Golan007:


Subsidy.

Let's call it by its name.

ok since we want to jump to the end, subsidy it is then

TheGoodJoe:


How will the operator of the modular refinery sell at at a loss if he is getting the Crude free? The crude covers the losses and leads to profit.

And where is this free crude coming from?

"We can divert those subsidies to modular refineries"
they are being smart by half.. you could easily divert the so called subsidy you're paying for imported pms to these modular refineries to encourage local production but making this excuses continually to justify importation of pms is just nothing short of economic sabotage ..you cant even confirm how much pms we use everyday as a country but you keep throwing up subsidy figures... its scam abeg

backbencher:
What the NNPC boss is saying is simple.

Modular refineries can only work when government allows petrol to be sold at market price, otherwise they won't make enough of a profit to function well otherwise.

Story. What about FG selling crude oil to modular refinery operators at subsidized prices.

TheGoodJoe:



Other countries like Saudi Arabia and co refine crude oil and sell at subsidized prices. Why is ours so different?

The difference is, we are incompetent while Saudi Arabia is competent.

Change4dbeta:

Story. What about FG selling crude oil to modular refinery operators at subsidized prices.

Still subsidies, which suppresses price, and discourages investment.

Remove current subsidies for pms importers and modulars will become profitable since they would not incur transport costs that importers incur.

Remove price controls too so they can sell at market price. Price at pump will initially go up, but increase in investment chasing profit will soon bring it down.

backbencher:


If you subsidies petrol from modular refineries, they would run at a loss.

Like now, assume it costs N362 to refine one liter of fuel in the modular refinery. Government comes in and tells that refinery to sell to the market at N152 per liter., pays a subsidy of N210 per liter to cover the loss.

Next year, costs go up to N462 at the refinery. Meanhwile, government revenue is not adequate enough because of our large populaiton. Would you support a rise in subsidy payments to keep the sale price at N152?

Or would you let the modular refinery make a profit by selling the fuel at N412 per liter to the market, and recoup its costs, and pay for expansion and upgrades?

Have been following your rebuttals (answers) keenly and I think I should chip in here.

Going by this quoted analysis, even if government allows modular refineries to determine cost of PMS, Nigerians will end paying an increment of about 5% every month on PMS. In one year, the price would have been adjusted 12 times and in 5 years time, I am sure no one would be able to afford fuel in Nigeria, because according to you, cost of production will always go up.

You should know that Nigeria currently pays subsidy in dollars, including the cost of importation and other expenses like landing cost, etc. If that amount is paid locally, it would reduce the strain on the naira. When the naira is strong enough, it reduces inflation. Nigerians will be able to afford food and other essentials at cheaper rates, then you can bring removal of subsidy to the table. Let's say we use 5 years to subsidize it locally and in those years, strengthen the naira, after five years, we will have enough foreign reserve.

Now, politicians have succeeded in their plans; every calculation you make now must include Dangote refinery which is co-owned by so many politicians with Dangote as a front. They have shortchanged Nigerians by another 50 years.

As it stands now, Nigerians will NEVER buy fuel cheaper than it is today, whether deregulation or not. The petroleum sector is gone forever, I mean forever. They will soon face the next sector.

So painful to be reasonable and be a Nigerian!!!

mrvitalis:

Not removing subsidy was why Jonathan lost my support

No way he could have removed it then.
Many of the people who vehemently resisted him are in government today and they also want to remove subsidy hahaha... I hope this film will end well

backbencher:


They would, but for that refinery to work, they need to be allowed to sell PMS at market price, not at subsidy price of N162, because that refinery is not going to refine fuel at a cost less than N200/

I have a question for you sir? Who determines how much we sell our crude for but us?

Who determines how much of our crude we earmark for sale to the foreign market and the the quota for domestic consumption?

What stops the government from selling in naira at an affordable rate to local refineries to enable them produce and sell at a profit locally and then sell the remaining crude in dollars to the international market at the OPEC regulated price? Won't this even reduce the pressure on our foreign reserve and improve our balance of trade position? Won't this slash the monumental amount being expended on subsidies yearly?

Please stop peddling these lame excuses and propaganda that modular refineries cannot work profitably.

Change4dbeta:

Story. What about FG selling crude oil to modular refinery operators at subsidized prices.

So people who produce crude oil should run at a loss so that you can have cheap fuel?

So that the workers who drill for oil end up with less money in their pockets so you can have cheap oil?

Does not work that way

obi58:


I have a question for you sir? Who determines how much we sell our crude for but us?

We don't set our price per se...we set it in concert with OPEC and with a lot of other countries. That's why we have things like Brent crude oil price, and suchlike. We can control the cost of producing a barrel, though.

Who determines how much of our crude we earmark for sale to the foreign market and the the quota for domestic consumption?

Government.

What stops the government from selling in naira at an affordable rate to local refineries to enable them produce and sell at a profit locally and then sell the remaining crude in dollars to the international market at the OPEC regulated price? Won't this even reduce the pressure on our foreign reserve and improve our balance of trade position? Won't this slash the monumental amount being expended on subsidies yearly?

The fact that at the end, the drillers who drill for oil , companies and employees, would earn less as a result.

What you are saying here is the equivalent of 'why doesn't the local farmer get paid less for what he produces, so that I can have cheaper food'. That's not how it works in reality.

Also, if we want to improve our forex reserve, and balance of trade, we must get away from oil and diversify. Our dependence on oil is why we have a lot of economic issues and problems.

Please stop peddling these lame excuses and propaganda that modular refineries cannot work profitably.

They can work profitably if they are allowed to sell the products they refine PROFITABLY, after buying crude that they process...PROFITABLY...so that at the end of the day everyone earns a profit, and can pay for things like maintenance, staff salaries, upgrades etc.

WikiGuru:


Have been following your rebuttals (answers) keenly and I think I should chip in here.

Going by this quoted analysis, even if government allows modular refineries to determine cost of PMS, Nigerians will end paying an increment of about 5% every month on PMS. In one year, the price would have been adjusted 12 times and in 5 years time, I am sure no one would be able to afford fuel in Nigeria, because according to you, cost of production will always go up

.

Yes , because what I am advocating for, and I don't work for the oil industry or government, is the right of a business to set its price, because without doing so, said business won't be able to pay for its cost of running...and oil business, especially the refining end, costs money.

You cannot sell at a loss in the name of subsidy, and have enough to pay for repairs, maintenance, upgrades, even staff salary increases.

You should know that Nigeria currently pays subsidy in dollars, including the cost of importation and other expenses like landing cost, etc. If that amount is paid locally, it would reduce the strain on the naira. When the naira is strong enough, it reduces inflation. Nigerians will be able to afford food and other essentials at cheaper rates, then you can bring removal of subsidy to the table. Let's say we use 5 years to subsidize it locally and in those years, strengthen the naira, after five years, we will have enough foreign reserve.

Paying it locally won't change much...plus if we want to reduce the strain on the naira, we have to diversify our economy away from oil. Relying too much on oil is why we have issues in the first place.

Then paying subsides, even locally, still leaves us with the problem of their rising cost , when things like oil prices rise, workers salaries have to rise, maintenance costs, etc...plus the cost from expanding production (and most of the things needed for a refinery have to be imported from aborad) and if the cost of production rises, the subsidy rises.....meaning we have to take money from other sectors to pay for the subsidy and borrow to meet up.At the end, it does not matter whether we pay in naira or in dollars,we still get into debt.

Now, politicians have succeeded in their plans; every calculation you make now must include Dangote refinery which is co-owned by so many politicians with Dangote as a front. They have shortchanged Nigerians by another 50 years.

There are 5 other private refineries in Nigeria (6 if you count BUA). There are at least 20 other licensed refineries waiting in the in the wings. Dangote's refinery is even a big risk, because if subsidy remains, he would run it at a loss. And then the banks who loaned him money to pay for the refinery would start getting tetchy

If subsidy goes, and everyone is allowed to make a profit, it would incentivise more and more people getting into domestic refining, and that includes modular refineries, because NOW they would be free to make more profits.


Plus, we would not have been here if we had removed subsidy in 1993, when Dangote was not that rich to become a petrol investor.

As it stands now, Nigerians will NEVER buy fuel cheaper than it is today, whether deregulation or not. The petroleum sector is gone forever, I mean forever. They will soon face the next sector.

So painful to be reasonable and be a Nigerian!!!

All in all, let everyone who wants to make a profit be free to make a profit. Capitalism. I don't like it, but there it is.

backbencher:
What the NNPC boss is saying is simple.

Modular refineries can only work when government allows petrol to be sold at market price, otherwise they won't make enough of a profit to function well otherwise.

The govt should give them crude oil at a subsidized price rather the subsidizing imported petroleum product refined in other country, that way all costs associated with logistics which is significant, will be eliminated.

v2:


The govt should give them crude oil at a subsidized price rather the subsidizing imported petroleum product refined in other country, that way all costs associated with logistics which is significant, will be eliminated.

At the end it amounts to in essence telling the people who bring out the crude oil that you are cutting their pay.

Or would you tell farmers to.cut the price at which they sell their crops by half so that Nigerians can have cheap food?

Golan007:


Nobody is responsible for your lack of education.

you are full...modular refinery was not invented by Nigeria for it not to work. Bloody poverty promoter.

bestdudes:
you are full...modular refinery was not invented by Nigeria for it not to work. Bloody poverty promoter.

Go get an education.
That monotechnic you attended failed accreditation.

backbencher:


We don't set our price per se...we set it in concert with OPEC and with a lot of other countries. That's why we have things like Brent crude oil price, and suchlike. We can control the cost of producing a barrel, though.



Government.


The fact that at the end, the drillers who drill for oil , companies and employees, would earn less as a result.

What you are saying here is the equivalent of 'why doesn't the local farmer get paid less for what he produces, so that I can have cheaper food'. That's not how it works in reality.

Also, if we want to improve our forex reserve, and balance of trade, we must get away from oil and diversify. Our dependence on oil is why we have a lot of economic issues and problems.





They can work profitably if they are allowed to sell the products they refine PROFITABLY, after buying crude that they process...PROFITABLY...so that at the end of the day everyone earns a profit, and can pay for things like maintenance, staff salaries, upgrades etc.

When you said government you hit the nail on the head. Your analogy with farming is quite incorrect. Oil is a natural resource which is the wealth base of the country and the government decides the quota for export and domestic use. Government provides licenses to oil firms to prospect oil. Any oil firm who finds it unprofitable to explore oil at government determined prices is free to exit the market because more important things like the common wealth of the nation is at stake. We can't live in penury as a nation to satisfy the fat salaries of oil workers if we are serious as a nation.

obi58:


When you said government you hit the nail on the head. Your analogy with farming is quite incorrect. Oil is a natural resource which is the wealth base of the country and the government decides the quota for export and domestic use. Government provides licenses to oil firms to prospect oil. Any oil firm who finds it unprofitable to explore oil at government determined prices is free to exit the market because more important things like the common wealth of the nation is at stake. We can't live in penury as a nation to satisfy the fat salaries of oil workers if we are serious as a nation.

So basically goverment should drill for oil at a loss while driving out all.companies drilling oil because they wish to.make a profit doing so.

And then government shoukd also pay workers drilling the oil bad salaries because fuel must be cheap

And you know that governemt can apply.that logic to other businesses too?

Countries that do what you advocate end up collapsing economically.

People have the right to make a profit..whether phone seller or oil.company drilling for oil. You won't work for half your salary, so that the poor would benefit, why should you force others to?

backbencher:
What the NNPC boss is saying is simple.

Modular refineries can only work when government allows petrol to be sold at market price, otherwise they won't make enough of a profit to function well otherwise.

Its actually not that simple

bularuz:


Its actually not that simple

It is.

Regulated price means prices goverment sets

And since government is setting price to help the poor, any price goverment sets on fuel produced in a modular refinery won't allow it to make a profit and run well.

backbencher:


It is.

Regulated price means prices goverment sets

And since government is setting price to help the poor, any price goverment sets on fuel produced in a modular refinery won't allow it to make a profit and run well.

Are you saying there is no profit on imported fuel, how do they made profit and why does can it not be applied here? I don't see any problem here unless there is something hidden.

bularuz:


Are you saying there is no profit on imported fuel, how do they made profit and why does can it not be applied here? I don't see any problem here unless there is something hidden.

There is.

What we do is send crude to subdtandard refineries aborad to keep costs down.

If we refined it to standard at home, it would be expensive either way.

backbencher:

What you are saying here is the equivalent of 'why doesn't the local farmer get paid less for what he produces, so that I can have cheaper food'. That's not how it works in reality.

I needed an excuse to sell my electric tomatoes, again.

budaatum:
Electrical Tomatoes

The emboldened is about the only bit of this that got my attention but I notice it caught no one else's.

"Price controls"! It means a product is kept at a price set by government, and in Nigeria, we know it's kept low and very likely beneath the cost at which it can be sold at a profit. Like petrol really. But we can at least claim a reason for petrol with our crude oil and our ineptitude at running refineries. Electric though!?

Imagine it were tomatoes. You invest in land and fertiliser and labour and grow them, and when you get them to the market and government sets the price. I'm absolutely certain if that price is higher than the cost at which you grow your tomatoes, you wouldn't mind much. You'd likely be delighted if it's high enough for you to make a tidy profit. And if you're fortunate and the price set is so high, you'd likely invest in more land and more fertilizer and more labour and grow even more tomatoes. But this is Naija, where the price set by government is more likely to be way below your costs so that after you sell your tomatoes, you would have lost money.

Now think, you lost money on your tomatoes. Are you going to plant tomatoes next season? If you're into the charity business or you're stupid, you just might. But if you're not and have rent and school fees for your kids to pay and you want to eat and pay the interest on a loan I very much doubt you'd be stupid enough to throw your money away growing unprofitable tomatoes!

Well, that's the case with electricity in Nigeria I'm afraid. You generate it, transport it along unreliable transmission wires, lose a large chunk of it to illegal use and theft and what you do get paid for does not cover the cost of producing it. Now tell, would you plant electricity next season? I very much doubt it unless you're into the charity business or you're stupid of course, but somehow I just can't imagine you'd be either.

So, what's the solution you might wonder. Increase the price of electricity of course. But come on people, increase the price of electricity so electricity planters can earn more money and plant more and sell more? Surely you must be cursing me by now, or haven't you noticed you'd have to pay more for my electric if you want it?

Ok, perhaps you're all nice civilised folks and don't want to curse me so let's try a different way of looking at this. Imagine Buhari removes the price control so I can sell my electricity at a market determined price like I currently sell my tomatoes no doubt at a profit high enough for me to want to plant more next year. Are you cursing me yet? I'm sure you would be if it was the subsidy on petrol I were talking about removing. Hell no! You'd likely stone me if you could get your hands on me!

Well, that's what this piece is saying where it says "The private sector is given little incentive to invest.” After all, I'm in the electric planting business for the money and the profit and not because I love you all as Adam Smith would say, so why give you light if you aren't paying me for the priviledge! And you wanna complain you're in darkness?!

When you pay me enough to cover my planting of tomatoes after paying for the land and the fertilizer and the labour and the interest on a loan and cover what I lose to theft and illegal harvesting, and still make a tidy profit to reinvest, I will plant 12000megawatts of tomatoes and I will sell 12000megawatts of tomatoes and even more megawatts of tomatoes than you can eat even because you would be incentivizing me to invest what you pay me in more land and more fertiliser and more labour to plant more tomatoes so I will have more tomatoes to sell you and make more money. But if you want cheap electric, keep your price controls and don't incentivize me but don't expect me to waste my time labouring in the sun just so you can have light because, like you, I ain't that stupid nor into the charity business!

Anyone cursing me yet, because I am telling you, we are too cheap!

backbencher:


So basically goverment should drill for oil at a loss while driving out all.companies drilling oil because they wish to.make a profit doing so.

And then government shoukd also pay workers drilling the oil bad salaries because fuel must be cheap

And you know that governemt can apply.that logic to other businesses too?

Countries that do what you advocate end up collapsing economically.

People have the right to make a profit..whether phone seller or oil.company drilling for oil. You won't work for half your salary, so that the poor would benefit, why should you force others to?

Oga sir government is not drilling oil at a loss. Get that propaganda out of your head. Other oil exporting countries remain profitable denominating their domestic quotas based on local costs and in their local currency and export the rest at a premium at the OPEC price and remain HIGHLY profitable doing so. There are so many inefficiencies in the current oil exploration process that if government increases its scrutiny will for one challenge the current quoted figures put out by oil companies as their daily oil production output because basically the current practice is that no one actually verifies the quantity of crude oil they claim they produce daily. So if they declare 20% of their actual output then that is what government shares and sells only then to go ahead to import fuel and subsidize.

Also many questions have been touted about how much we actually consume in a day and why more efforts are not being made to reduce smuggling across the borders.


It's a lie from the pit of hell that oil companies will become unprofitable because of this. Crude oil remains the property of the federal government. Oil companies get paid for exploration yes and this covers whatever costs they incur with a premium and this can comfortably be covered in the quota sold to the international market. This will also eliminate the need for importation and subsidies for importation.

Insisting that domestic refineries should buy at international rates is akin to a farmer insisting that his family go to the market to buy his produce instead of saving some for his family's consumption.

That is akin to shooting one's self in the foot and sacrificing the good of the greater for the satisfaction of the few. This is what gave birth to the so called cabal who are milking the nation dry at the expense of the majority. Even if it comes to choosing, As a responsible government there is only one real choice to make between the good of the people and paying oil companies fat bonuses at the detriment of the people. It's people like you who shouted for privatisation of Power and other government agencies instead of tackling the endemic corruption inherent in them and till today what is the result?

obi58:


When you said government you hit the nail on the head. Your analogy with farming is quite incorrect. Oil is a natural resource which is the wealth base of the country and the government decides the quota for export and domestic use. Government provides licenses to oil firms to prospect oil. Any oil firm who finds it unprofitable to explore oil at government determined prices is free to exit the market because more important things like the common wealth of the nation is at stake. We can't live in penury as a nation to satisfy the fat salaries of oil workers if we are serious as a nation.

You are funny. Does this so called "natural resources" naturally just flow from the natural tap I wonder?

You "pay fat salaries of oil workers" (3 months work one month off, an Indian driller in Nigeria once told me without revealing his salary while sitting next to me in first class his company paid to get him home), to get the "natural resource" out of the ground. And if an oil firm finds it unprofitable to drill the "natural resource" out the ground and get it to market, in the ground will it stay earning zero dollars for you so you will have to "live in pernury".

Nigeria does not determine the price of crude oil, is what you miss here.

obi58:

Oga sir government is not drilling oil at a loss. Get that propaganda out of your head. Other oil exporting countries remain profitable denominating their domestic quotas based on local costs and in their local currency and export the rest at a premium at the OPEC price and remain HIGHLY profitable doing so.

It's a lie from the pit of hell that oil companies will become unprofitable because of this. Crude oil remains the property of the federal government. Oil companies get paid for exploration yes and this covers whatever costs they incur with a premium can comfortably be covered in the quota sold to the international market.

Insisting that domestic refineries should buy at international rates is akin to a farmer insisting that his family go to the market to buy his produce instead of saving some for his family's consumption.

That is akin to shooting one's self in the foot and sacrificing the good of the greater for the satisfaction of the few. This is what gave birth to the so called cabal who are milking the nation dry at the expense of the majority. Even if it comes to choosing, As a responsible government there is only one real choice to make between the good of the people and paying oil companies fat bonuses at the detriment of the people. It's people like you who shouted for privatisation of Power and other government agencies instead of tackling the endemic corruption inherent in them and till today what is the result?

So if you were a yam farmer and it costs you 3000 naira to.plant and grow one tuber of yam, would you sell that tuber of yam.at 1000 naira because you have to help the poor?
How would your family feed then? How woulf you pay your farmworkers?

That's what you are advocating

Petrol is not cheap.

backbencher:


So basically goverment should drill for oil at a loss while driving out all.companies drilling oil because they wish to.make a profit doing so.

And then government shoukd also pay workers drilling the oil bad salaries because fuel must be cheap

And you know that governemt can apply.that logic to other businesses too?

Countries that do what you advocate end up collapsing economically.

People have the right to make a profit..whether phone seller or oil.company drilling for oil. You won't work for half your salary, so that the poor would benefit, why should you force others to?

Government already applies that logic to other businesses! They grab all new graduates and pay them allowee, thereby distorting the labour market!

In a free labour market, wages will be much higher than the suppressed rate being currently paid, but I bet some will stone me if I campaign for the abolishment of NYSC.

budaatum:


You are funny. Does this so called "natural resources" naturally just flow from the natural tap I wonder?

You "pay fat salaries of oil workers" (3 months work one month off, an Indian driller in Nigeria once told me without revealing his salary while sitting next to me in first class his company paid to get him home), to get the "natural resource" out of the ground. And if an oil firm finds it unprofitable to drill the "natural resource" out the ground and get it to market, in the ground will it stay earning zero dollars for you so you will have to "live in pernury".

Nigeria does not determine the price of crude oil, is what you miss here.

Lie from the pit of hell.... Crude oil quotas sold on the international market is determined by OPEC yes but we determine what we export. crude oil remains our resource. We are not constrained to sell locally at international prices.

obi58:
Lie from the pit of hell.... Crude oil quotas sold on the international market is determined by OPEC yes but we determine what we export.

Obi, please do educate yourself. Crude oil is currently selling for about $100 a barrel, and not because Nigeria or OPEC set the price, but because international supply and demand does. And we export because that's currently where the market is, and if we don't export, Nigeria, with no alternatives will starve.

What's funny is subsidies completely eliminate the benefits of high crude oil price because we end up paying it all to importers. Go look at the [url=http://saharareporters.com/2022/02/27/states-face-salary-crisis-nigeria%E2%80%99s-federal-allocation-drops-four-year-low-n574billion]allocation of your state[/url] and see how much it's reduced by since oil price went up, you'd see what I mean.

obi58:


Lie from the pit of hell.... Crude oil quotas sold on the international market is determined by OPEC yes but we determine what we export. crude oil remains our resource. We are not constrained to sell locally at international prices.

Basically you are advocating government sets the price, instead of the people doing the drilling.

That's called price controls. And i bet you that the government set price would be set at a level below the actual cost of.drilling because cheap fuel and a need to keep subsidy low

I agree with you that crude sold locally need not be at international price. But it won't be as low as you want it. And it won't be free as some suggest it should be. And it won't solve our money problems because we need to diversify

backbencher:


Basically you are advocating government sets the price, instead of the people doing the drilling.

That's called price controls. And i bet you that the government set price would be set at a level below the actual cost of.drilling because cheap fuel and a need to keep subsidy low

I agree with you that crude sold locally need not be at international price. But it won't be as low as you want it. And it won't be free as some suggest it should be. And it won't solve our money problems because we need to diversify

This is the only sensible thing you have said so far
. Get the refineries working. Sell crude to them in naira for the local market. Determine the rate based on an in-depth independent objective analysis of the costs of oil exploration. Export the rest at international price. This will insulate the domestic economy from price fluctuations in the international market. This will reduce dollar denominated imported inflation. This will eliminate subsidies being eaten by the cabal and free up Forex for more productive uses. It's not rocket science.

You may call it price control but the truth is that every developed country adopts protectionist policies for its people to some extent. If economies like China and the US do it why can't we?

Also your analogy on the farmer is DOA. Even if the garri he produces costs 1m naira in the market, no responsible father would sell all his produce and send his family to buy garri at the market because he wants to make profit.

obi58:


This is the only sensible thing you have said so far
. Get the refineries working. Sell crude to them in naira for the local market. Determine the rate based on an in-depth independent objective analysis of the costs of oil exploration. Export the rest at international price. This will insulate the domestic economy from price fluctuations in the international market. This will reduce dollar denominated imported inflation. This will eliminate subsidies being eaten by the cabal and free up Forex for more productive uses. It's not rocket science.

But as i said it won't be cheap.

Plus in my opinion goverment setting prices for anything, crude inclusive, is a disaster awaiting

At the end people should be allowed to drill for oil.and people should be allowed to sell it at any price, international price included

At the end, fuel cannot cost less than 300 naira per liter .