightly differently from what you literally wrote.) Thus suggesting most of the profit is in selling the crude, not refining.

That is why countries like Saudi Arabia and Kuwait have lower prices. They sell their crude for lower prices to themselves and refine it themselves. The cost of exploration and recovery of crude is low in some countries, export pricing is what is high.

Agreed.

If you are a small time business man who wants to make money, puncturing a pipeline and siphoning crude is the easy part. Finding the equipment to transport large quantities of crude to willing buyers is a nightmare. Not just anybody can own an oil tanker (ship) and you can't carry the crude around in Jerry cans. Conversely, if you siphon the crude and process it like "unrattled" suggested, you can then walk around with jerry cans and sell directly to folks or partner with a petrol station to sell your product.

Crude in your hands is useless to a small scale businessman. If you were Otedola and co who owned barges and shipping tankers, that would be a different case.

I couldn't load the crude in barrels and sell off to some larger guy who will then deal with the messiness of refining?

A barrel of oil is worth $100. Why bother refining that stolen barrel myself? There is bound to be a guy willing to buy that barrel from me for at least 50 or 60% of the sticker price (or some other large #.)

If I am a small boy with my own gang of bunkerers, is it really easier for me to refine the oil myself than to just find some bigger dude who will then process it?

My point, for the criminal-minded businessman, refining affords you a scalable business model since

using this equation,


Cost of PMS = Cost of crude + cost of refining + associated costs like transport.

Is refining oil really that easy for a small guy though? That is my whole point. . . I don't think it is. It isn't like these gangs are groups of BS/MS level chemists and mechanical engineers. Instead probably mostly semi-illiterates. Even if they manage to refine oil, their processes won't be as efficient (and hence, not as profitable) as the guy with the $8 billion dollar refinery, for example.

And waste = less money made. This is why if it were me in the business, I'd focus purely on stealing oil.

Anyway, you might be right man. I haven't thought a lot about this particular business model, lol

unrattled:
If you've lived in the Niger Delta you'd understand.
Simple explanation.

Removal of subsidy = high petrol cost,
break a pipe and steal crude, refine it locally to whatever low spec you can.
Get one litre of original fuel, mix it with 3 litres of backyard fuel, sell at N100 - N139 per litre (not by the roadside, but in filling stations) all in the name of deregulation.

Catch the logic?
Result:  , !!!

OK, I see your point. . . in principle selling backyard-refined fuel will be more profitable, since the price of refined petrol products has increased (though one of the arguments against the fuel subsidy is that only a tiny fraction of the money spent actually reaches the end consumer. So the true price to the end consumer may not actually change as much as we think. .)

That much I agree with.

But if it were me stealing oil, I'd just sell the crude myself rather than trying to process it at all. Since you won't be able to compete cost-wise refining oil with a big refinery. . . so better just to steal and sell rather than steal, process and sell.

Anyway you are probably right.

unrattled:
Ouch!
Now those pot cookers (illegal bunkerers) in Rivers State will swing into full business.

Welcome to cheap petrol, adulterated fuel and damaged motor engines.

Why does removed subsidy => more bunkering and backyard refineries?

I don't follow the logic.

VoodooDoll:
Rebasing per the Reuters link puts it at around $390bn. I've seen figures elsewhere which are more modest. 

GDP calculation isn't an exact science but if we are still using a 1990 base year then the old numbers look seriously outdated.

Eh. They got the # by just looking at how much rebasing increased Ghana's economy by:

When Ghana made rebased its vital statistics last November, output shot up by 60 percent.

A similar increase for Nigeria's $247 billion economy would bring it to $395 billion, much closer to the continent's top economy, South Africa -- currently at $422 billion.

That really isn't very convincing. They are guessing just like we are.

Anyway like I said, I don't have a problem with this 350 #. . . it is probably closer to the truth than say 250.

I don't understand why they didn't just phase the subsidy out slowly over time.

Less politically costly to just drop the amount spend by 20%/year for the next 5 years.

VoodooDoll: Hrm, ok. So you are right. . . Nigerian economy is probably much larger than the #s suggest, at least based on these rebasing articles.

Btw where did you get the 350 from? The rebasing hasn't been done yet, has it? So we won't have an estimate until it is done.

Anyway, fine, we can use that number. It is probably a better estimate that 250.

I have not seen any contradiction in the media regarding the funding for these refineries. All of them say that 80 is coming from the Chinese.

THISDAY gathered that the consortium of Chinese investors “will take up 80 percent of the funding leaving the remaining 20 per cent to the NNPC. Lagos State will provide such necessary infrastructure as road network, electricity in addition to land.”

http://www.thisdaylive.com/articles/lagos-chinese-investors-sign-8bn-refinery-deal/83991/

If you find anything contradicting this, kindly post.

Nigeria's GDP is not anywhere near $350 billion. PPP yes, but nominal, no. Nominal is on the order of $200-250 billionish or so.