₦airaland Forum

@Acidosis
Laughing in Ijebu

For some reasons, I don't support this call for the president's resignation. But, I expected a better performance from him because he had the rare privilege of being an acting president before he got a fresh mandate. That ought to have prepared him for the tasks ahead.
My advice for him is to rid himself of all the charlatans and hypocrites around him and steer the ship of this nation towards the course of greatness.

@Omoeso
Thank you jare my brother\sister (whichever is applicable).
The truth is, nepotism is our bane in this country. We all want our people there so that we can be favoured above others in terms of juicy appointments or contracts. The thieving political class are aware of these shallow expectations and that is why they take advantage of our pettiness.
While it is not misplaced to demand for equitable distribution of resources, I also think we should be demanding for accountability from government at all levels. While also ensuring the strengthening of all our democratic institutions to prevent every fear of perceived or real domination by not only any particular tribe but political class.

As part of the entity called Nigeria, it is within our legitimate rights to demand for fairness and equity.
For those insinuating that we voted for Action Congress and thus should not complain, you should know that not all Yorubas belong to the Action Congress.
However, like someone rightly observed, the Yorubas have no one to blame except themselves. Tinubu and his boys gave that kolanut chewer 'Tambuwal' the slot given to the Southwest.
As for me, I am not interested in who occupies whatever position (as Bankole's ignominy has shown). I am only interested in good governance.

@Detongue
If you continue thinking like this, you'll soon swallow your tongue (no pun intended).
Everyone cannot be president, there will always be critics which I think is good for democratic development.
Moreso, Wole Soyinka has always been consistent.
FYI, he does not even run the fraternity like a dictator.

^^
And what have you done to Ladipo,Mushin? Was that not what the Council chairman was complaining about that your people started calling him a murderer?
He who lives in a glass house should not throw stones!

@namfav:
You called majority of Southerners fools? How dare you? I hope the fura you took is not causing damage to your brain? You simpleton!

Lwkmd

He should shut his phucking trap! Who doesn't feed hungry peeps? Was he even missed?
He has to work on his own image because there are several reports that he doesn't honour contractual agreements. It is common knowledge that he collects money from people and doesn't show up to perform as agreed.
BTW, if he had gone to Ojota, he would have incurred the peeps wrath with his errant behaviours.

Na today? Second base jare!

Continue reading what? Abeg, if you have any sensible thing to add, paste it here. I for one will not go to your jeko-jeko .

@Patsey, I am enjoying you jare. Let them keep goofing. BTW, I was at OAU when Ademowo did his postgraduates and I can confirm that his supervisor (who was an Anglican priest) basically wrote His Lord Bishop's doctoral thesis.
The problem with some of the clergy is that they don't want to condemn one of their own. Jonathan being a christian and a southerner has nothing to do with good governance. The speaker of the United states congress just referred to Obama's policies as pathetic, yet the most powerful president in the world did not send Army to his home. We are yet to hear of any Black society in the US demonstrating in support of Obama or asking him to deal ruthlessly with his detractors. Now, that is true democracy.
Makinde has never hidden his disdain for Buhari, who was Bakare's principal during the last presidential election. In a veiled reference to Buhari during the campaigns, he gleefully said that no religious fundamentalist will ever rule this country again.
I am a christian, and I know the likes of Makinde very well. Bakare might not be perfect, he's human afterall, but for what he has contributed to the mass movement in the last decade, he towers above the likes of Makinde, Oritsejafor et.al.


P.S sorry, I was typing with my phone.

This is a moronic thread. You should rather ask, 'what has your father done about the bombings?'

This Ezeagu and his cohorts are impostors. Please read the story below. Where were they in all these?



 

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Save Nigeria Group plans mass rally to protest political situation in Nigeria, on March 10 in Abuja

| March 05, 2010

The Save Nigeria Group (SNG) a coalition of civil society and religious bodies in Nigeria is to hold a mass rally on March 10, the date of the next meeting of the Executive Council of the Federation (EXCOF), in Abuja to protest against the current political situation in Nigeria.

In a press release titled, “Now That They Have Exhausted Our Patience, ” the Save Nigeria Group said it plans a series of actions to “retrieve the country from the iron fisted clutches of the cabal” and “Other forms of nationwide civil disobedience measures to put a final closure to the shenanigans of the cabal and enforce electoral reforms to ensure that we are no longer deal with in the old ways”

The group criticized the secrecy around President Yar’Adua’s return from Saudi Arabia and his continued absence from the public's eye with a spokesman saying, “Had we not been vigilant, they would have continued to lie to us by using his name to issue all sorts of directives which the ailing President is not privy to,”

The group led by the SNG leader, Pastor Tunde Bakare, met with Acting President Goodluck Jonathan who received them and promised to get back to the group.

The delegation also included Mr. Femi Falana, President of West Africa Bar Association, Mr. Tanko Yinusa; Mr. Tola Ayo-Adeyemi, Mrs. Joe Okei-Odumakin, Mr. Yinka Odumakin, Mr. Willy Ezeugwu; Mr. Osita Okechukwu, Nagatu Moha-mmed, Shehu Sani, Salisu Lukman, Raymond Dokpesi, Buba Galadima, Hajia Jinatu Mohammed, Osita Okechukwu, CNPP spokesperson, and Mr. Jimmy Agbaje, the DPA Lagos gubernatorial candidate


Save Nigeria Group plans mass rally to protest political situation in Nigeria, on March 10 in Abuja
------------------------

http://www.ngex.com/news/public/newsinfo.php?nid=8827



^^^ abeg help me ask am oo.

Hmmmmm, why are they just coming out? My guess is they have succeeded in breaking their ranks. With the way this guys wrote this letter, 'e be like say water don enter mouth.'
Where were this 'authentic members' when Bakare was the rallying point of their group? I guess Yinka Odumakin too is no
longer a member of the SNG? I am a fan of the SNG's official Facebook page. So, why were Bakare's comments and positions during the strike being posted on the website of a group that he doesn't belong to? Smh

Lie

*attention should have read mounting*
Oga Seun, haba! Why this spambot they change my word now?

*attention should have read erection*

I don't give a damn about Fashola or Action Congress. I am a Lagosian from Epe Local Government and I have vigorously denounced Fashola's anti-people policies. I am appalled at his decision to increase LASU's school fees astronomically and the recent erection of Lekki Toll Gate. For non-indigenes who might consider it a noble undertaking, I want you to look at your state and imagine your Governor mounting such tolls between your home Local government and the next one to it and understand what I am talking about(Moreso, Ibeju Lekki was under Epe Local Government until the 90s). We, the Epe and Ibeju Lekki people, have no other place to claim as our own. It is a travesty and posterity will judge Fashole and his Godfather, Tinubu.

Jonathan cannot sack Diezani Allison-Madueke because she is Oga Jona's sister in-law. A very reliable source told me that Madam Patience has no issue for Oga Jona. Although Oga Jona has kids and they were born by Diezani's elder sister.

Shoeless!

@karl max:
Stop been foolish where in my post did Ʊ hear me mention yorubas use more fuel pls if Ʊ can read ask someone who can read to help Ʊ out

My stand remains that lagos state I don't care if other ethnic group live in lagos I live there myself use the highest volume of the subsidized PMS in nigeria and oh add this to it the rich use more of the volume that lagos get and if other ethnic group life in lagos they also pay their tax that fashola gives his oga 10 percent of let every state pay its petrol tax that's my stand and lagos should stop. Short charging the poorer state CAN should not use the population of lagos when it is in there favour and when it is against them!! Lagos and the rich in lagos use more of this subsidized pms the president is on point the truth is always better

Mr. Mumu max, sorry I even made the mistake of confusing your name with Karl Marx. Like someone had rightly mentioned elsewhere on NL, the original Karl Marx must be stirring in his grave because a retardeen is impersonating him. It is not surprising that you are denying what you posted earlier. I am beginning to believe that someone has hacked into your NL account and thus misrepresenting your thoughts.

karl max:
Of course that's the truth is the rich in lagos that consume more of the subsidized fuel my president we are aware!!! That's why they want to kill dem self for Ʊ mr president to continue subsidizing fuel for them to continue there owambe

So the reference to Owambe was not directed at Yoruba people abi? You are a pathetic f00l.

@ Jarus
It promises to be very interesting. I dey laugh oo!

@Karl Marx or whatever you call yourself. Aint you too f00lish to be reasonable? Of what relevance would that statistic from DPR be to you? To assauge your bigoted reasoning that Yorubas (Lagosians) consume more fuel than other Nigerians? Have you forgotten that Lagos is cosmopolitan and comprises of other ethnic stocks apart from Yorubas? So, by advising your retarded president to remove the subsidy, you will be punishing the 'Yoruba cabals' who voted overwhelmingly for him during the election, abi? Good thinking Mr. Pseudo-economist and ethnic chauvinist.

@Ranks007
Have you seen Sanusi Lamido's needless allusion to FFK? What do you think of his unprovoked 'name-calling'?

ritten by Wale Majaro

As I write this, Nigeria has been paralyzed by a labour strike for the whole of this week. On New Year's day, the government removed government subsidies on petrol, the price went from N65 to N141. Arguments rage about whether or not removing the subsidies is a good idea. A friend of mine has analysed the problem scientifically, please read his excellent piece below:

Arithmetic of Fuel Subsidy (by Wale Majaro)

The Nigerian government claims that Nigerians consume 34million L of petrol per day. Most experts disagree and give a figure between 20ML and 25ML per day. For this write up, I will use the government figure. The government has also said that N141/L is the unsubsidized pump price of petrol imported into Nigeria, with N131.7 the landing price and N9.3 as profit.

Now, the government has made claims of the refineries working between 30% and 60%, depending on whom you listen to. For the sake of argument, I will assume that our refineries don’t work at all (i.e. 0% Production). Thus, my calculation is based on 100% of petrol used in Nigeria being imported, the worst case scenario. If the refineries actually work at 60% as the government claims, they should be processing 270,000 bbl/day of crude. Each barrel of crude produces 75L of petrol. So, if the government is to be believed, the refineries produce 19.5 million L of petrol a day and we should therefore only import 14.5million L a day. My analysis will ignore this completely.

So here is the arithmetic, using the government’s own figures:

Daily fuel consumption/importation: 34million L
Cost at pump: N141
No of days in a year: 365
Total cost of all petrol imported into Nigeria = 34Mx141x365 = N1.75 trillion

Now, Nigerians have been paying N 65/L for fuel, haven’t we? Therefore, cost borne by the consumers = 34Mx65x365 = N807 billion

Cost of the subsidy borne by the government is:

Subsidy = Total cost of import – cost borne by consumers
= N1.75 trillion – N807 billion
= N943 billion

So, even if we believe the claim that we consume 34million L/day and we assume that the refineries don’t work, the government should still not have spent up to N 1 trillion on the subsidy in 2011. How did they manage to spend N1.3 trillion by October? Since N1.3 trillion was spent by October, then the bill for the full year 2011 (assuming a constant rate of consumption) is: N1.56 trillion!

What accounts for the difference between N943 billion and N1.56 trillion? This is a difference of N617 billion that the government cannot explain. Did I hear a government official claim that the difference is what goes to subsidize our neighbours through smuggling? Time for more arithmetic.

Using figures from Okonjo-Iweala’s World Bank, here are the populations of West African countries:

Nigeria: 158.4 million
Benin: 8.8 million
Togo: 6 million
Cameroun: 19.6 million
Niger: 15.5 million
Chad: 11.2 million
Ghana: 24.4 million
The total population of all our neighbours: 85.5 million

Now, let us assume that fully 50% of the petrol consumed in each of these countries is illegally exported from Nigeria. Let us also assume that each of these countries consumes petrol at the same rate the Nigerian government claims petrol is consumed in Nigeria. I have deliberately ignored the ff facts which show that petrol consumption in these countries will necessarily be considerably lower than consumption in Nigeria:



Some of these countries have stable electricity (eg Ghana) and thus do not depend on petrol-driven generators for power.

Ghana, Togo and Benin are much smaller than Nigeria, thus traveling distances will be smaller.

Niger and Chad are mostly desert and cross-desert transportation of goods/people is mostly by diesel-consuming trucks, not petrol-consuming cars.

Apart from Ghana, the car density in each of these countries is much, much lower than the car density in Nigeria. In Nigeria, there are 31 cars for every 1000 citizens. In Togo and Chad, you have less than 10 cars for 1000 people.

Ghana has started to produce oil and will very likely rely less and less on refined products smuggled from Nigeria, once the Ghanaian local refining capacity is built up.


Rate of petrol consumption in Nigeria = Total consumed/total population
= 34ML/158.8M people
= 0.21L/person/day

Rate of petrol consumption in neighbouring countries is assumed to be same as Nigeria = 0.21L/person/day

Petrol consumption by our neighbours = Rate of consumption x total population
= 0.21x85.5M
= 18.35ML per day

Now, we have assumed that 50% of the petrol consumed in each of these countries comes from Nigeria. This value comes to: 9.18 millionL per day.

Let’s pause here. Think about it again. Is it possible for 9.18 million L of petrol to be smuggled out of our borders and the government cannot do anything about it? The biggest fuel tankers in Nigeria have a capacity of about 36,000L. How many of these trucks do you need to smuggle 9.18 ML of fuel? 254! Our government is telling us that over 250 huge tankers pass through our borders everyday and they cannot do anything about it! Wow! Talk about incompetence! This in itself is an urgent security challenge – if you cannot stop 250 tanker trailers from crossing the borders daily, how can you stop importation of weapons or even an invasion by a foreign army?

But that is not all.

Let’s believe the government and assume that about 9.18ML is actually taken to our neighbours everyday and this is all subsidized by the Nigerian government.

How much will this translate to?

Difference between pump price before and after subsidy removal = N141-N65 = N76
Total spent on subsidizing petrol to our neighbours annually = N76 x 9.18ML x 365
= N255 billion

I have assumed that:



There are no working refineries in Nigeria.

Nigeria actually consumes 34ML of petrol per day.

Ghana, Togo, Benin, Cameroun, Niger, Chad all get 50% of their petrol illegally, from Nigeria.

Ghana, Togo, Benin, Cameroun, Niger, Chad all consume petrol at the same rate as Nigeria.


Yet, the government’s figures still don’t add up! There is N362 billion missing. This is the difference between N943 billion and N1.56 trillion, assuming N255 billion is wasted through subsidizing the rest of West Africa. The government should tell us what/who eats up this N362 billion ($2.26 billion).

These figures simply show the incompetence and insincerity of our government officials. The simplest part of the arithmetic is laid down below:



NNPC crude oil allocation for local consumption: 400,000 barrels per day

Assuming refineries work at 30%, 280,000 barrels can be sold on the international market. (Remember that I assumed that refineries don’t work in calculating our consumption, to give an absolute worst case scenario).

Money accruing to FGN, through NNPC on the sale, using $80/bbl: $22.4m a day. Note that the true price is higher, as oil currently sells for $100/bbl and Nigerian crude sells at a premium to the benchmark Brent crude.

Annually, this translates to: $8.176bn or N1.3trillion.


What does this mean? The government does not subsidize our petrol imports, at least not from the Federation Account. The same crude that should have been refined by NNPC is simply sold on the international market (since our refineries barely work) and the money is used to buy petrol. The 400,000 barrels/day given to NNPC for local consumption can either be refined by NNPC or sold to pay for imports. The “subsidy” should be funded with this money, not the regular FGN budget. If the government uses its regular budget for subsidizing petrol, then what happens to the crude given to NNPC for local refining, but gets sold on the international market?

Conclusion

Now that the petrol pump price has been hiked by over 100% and resulted in 100-200% increases in the price of transportation, personal electricity generation and foodstuff, what do I advise the government to do?



Revise the petrol price, not to N65, but to an amount which takes inflation into consideration. Cumulative inflation from 2008 to 2011 is about 27%. A new petrol price of N88 should be a reasonable sacrifice for Nigerians, while the government tries to build trust by sorting out the real issues of the midstream/downstream oil industry and cutting down the cost of governance.

Partner with the International Oil Companies (IOCs) operating in the upstream oil sector to carry out the deregulation of the midstream/downstream oil sectors. Refineries are not very profitable compared to other areas in the oil industry; with profit margins ranging from 0-15% (this is why we don’t see companies queuing up to set up refineries). The government needs to give incentives to these companies to set up refineries in Nigeria, in the form of tax breaks, duty exemptions, crude price guarantees, etc. All agreements should be in place, with an enabling law, by September 2012.

The government has already shown and admitted that it cannot manage refineries. All new Greenfield refineries should use the NLNG model, where government owns enough equity to influence strategy in favour of the Nigerian people, but is not involved in the routine management of the company. This is the best way to get the best out of these refineries while protecting the national interest. The new refineries should come on stream by end of 2014.

Sell the existing refineries to the IOCs and stop spending taxpayers’ money trying to revamp them within the current structure. The IOCs have built and currently operate hundreds of refineries across the world, so refining is their bread and butter. ExxonMobil’s Torrance Refinery is over 80 years old, Total’s Port Arthur Refinery is about 100 years old – these companies know how to manage refineries.

The sale of the refineries should be carried out by September 2012. I know the refineries have been very poorly managed, so we should not expect to make tons of cash from selling them. The main advantages of the existing refineries to a buyer are the existing Brownfield facilities (roads, utilities, power), an existing pipeline distribution system and a skilled workforce. The IOCs should be mandated to revamp these new refineries to 70% nameplate production by January 2014 and 95% by January 2015.

Incorporate PPPRA into DPR by December 2012, with an appropriate legislation (I’m not sure whether this is already included in the PIB). Let us have one strong agency to monitor all activities, including product pricing in the downstream oil industry.

Balkanize PPMC and sell it off to private investors, again with the government retaining a non-controlling stake in the new entities. This should be done by September 2012, in parallel with the sale of refineries.

Increase the fuel price in Jan 2014, not by simply jacking up the prices, but by introducing a tax on imported products. The tax should be deducted at source when making “subsidy” payments to the importers. Jan 2014 is chosen because I expect the output from local refineries to improve to at least 70% within 1 year of operations by IOCs.

Introduce a law that any company that will be licensed to import petroleum products from July 2013 must either be currently running a refinery in Nigeria or be in the process of building a refinery in Nigeria (i.e. project has passed FID stage and execution contracts are signed). The total products each individual company can import must not be more than 20% of the company’s total refining capacity (existing + in construction) in Nigeria. This is the only way to break the importation “cabal”.

Immediately, start prosecuting all companies and individuals suspected of involvement in the royal mess that the fuel importation segment has become. Use the same vigour (or more) that was used in the 2009-2010 reform of the banking sector. Also, all companies and individuals suspected of involvement in the refinery TAM contract scams should be prosecuted.

Immediately, tighten the borders to minimize smuggling of petroleum products to neighbouring countries and sack/prosecute the relevant officials if smuggling remains a major issue. Our petrol will always be cheaper than that of our neighbours, especially if/when local refining reaches/surpasses local consumption. As every economist knows, products will always be cheaper in the source location than other places.

Set up petroleum product trading agreements for surplus products in Nigeria to be sold to neighbouring countries in a legal and transparent manner. All agreements should be in place by July 2013, well in advance of additional capacity coming on stream. These agreements will assure companies building refineries that there is an available regional market for them to legally sell products refined in Nigeria.


With all the above, “subsidy” will disappear by Dec 2014, but in a gradual process, ensuring no price shocks (such as the 100% increase of Jan 2012) re-occur and ensuring that the industry is actually sanitized. Of course, the government also needs to keep to its several promises of improving the power sector and revamping rail lines, two critical developments which will reduce our consumption of petroleum products significantly.

Data Sources:



http://www.nigeriafirst.org/article_11527.shtml Para. 14

http://www.nigerianoilgas.com/?p=518

http://www.pppra-nigeria.org/index.asp

http://www.thisdaylive.com/articles/subsidy-deductions-hit-n1-264tr-say-govs/101264/

http://data.worldbank.org/indicator/SP.POP.TOTL

http://siteresources.worldbank.org/INTPSIA/Resources/490023-1120841262639/Angola_PSIA_vol1_English.pdf

http://www.livecharts.co.uk/MarketCharts/crude.php

http://www.cenbank.org/rates/inflrates.asp?year=2011

http://www.nlng.com/PageEngine.aspx?&id=43

http://www.totalpetrochemicalsusa.com/pdf/F_FactsPortArthur.pdf

http://www.exxonmobil.com/NA-English/PA/about_where_ref_torrance.aspx

http://www.petroleumonline.com/content/overview.asp?mod=8

http://www.marketwatch.com/story/european-refining-margins-negative-in-dec-total-2012-01-05

http://205.254.135.7/tools/faqs/faq.cfm?id=24&t=6

http://data.worldbank.org/indicator/IS.VEH.NVEH.P3

http://cdn.dailypost.com.ng/wp-content/uploads/2012/01/Consolidated-Detailed-Findings.pdf

Original Artice

.

Fellow Nairalanders, I got this from a friend's facebook page and I think it's worth sharing.
Please take time to read it.
Written by Wale Majaro

As I write this, Nigeria has been paralyzed by a labour strike for the whole of this week. On New Year's day, the government removed government subsidies on petrol, the price went from N65 to N141. Arguments rage about whether or not removing the subsidies is a good idea. A friend of mine has analysed the problem scientifically, please read his excellent piece below:

Arithmetic of Fuel Subsidy (by Wale Majaro)

The Nigerian government claims that Nigerians consume 34million L of petrol per day. Most experts disagree and give a figure between 20ML and 25ML per day. For this write up, I will use the government figure. The government has also said that N141/L is the unsubsidized pump price of petrol imported into Nigeria, with N131.7 the landing price and N9.3 as profit.

Now, the government has made claims of the refineries working between 30% and 60%, depending on whom you listen to. For the sake of argument, I will assume that our refineries don’t work at all (i.e. 0% Production). Thus, my calculation is based on 100% of petrol used in Nigeria being imported, the worst case scenario. If the refineries actually work at 60% as the government claims, they should be processing 270,000 bbl/day of crude. Each barrel of crude produces 75L of petrol. So, if the government is to be believed, the refineries produce 19.5 million L of petrol a day and we should therefore only import 14.5million L a day. My analysis will ignore this completely.

So here is the arithmetic, using the government’s own figures:

Daily fuel consumption/importation: 34million L
Cost at pump: N141
No of days in a year: 365
Total cost of all petrol imported into Nigeria = 34Mx141x365 = N1.75 trillion

Now, Nigerians have been paying N 65/L for fuel, haven’t we? Therefore, cost borne by the consumers = 34Mx65x365 = N807 billion

Cost of the subsidy borne by the government is:

Subsidy = Total cost of import – cost borne by consumers
= N1.75 trillion – N807 billion
= N943 billion

So, even if we believe the claim that we consume 34million L/day and we assume that the refineries don’t work, the government should still not have spent up to N 1 trillion on the subsidy in 2011. How did they manage to spend N1.3 trillion by October? Since N1.3 trillion was spent by October, then the bill for the full year 2011 (assuming a constant rate of consumption) is: N1.56 trillion!

What accounts for the difference between N943 billion and N1.56 trillion? This is a difference of N617 billion that the government cannot explain. Did I hear a government official claim that the difference is what goes to subsidize our neighbours through smuggling? Time for more arithmetic.

Using figures from Okonjo-Iweala’s World Bank, here are the populations of West African countries:

Nigeria: 158.4 million
Benin: 8.8 million
Togo: 6 million
Cameroun: 19.6 million
Niger: 15.5 million
Chad: 11.2 million
Ghana: 24.4 million
The total population of all our neighbours: 85.5 million

Now, let us assume that fully 50% of the petrol consumed in each of these countries is illegally exported from Nigeria. Let us also assume that each of these countries consumes petrol at the same rate the Nigerian government claims petrol is consumed in Nigeria. I have deliberately ignored the ff facts which show that petrol consumption in these countries will necessarily be considerably lower than consumption in Nigeria:



Some of these countries have stable electricity (eg Ghana) and thus do not depend on petrol-driven generators for power.

Ghana, Togo and Benin are much smaller than Nigeria, thus traveling distances will be smaller.

Niger and Chad are mostly desert and cross-desert transportation of goods/people is mostly by diesel-consuming trucks, not petrol-consuming cars.

Apart from Ghana, the car density in each of these countries is much, much lower than the car density in Nigeria. In Nigeria, there are 31 cars for every 1000 citizens. In Togo and Chad, you have less than 10 cars for 1000 people.

Ghana has started to produce oil and will very likely rely less and less on refined products smuggled from Nigeria, once the Ghanaian local refining capacity is built up.


Rate of petrol consumption in Nigeria = Total consumed/total population
= 34ML/158.8M people
= 0.21L/person/day

Rate of petrol consumption in neighbouring countries is assumed to be same as Nigeria = 0.21L/person/day

Petrol consumption by our neighbours = Rate of consumption x total population
= 0.21x85.5M
= 18.35ML per day

Now, we have assumed that 50% of the petrol consumed in each of these countries comes from Nigeria. This value comes to: 9.18 millionL per day.

Let’s pause here. Think about it again. Is it possible for 9.18 million L of petrol to be smuggled out of our borders and the government cannot do anything about it? The biggest fuel tankers in Nigeria have a capacity of about 36,000L. How many of these trucks do you need to smuggle 9.18 ML of fuel? 254! Our government is telling us that over 250 huge tankers pass through our borders everyday and they cannot do anything about it! Wow! Talk about incompetence! This in itself is an urgent security challenge – if you cannot stop 250 tanker trailers from crossing the borders daily, how can you stop importation of weapons or even an invasion by a foreign army?

But that is not all.

Let’s believe the government and assume that about 9.18ML is actually taken to our neighbours everyday and this is all subsidized by the Nigerian government.

How much will this translate to?

Difference between pump price before and after subsidy removal = N141-N65 = N76
Total spent on subsidizing petrol to our neighbours annually = N76 x 9.18ML x 365
= N255 billion

I have assumed that:



There are no working refineries in Nigeria.

Nigeria actually consumes 34ML of petrol per day.

Ghana, Togo, Benin, Cameroun, Niger, Chad all get 50% of their petrol illegally, from Nigeria.

Ghana, Togo, Benin, Cameroun, Niger, Chad all consume petrol at the same rate as Nigeria.


Yet, the government’s figures still don’t add up! There is N362 billion missing. This is the difference between N943 billion and N1.56 trillion, assuming N255 billion is wasted through subsidizing the rest of West Africa. The government should tell us what/who eats up this N362 billion ($2.26 billion).

These figures simply show the incompetence and insincerity of our government officials. The simplest part of the arithmetic is laid down below:



NNPC crude oil allocation for local consumption: 400,000 barrels per day

Assuming refineries work at 30%, 280,000 barrels can be sold on the international market. (Remember that I assumed that refineries don’t work in calculating our consumption, to give an absolute worst case scenario).

Money accruing to FGN, through NNPC on the sale, using $80/bbl: $22.4m a day. Note that the true price is higher, as oil currently sells for $100/bbl and Nigerian crude sells at a premium to the benchmark Brent crude.

Annually, this translates to: $8.176bn or N1.3trillion.


What does this mean? The government does not subsidize our petrol imports, at least not from the Federation Account. The same crude that should have been refined by NNPC is simply sold on the international market (since our refineries barely work) and the money is used to buy petrol. The 400,000 barrels/day given to NNPC for local consumption can either be refined by NNPC or sold to pay for imports. The “subsidy” should be funded with this money, not the regular FGN budget. If the government uses its regular budget for subsidizing petrol, then what happens to the crude given to NNPC for local refining, but gets sold on the international market?

Conclusion

Now that the petrol pump price has been hiked by over 100% and resulted in 100-200% increases in the price of transportation, personal electricity generation and foodstuff, what do I advise the government to do?



Revise the petrol price, not to N65, but to an amount which takes inflation into consideration. Cumulative inflation from 2008 to 2011 is about 27%. A new petrol price of N88 should be a reasonable sacrifice for Nigerians, while the government tries to build trust by sorting out the real issues of the midstream/downstream oil industry and cutting down the cost of governance.

Partner with the International Oil Companies (IOCs) operating in the upstream oil sector to carry out the deregulation of the midstream/downstream oil sectors. Refineries are not very profitable compared to other areas in the oil industry; with profit margins ranging from 0-15% (this is why we don’t see companies queuing up to set up refineries). The government needs to give incentives to these companies to set up refineries in Nigeria, in the form of tax breaks, duty exemptions, crude price guarantees, etc. All agreements should be in place, with an enabling law, by September 2012.

The government has already shown and admitted that it cannot manage refineries. All new Greenfield refineries should use the NLNG model, where government owns enough equity to influence strategy in favour of the Nigerian people, but is not involved in the routine management of the company. This is the best way to get the best out of these refineries while protecting the national interest. The new refineries should come on stream by end of 2014.

Sell the existing refineries to the IOCs and stop spending taxpayers’ money trying to revamp them within the current structure. The IOCs have built and currently operate hundreds of refineries across the world, so refining is their bread and butter. ExxonMobil’s Torrance Refinery is over 80 years old, Total’s Port Arthur Refinery is about 100 years old – these companies know how to manage refineries.

The sale of the refineries should be carried out by September 2012. I know the refineries have been very poorly managed, so we should not expect to make tons of cash from selling them. The main advantages of the existing refineries to a buyer are the existing Brownfield facilities (roads, utilities, power), an existing pipeline distribution system and a skilled workforce. The IOCs should be mandated to revamp these new refineries to 70% nameplate production by January 2014 and 95% by January 2015.

Incorporate PPPRA into DPR by December 2012, with an appropriate legislation (I’m not sure whether this is already included in the PIB). Let us have one strong agency to monitor all activities, including product pricing in the downstream oil industry.

Balkanize PPMC and sell it off to private investors, again with the government retaining a non-controlling stake in the new entities. This should be done by September 2012, in parallel with the sale of refineries.

Increase the fuel price in Jan 2014, not by simply jacking up the prices, but by introducing a tax on imported products. The tax should be deducted at source when making “subsidy” payments to the importers. Jan 2014 is chosen because I expect the output from local refineries to improve to at least 70% within 1 year of operations by IOCs.

Introduce a law that any company that will be licensed to import petroleum products from July 2013 must either be currently running a refinery in Nigeria or be in the process of building a refinery in Nigeria (i.e. project has passed FID stage and execution contracts are signed). The total products each individual company can import must not be more than 20% of the company’s total refining capacity (existing + in construction) in Nigeria. This is the only way to break the importation “cabal”.

Immediately, start prosecuting all companies and individuals suspected of involvement in the royal mess that the fuel importation segment has become. Use the same vigour (or more) that was used in the 2009-2010 reform of the banking sector. Also, all companies and individuals suspected of involvement in the refinery TAM contract scams should be prosecuted.

Immediately, tighten the borders to minimize smuggling of petroleum products to neighbouring countries and sack/prosecute the relevant officials if smuggling remains a major issue. Our petrol will always be cheaper than that of our neighbours, especially if/when local refining reaches/surpasses local consumption. As every economist knows, products will always be cheaper in the source location than other places.

Set up petroleum product trading agreements for surplus products in Nigeria to be sold to neighbouring countries in a legal and transparent manner. All agreements should be in place by July 2013, well in advance of additional capacity coming on stream. These agreements will assure companies building refineries that there is an available regional market for them to legally sell products refined in Nigeria.


With all the above, “subsidy” will disappear by Dec 2014, but in a gradual process, ensuring no price shocks (such as the 100% increase of Jan 2012) re-occur and ensuring that the industry is actually sanitized. Of course, the government also needs to keep to its several promises of improving the power sector and revamping rail lines, two critical developments which will reduce our consumption of petroleum products significantly.

Data Sources:



http://www.nigeriafirst.org/article_11527.shtml Para. 14

http://www.nigerianoilgas.com/?p=518

http://www.pppra-nigeria.org/index.asp

http://www.thisdaylive.com/articles/subsidy-deductions-hit-n1-264tr-say-govs/101264/

http://data.worldbank.org/indicator/SP.POP.TOTL

http://siteresources.worldbank.org/INTPSIA/Resources/490023-1120841262639/Angola_PSIA_vol1_English.pdf

http://www.livecharts.co.uk/MarketCharts/crude.php

http://www.cenbank.org/rates/inflrates.asp?year=2011

http://www.nlng.com/PageEngine.aspx?&id=43

http://www.totalpetrochemicalsusa.com/pdf/F_FactsPortArthur.pdf

http://www.exxonmobil.com/NA-English/PA/about_where_ref_torrance.aspx

http://www.petroleumonline.com/content/overview.asp?mod=8

http://www.marketwatch.com/story/european-refining-margins-negative-in-dec-total-2012-01-05

http://205.254.135.7/tools/faqs/faq.cfm?id=24&t=6

http://data.worldbank.org/indicator/IS.VEH.NVEH.P3

http://cdn.dailypost.com.ng/wp-content/uploads/2012/01/Consolidated-Detailed-Findings.pdf

Original Artice

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Putting the cart before the horse. It's just an afterthought.