₦airaland Forum

Kasssandra:
All I know is, Buhari, GEJ, Yaradua, Obasanjo, and the army rulers...they are all alike. They love the subsidy. Meanwhile we have lost four refineries, billions of naira in potential profits, billions in potential tax revenue, billions of liters of fuel, and our chance to be a major exporter of refined product....because we cannot get over our addiction to cheap fuel. We've ruined our economy, and provided a safehaven for the corrupt to steal and loot...because fuel has to be cheap by force. And all Nigerians want is cheap fuel, and using the subsidy corruption to knock their side into power, wherein they take over and continue the looting.

But never mind....let's enjoy our cheap fuel.

After all, we can call anyone who wants the subsidy gone a Buhari , IMF, Hausa, Fulani, Biafra, Satan, Arab, World Bank...supporter...all at one go. We all love our cheap fuel.

^^^
Some fair points you have made, particularly about the losses arising from the subsidy on imported fuel. But the bit about our love for cheap fuel...

I have a couple of questions...

Is there a subsidy on fuel that NNPC produces and refines locally? How much is it? The figures do not have to be the most current.

Thanks.

Make i just drop dis here MANNABBQGRIILLS i hope you still have memories of how y’all and your darling daddy protested at Ojota mocking GEJ when he proposed to removed subsidy.

SmartPolician:
Subsidy can be totally removed and many Nigerians won't feel the impact.

There are two major ways of achieving the long-term plan:

1. Increase electricity production to 15k to 20k megawatts. This will cushion the demand for petrol from service providers (barbers, hairdressers, restaurants, cybercafees, etc.) that use petrol generators to power their services. Millions of Nigerians fall into this category.

Getting there requires letting the power sector ie the DISCOS and GENCOS...set their prices that would enable them to make enough of a profit to fix and maintain and expand and upgrade facilites to get there, and surpass it

Also,we have to pay our bills. No excuses, no bypassing the meters, no complaining about how 'they are ripping us off'.

We have bad power because we...Nigerians all, and the government, and the elite and the oppressors, and the poor.....don't want to pay for good power. Unlike the GSM sector which works because we paid their extortionate price, which encouraged investment, growth, and all that was done without government money.

You want things to run well, pay for them...at full price.

2. Introduce solar buses. We saw on Nairaland how a Maiduguri-based startup reveal how they have been test-driving their solar buses for some time. The federal government can liaise with such companies and even get other local automakers to explore that technology and build bigger buses that run on solar energy. https://www.nairaland.com/7290522/phoenix-renewables-celebrates-30-days

1.The solar buses are being used on a limited basis. Most transport in Maid is by the fuel guzzlers.(It is a pilot project)

2.If we want to replace our fuel guzzlers with solar or battery run busses...the bus is run by a battery, which is charged by a solar powered charging point....we would have to spend a lot of money...meaning...it may cost far more to ride in a solar bus than a petrol bus.

Now are Nigerians, who love cheap things...ready to pay that money in the form of fares? Or do they want government to make the bus run for free....and thus no profit for maintenance and repairs, and suchlike?

Plus green energy is still expensive. And I say this as someone who thinks it is in our future, and even wonders why government isn't focusing more on solar...and why we don't have solar panels all over the Sahara....

This will significantly reduce the demand for PMS and cushion the effects of sufferings in the country. In the end, we channel the trillions of subsidy funds into more meaningful ventures. I always tell people that leadership is hard, but you just need a bit of creativity and smart thinking to overcome the murky waters. But when you deliberately elect someone like Buhari to run your country, you have decided to commit harakiri.

It is good for leadership to think outside the box...but we also have to be realistic. Very realistic. People at the end of the day, big and small, want to be paid. That's why subsides ultimately don't work.

Fujiyama:
^^^
Some fair points you have made, particularly about the losses arising from the subsidy on imported fuel. But the bit about our love for cheap fuel...

I have a couple of questions...

Is there a subsidy on fuel that NNPC produces and refines locally? How much is it? The figures do not have to be the most current.

Thanks.

1.When we refined fuel at home, there was a subsidy.

2.We don't refine fuel at home at the momemnt...and most of our fuel consumed here is imported. As much as 90-95% of our fuel


3.The thing is, we rely on oil for everything...including revenue, and the money we use to subsidise it. That's why we have issues with our budget this year..

4.Also, crude oil we use in this country is sold at international price, or close to it. So, when prices rise ....the cost of subsidy rises.

5.Finally, when you subsidise fuel, you reduce the profit that could be made...which is why we really lost our four refineries...and why Dangote refinery would crack if we subsidised fuel from that place.

grandstar:
You're right the people no go hear word.

The only choice is to impose it on them.

It may come to that...because the thing is chopping our budget. And we are playing father christmas for large parts of the West African subregion via smuggling.

At some point, it is either we remove subsides, or we just take more loans .....

Fujiyama:
^^^


What does the stuff in bold even mean?

In your 2 posts I didn't see anything about measures to cushion the blow of subsidy removal. What do you recommend?

Cushion subsidy removal? There are several but will be met with resistance:

1. Lift the ban on importation of frozen poultry and cap import duty at 20% or less..

2. Lift the protectionist barrier against rice importation and set duty at 20% or less

3. Reduce import duty on car imports.

The first 2 measures will help drive down the price of food and also fatten the government's coffers as well.

The 3rd will not only only ensure the car industry is not only more vibrant, but will fatten the government purse too. There should be an end to car smuggling from Benin Republic.

Yes, there will be losers if these are implemented but all what protectionism has achieved is simply to make life harder for Nigerians by forcing us pay higher prices for goods, cost government revenue and fatten the purse of beneficiaries.

Nigerians are hungry. A reduction of duty on rice and poultry to 10% each will be the most welcome. This will help bring down the cost of food. Let the losers focus on producing items the country is competitive in so has to snag a win/win and not the win/lose on ground.

BigCowHornn:
Stupid fools

You'll subsidize fuel and do the same thing to the Naira.
Your economy will be roaring out of control allowing smugglers from neighboring nations make millions and billions of it still you never learn.

A short visit to the border area of places like Lagos would have opened your eyes but you stay in AC cooled halls in Abuja to say what you don't know.

Go to Seme border, Lagos. All the mega fuel smugglers are the one building huge mansions and riding cars like Yahoo boys and most of them are not even Nigerians. All have filling stations that operate only in total darkness at night, selling fuel to crowds of ghosts that pour in from across the border right under the noses of the customs..

You are not yet ready to save your country.

^^^
You clearly have an issue with the lawmakers in Abuja and you are fully justified.

I have a couple of questions: if the fuel import subsidy is removed and the system fully deregulated, prices could range anywhere from NGN400 to N800 or even higher. It all depends on the exchange rate and the cost of fuel imports...and we have no power over that here. What happens (in the short term at least) as inflation kicks in? Remember that PMS is also used to fuel tens of thousands of power generators, small scale industrial equipment etc. The ripple effect WILL be significant. Is a fiscal intervention in order? What are your thoughts?

fkj950ax:
Are you sure you read the report. It has nothing to do with benefits to the senators.

They currently oppose Buhari ending subsidy at the end of his administration as he wants to in order to prevent the next president getting attacked by Nigerians from the hardship subsidy removal will cause.
If subsidy must be removed, it should be done towards the end of next year by the next administration.

Let subsidy the removed the very day the refinery (either Dangote's or the PH refinery) starts working..

And it would be better Buhari removes it. Since most Nigerians hate him, it is better to take the hate of subsidy removal with him. At least Nigerians will know it's Buhari that made fuel expensive and not the next Government.

successmatters:
Senators, or do you mean shareholders in the corrupt enterprise called Nigeria government?

Don’t worry, Peter Obi is coming to knock you all into line.

The kind of asinine statements obidiotz make is unbelievable.

"Oh you mean the global inflation caused by energy crisis and supply issues? Obi will end it."

"Climate change? Pah! Gringory will wave a wand and it's gone"

"Subsaharan terrorism that France couldn't end? Not a thing for our wizard Gringory"

"The decades of infrastructural and societal rot endemic in Nigeria? Why, it's a day's job for our wunderkind Gringory"

Meanwhile Gringory didn't do shiit in Anambra, nor did he do anything remarkable in the years since he left government house.

grandstar:
If the senators want, let them push the subsidy removal to the end of the year, it wouldn't change much.

If Tinubu sees its inevitable to deregulate the petrol price, he'll first temporary reduce the subsidy and then, fully deregulate the price by the end of the year, preparing the populace for it. Tinubu has the grassroots appeal and also firmness to deal with protesters.

Obi would remove the subsidy and fully deregulate the price within a year. He has the grassroot goodwill to push it through. He can also be firm when he needs to.

Though Atiku promised to deregulate the price, he might have the greatest difficulty doing it. He lacks grassroot appeal and he is perceived as a fat cat. Nigerians would see it as a wicked measure by a man out of touch with the masses. He isn't an orator.

He might achieve a full deregulation but only after huge fiscally costly concessions.

Best analysis so far.
It's quite sad that two different person can do exactly the same thing for the same reason, but people will react to them differently.

For example is the railway to Maradi which Goodluck Jonathan wanted to do then. It didn't cause public outcry then. But for Buhari, everyone is against it.

Such is life

Fujiyama:
^^^
There is a trust deficit with this administration (like all the other failed administrations before it) and nobody should blame ordinary Nigerians for this.

Agreed...subsidy on fuel imports didn't start with the Buhari administration. But people are not blind. If this government actually did what it promised and cleaned up the public sector there would be two outcomes - cost savings that could actually be put to good use (like building new refineries or repairing old ones) AND people would actually trust government enough to act on their behalf. As it is now, the cost of the so called subsidy under this administration far exceeds the cost of several brand new refineries. Does that make any sense?

This administration squandered the goodwill it had and will forever be remembered for coddling bandits, terrorists and other psychopaths. It will also be remembered for a jarring failure to act decisively on public sector corruption - the one thing that people believed Buhari would actually do. What has this government done about the Oronsaye report?

What a waste.

Where would the Government get the money to build/fix the refinery when money is being spent on subsidies.. Have you forgotten it's the subsidy that caused the refineries to die off in the first place? Money that was supposed to be used to service and build new refineries were being wasted on subsidies. That's what brought us to where we are today.

Nigeria is too broke to build a new refinery. Dangote's refinery is nearing $20 billion to complete. Nigeria with more responsibilities than Dangote cannot build a new refinery.
The old refineries need to be totally repaired (heard they're currently fixing the PH refinery).

grandstar:
Cushion subsidy removal? There are several but will be met with resistance:

1. Lift the ban on importation of frozen poultry and cap import duty at 20% or less..

2. Lift the protectionist barrier against rice importation and set duty at 20% or less

^^
Interesting view...but I do not see how these two measures will mitigate the shock to your value chain that a full (or even partial) deregulation of fuel import subsidy regimes will bring. Eliminating or reducing tariffs (let's assume for now that this is even the right policy choice...more on that later) on imported rice and poultry will NOT save the economy from the hike in transport fares that fuel subsidy removal will bring. If intra and inter state transport fares rise by at least 100% (as they most definitely will) in a deregulated fuel system then zero tariffs on rice and chicken won't do much good, I'm afraid.

Several small businesses depend on PMS to run. Several homes depend on PMS to save them from the curse of PHCN - and a full deregulation (without some seriously well thought out fiscal intervention) will leave them in darkness. What good will it do to have cheap frozen poultry if I can't afford to refrigerate it?

grandstar:
3. Reduce import duty on car imports.

The first 2 measures will help drive down the price of food and also fatten the government's coffers as well.

The 3rd will not only only ensure the car industry is not only more vibrant, but will fatten the government purse too. There should be an end to car smuggling from Benin Republic.

^^^
I disagree with the utility of this policy for the same reasons as the reduced/zero tariffs on rice and chicken. The benefits (of car import duty reduction) to low income Nigerians is limited at best..for the reasons I mentioned above. Just as an aside...even if cars become more affordable to vulnerable Nigerians, what of the significantly higher cost of fueling them under a deregulated regime?

I also don't see how lower import duties on vehicles will 'fatten the government purse'...

grandstar:
Nigerians are hungry. A reduction of duty on rice and poultry to 10% each will be the most welcome. This will help bring down the cost of food. Let the losers focus on producing items the country is competitive in so has to snag a win/win and not the win/lose on ground.

^^^
What are the biggest costs in the average household in Nigeria today? Rent? Food? Transport? Are rice and chicken tariffs (as important as they are) going to have such a huge impact?

Fujiyama:
^^^
You clearly have an issue with the lawmakers in Abuja and you are fully justified.

I have a couple of questions: if the fuel import subsidy is removed and the system fully deregulated, prices could range anywhere from NGN400 to N800 or even higher. It all depends on the exchange rate and the cost of fuel imports...and we have no power over that here. What happens (in the short term at least) as inflation kicks in? Remember that PMS is also used to fuel tens of thousands of power generators, small scale industrial equipment etc. The ripple effect WILL be significant. Is a fiscal intervention in order? What are your thoughts?

Yes you have a point and the rusk is real.

The root problem here though is Nigeria imports fuel. Let that stop

We are an oil producing nation and our economy is not that high. There is way 1 liter of furl should exceed the 1.2 dollars a liter it is in the USA now ... 750 naira at its peak. That's the price in other African nations. It's why they come here to smuggle it there.

Fujiyama:
^^^
Believe it or not, you do understand. Your questions I list below are proof of this.



^^
Good question.

OBJ 'removed subsidy' 6 times if I remember correctly. The Yaradua/GEJ administration also removed subsidy at least once. Same thing with the Buhari administration. How many times will it be removed? Is the subsidy a moving target?



^^
This is why I said you do understand the issues. Government will not answer your questions because it will expose them.

The woman selling bar soap (or dry gin, amala, semo, pure water etc.) down the street can tell us her cost of production. But 9jeriyan government cannot (or will not) tell us how much it costs to locally produce and refine a litre of petrol? If you can't count it, measure it or cost it then how can you explain it? How can you make profit from it?



^^
Again...this is why I said you know what the problem is. Your government cannot (or rather will not) answer your question.

Our government cannot successfully build and operate refineries and so that responsibility has been outsourced to Dangote, a private citizen.

Meanwhile...Saudi Arabia has successfully built refineries. Russia too. So have Kuwait, Oman and Qatar. And Niger, our neighbour. Singapore also has refineries...although it doesn't have one drop of crude oil.

But our refineries are not working...and we don't know why.

When we are ready we know what to do.

LoL. You nail it
Just sick n tired of this country.
Nothing is working

Of recent I got to know that Nigeria has no SUBMARINE. Where African countries like Morocco - Egypt - South Africa have 2-3 each.
It a shame

Kasssandra:
1.When we refined fuel at home, there was a subsidy.

^^^
You sure about this? How much was it? I don't mind how outdated the figures are. I find it striking that I could (some months ago at least) get the cost per litre of imported refined fuel (all-in costs including bridging, distribution and landing costs) from the PPRA website but I can't get production costs for NNPC's locally refined fuel. Let's end the speculation.

Kasssandra:
2.We don't refine fuel at home at the momemnt...and most of our fuel consumed here is imported.

^^^
True.

Kasssandra:
3.The thing is, we rely on oil for everything...including revenue, and the money we use to subsidise it. That's why we have issues with our budget this year..

^^^
Also true.

Kasssandra:
4.Also, crude oil we use in this country is sold at international price, or close to it. So, when prices rise ....the cost of subsidy rises.

^^^
True.

So...shouldn't the discussion be about local production then?

Kasssandra:
5.Finally, when you subsidise fuel, you reduce the profit that could be made...which is why we really lost our four refineries...and why Dangote refinery would crack if we subsidised fuel from that place.

^^^
Ok. Don't agree with your reasons for why the refineries failed but we'll tackle that later.

But my question still stands: how much does it cost to produce and refine one litre PMS here?

Fujiyama:
^^
Interesting view...but I do not see how these two measures will mitigate the shock to your value chain that a full (or even partial) deregulation of fuel import subsidy regimes will bring. Eliminating or reducing tariffs (let's assume for now that this is even the right policy choice...more on that later) on imported rice and poultry will NOT save the economy from the hike in transport fares that fuel subsidy removal will bring. If intra and inter state transport fares rise by at least 100% (as they most definitely will) in a deregulated fuel system then zero tariffs on rice and chicken won't do much good, I'm afraid.

Several small businesses depend on PMS to run. Several homes depend on PMS to save them from the curse of PHCN - and a full deregulation (without some seriously well thought out fiscal intervention) will leave them in darkness. What good will it do to have cheap frozen poultry if I can't afford to refrigerate it?



^^^
I disagree with the utility of this policy for the same reasons as the reduced/zero tariffs on rice and chicken. The benefits (of car import duty reduction) to low income Nigerians is limited at best..for the reasons I mentioned above. Just as an aside...even if cars become more affordable to vulnerable Nigerians, what of the significantly higher cost of fueling them under a deregulated regime?

I also don't see how lower import duties on vehicles will 'fatten the government purse'...



^^^
What are the biggest costs in the average household in Nigeria today? Rent? Food? Transport?

You made some strong points.

But what is the cost of maintaining the subsidy? It just has to go. Much poorer countries in Africa have a deregulated price for petrol and they are surviving. Subsidized petrol is an indulgence that the people have become accustomed to and its wrecking the economy.

It's surprising that Nigerians who can't survive the deregulated fuel price are prepared to pay far more for it during scarcity. Nigerians won't die if the subsidy is removed. Also, poor Nigerians pay a deregulated price for kerosene.

The price of kerosene is deregulated and the poor did not die.

The price of kerosene is deregulated and the poor did not die

The price of kerosene is deregulated and the poor did not die.

It's something that should be rammed into the minds of Nigerians

I don't support zero duty on rice and poultry. 10% should suffice.

The hike in transport prices were the price deregulated will not be as frightening as perceived. The deregulated price of diesel is around ₦780/litre and a majority of heavy duty vehicles rely on it.

A deregulated petrol price will take a toll on businesses that depend on petrol, many being mom and pop operations. But there's no alternative but to deregulate the price

I can't readily say the transport price hike will be 100% or even worse were the price of petrol deregulated but it's a necessary evil. Cheaper food whether we like it or not, will make the people happier, especially women.

Cheaper cars will fatten the governments wallets by encouraging the imports of cars. Even the custom comptroller general pleaded for this.

If the government promises to bring down the cost of food in exchange for market determined prices for petrol, it's something the people will accept when it occurs. It's a trade-off the people will accept.

If there's cheaper food and NLC demands the return to subsidized petrol, they won't garner the mass support to change things.

BigCowHornn:
Yes you have a point and the rusk is real.

The root problem here though is Nigeria imports fuel. Let that stop

^^^
The problem is how?

BigCowHornn:
We are an oil producing nation and our economy is not that high. There is way 1 liter of furl should exceed the 1.2 dollars a liter it is in the USA now ... 750 naira at its peak. That's the price in other African nations. It's why they come here to smuggle it there.

^^^
With deregulation, some kind of fiscal intervention is unavoidable. The form it will take is what is unknown...but it will be beyond hard for a government to deregulate this system without any social programmes in place to cushion the blow. Unless...they intend to roll out the tanks and machine guns to quell any dissent. And who knows where that will lead...

The trust deficit is there and it is real. If the subsidy goes and transport fares double (or triple!)... and people cannot fuel their generators...and the economy tightens as people are laid off and lose even the little they have...there will be chaos in the streets. And the government knows this.

Fujiyama:
^^^
The problem is how?



^^^
With deregulation, some kind of fiscal intervention is unavoidable. The form it will take is what is unknown...but it will be beyond hard for a government to deregulate this system without any social programmes in place to cushion the blow. Unless...they intend to roll out the tanks and machine guns to quell any dissent. And who knows where that will lead...

The trust deficit is there and it is real. If the subsidy goes and transport fares double (or triple!)... and people cannot fuel their generators...and the economy tightens as people are laid off and lose even the little they have...there will be chaos in the streets. And the government knows this.

Before anything at all can be done Nigeria needs to stop importing fuel. Our refineries need to work

Once that is fixed other problems are manageable

You see from power problem to this girl thing other poor nation have it right and it's not causing any issues

Togo Benin Republic even Cameroon no subsidy and there's always light.
Just go to Seme here. Stand look across the border into Benin Republic. There is almost always light. You know the funny Thing? Nigerian customs office there connects light from there

As expected BTW... See my signature for our ongoing building project of a 3bedroom residential accommodation in oron Akwa ibomAs expected BTW... See my signature for our ongoing building project of a 3bedroom residential accommodation in oron Akwa ibom...

grandstar:
But what is the cost of maintaining the subsidy? It just has to go.

^^^
OK. It will be interesting to see if and how they do it successfully.

grandstar:
The price of kerosene is deregulated and the poor did not die.

It's something that should be rammed into the minds of Nigerians.

^^^


That's a rather strange view to take.

Poverty does kill. When you have to make a choice between fuelwood, food or medicine then poverty does become a ruthless, cold blooded killer.

This country is officially the poverty capital of the world and nothing good can come out of that dubious award. Poor countries with a large youth population tend to suffer chronic instability. Nigeria is no exception.

grandstar:
I don't support zero duty on rice and poultry. 10% should suffice.

^^^
In my last post I asked you what the biggest costs of the average Nigerian household are. (Hint: it isn't rice and poultry). That was also why I questioned the point of slashing tariffs on imported rice and chicken. Furthermore, what are the implications for local farmers? Can our local rice and chicken compete with these imports - some of which ironically are subsidized by their home governments? But that's a "national security is food security" discussion for some other time.

grandstar:
The hike in transport prices were the price deregulated will not be as frightening as perceived.

^^^
Ok. Time will tell.

grandstar:
A deregulated petrol price will take a toll on businesses that depend on petrol, many being mom and pop operations. But there's no alternative but to deregulate the price

^^^
You are finally coming round to the reality of the impact of this policy. Like I said, time will tell. It will be interesting to see the effects of a full deregulation without a fiscal intervention by government.

grandstar:
I can't readily say the transport price hike will be 100% or even worse were the price of petrol deregulated but it's a necessary evil.

^^^
We'll see.

So...you honestly think a full fuel import regime deregulation with a highly depreciated Naira (nearly 100% in the last few months) will not lead to transport fare hikes of 100% and above? So transporters will elect to absorb that cost for love of country?

Time will tell.

grandstar:
If the government promises to bring down the cost of food in exchange for market determined prices for petrol, it's something the people will accept when it occurs. It's a trade-off the people will accept.

^^^
Finally.

You have come round. You have recognized the need for an intervention of sorts. So...how does the government bring down the cost of food...subsidies perhaps? As an aside...aren't you exchanging one form of subsidy for another? Is the problem with subsidies as an idea or just fuel import subsidies? But once again, that's a debate for another day. The issue for today is that you recognize the importance of an intervention.

Hushbingo:
Nigeria Girls Are Useless

Wise man

So buhari regime is to destroy Nigeria, kill and sell d country. 20.51 trillion Maka y, all d money he borrow and d money, he collected is Share to his family and relative account.


GOD have forgotten Nigeria

Racoon:
These same sets of bastards that have colluded with the executives to loot this country via the fraudulent subsidy regime.

A thief calling a angel, thief's

Fujiyama:
^^^
OK. It will be interesting to see if and how they do it successfully.



^^^


That's a rather strange view to take.

Poverty does kill. When you have to make a choice between fuelwood, food or medicine then poverty does become a ruthless, cold blooded killer.

This country is officially the poverty capital of the world and nothing good can come out of that dubious award. Poor countries with a large youth population tend to suffer chronic instability. Nigeria is no exception.



^^^
In my last post I questioned the point of slashing tariffs on imported rice and chicken. What are the implications for local farmers? Can our local rice and chicken compete with these imports - some of which ironically are subsidized by their home governments? But that's a "national security is food security" discussion for some other time.



^^^
Ok. Time will tell.



^^^
You are finally coming round to the reality of the impact of this policy. Like I said, time will tell. It will be interesting to see the effects of a full deregulation without a fiscal intervention by government.



^^^
We'll see.

So...you honestly think a full fuel import deregulation with a highly depreciated Naira (nearly 100% in the last few months) will not lead to transport fare hikes of 100% and above?

Time will tell.



^^^
Finally.

You have come round. You have recognized the need for an intervention of sorts. So...how does the government bring down the cost of food...subsidies perhaps? As an aside...aren't you exchanging one form of subsidy for another? Is the problem with subsidies as an idea or just fuel import subsidies? But once again, that's a debate for another day. The issue for today is that you recognize the importance of an intervention.

I think you have a bit of pie-in-the-sky fantasy about economics. Economics is not about what you like or do not like but what has to be done. Charles Soludo, Pat Utomi, Lamido Sanusi have all supported the removal of the subsidy and full deregulation of the price. At the end of the day, the benefits outweigh the disbenefits. Even Oshiomole who thought providing the subsidy cost nothing changed his tune and supported its removal in 2012.

The question you're failing to ask is what is the benefit of deregulating the price or what has the economy lost by not deregulating it? It is the difference between impoverishment and wealth creation. It is the difference between making things ultra cheap through subsidies for the poor vs empowering them with wealth to buy things.

Let's look at the telecom sector. In 2001, when GSM mobile services were introduced, MTN and Econet fixed calls at N50 per minute. People complained and NITEL-owned MTEL fixed its own at N22. Where is MTEL today?

Or let's even assume there was a populist president like Buhari who decreed it should not go beyond N22 for any operator, where do you think the industry will be today? The price will probably be around N20 and maybe 8m lines in circulation and any attempt to increase the price would be strongly resisted.

Deregulation encourages massive investment and that investment creates wealth that trickles down. That is why economists support them. Look at the telecoms industry today! Due to a deregulated price, massive investment poured into the sector, and Nigerians today are wealthier and better off because of it.

It is the same transformative effect that would have occurred in the oil sector if refined crude oil products were deregulated decades ago. Private investment would flow in. By now, the country would have been refining at least 1m barrels per day. Instead, it is a massive importer of the stuff. Foreign lenders will be skittish lending $2bn to build a 100,000bpd plant with a state-controlled price regime in place. Refining might even be up to 2.5m/BPD if the country played its card right. Think of what size the economy would be if a 1m/bpd was refined daily.

Were the price to be deregulated today, the moribund refineries could be sold off or turned around by the newly commercialized NNPC. Trade shows can be done globally to encourage investment in oil refining. The benefits within a 5-year period alone would be massive.

Dangote's refinery alone will employ over 8,000 engineers. Were the country refining up to 2m/BPD, 24,000 engineers would be needed. Massive inflows of investment will trickle down with multiplier benefits all around. The wealth creation achievable would surpass that of the telecom industry multiple times.

The advantages of petrol subsidy

1. Cheap petrl
2. Cheap transport cost

Disadvantages

1. Higher budget deficits which encourage higher public borrowing.
2. Government borrowing crowding out private-sector borrowing
3. The use of Ways and Means to cover the deficit. The central bank simply prints money to cover the deficit. This is already happening.
4. Pressure on the foreign reserves.
5. Pressure on the foreign reserves leads to ever-depreciating Naira
6. High inflation.
7. Low investment into the downstream sector of the economy
8. More money is spent on fuel subsidies than on health, education and the military combined!
9. High cost of credit
10. And much more!

All of the above leaves the people impoverished.

I do support some interventions but never let the cure be worse than the disease. Using a new subsidy to replace an old one is wrong. It is better to ask what are the best ways to assist the poor.

Conditional Cash Transfers (CCT) are loved by economists have they have been shown to improve the lives of poor recipients. CCT's are cash transfers from governments, let us say N5,000 a month to a poor parent if she meets some milestones, such as child attending school, getting immunized, attending much-needed family planning, and so on. The money is targeted at the poor and it is usually paid directly to mothers who will most likely spend it on the household unlike fathers who may lavish it on booze, women, and Baba Jebu (What sexist thinking!)

It's tough implementing it here because of poor data. If 8k is given to 10m mothers monthly, it will go a long way in

As I have earlier said, all government has to do is reduce the import duty on food and it will become cheap. Place a duty on it and it will bring in massive revenue to the government.

Nigeria became the poverty capital of the world because Buhari went against the deregulated approach in the fx market. He started fixing the exchange rate of the Naira at rates which were not reflective of market realities. Will you exchange your dollars at the official rate of N430? He has no right to set the rate but the timid CBN governor won't tell him off. Before he came to power, the forex market was deregulated and prices reflected market realities.

His fx intervention has crippled the economy as it has led to an artificial shortage of forex at the official rate leading to too much pressure being heaped on the thinly traded black market, leading to a massive divergence in values between the 2 markets. Lamido Sanusi said the differential between the 2 markets must never be more than 3%. The differential presently is ver 50%!

Fujiyama:
^^^
You sure about this? How much was it? I don't mind how outdated the figures are. I find it striking that I could (some months ago at least) get the cost per litre of imported refined fuel (all-in costs including bridging, distribution and landing costs) from the PPRA website but I can't get production costs for NNPC's locally refined fuel. Let's end the speculation.



^^^
True.



^^^
Also true.



^^^
True.

So...shouldn't the discussion be about local production then?



^^^
Ok. Don't agree with your reasons for why the refineries failed but we'll tackle that later.

But my question still stands: how much does it cost to produce and refine one litre PMS here?

Ultimately we don't know for now how much it costs to produce one liter of fuel here right now, or in the past (the internet has its limits.)

The problem is, if you want to run a business effectively, you have to let the business make a profit first. I see that you are convinced that subsidy works if it is 'done right'...but the problem is, there is no right way of doing subsidy.

If we spent one trillion last year, and then suddenly spend two trillion on subsidy...things go wrong.


Finally, subsidy is why we have bad refineries. You run the things at a loss, and pay subsidy to cover the loss, and then pay nnpc worker salaries out of government revenue, not out of revenue made by the NNPC.....that opens the door to a lot of wuru wuru.


Niger and Ghana have working refineries. Fuel is very expensive there. That's because they have always sold fuel at a profit there. We sell fuel at a loss here and have done so for decades. And at the end of the day, we get surprised when the system gets messed up.


I'm going to conclude by asking you a question...and I insist you answer it. If you don't no wahala.

Suppose you were selling shoes. You buy shoes at N10000 wholesale, and you sell at N15000 retail so as to make enough profit to cover your expenses. Government comes in and tells you to sell at N6000...to help the poor get good pairs of shoes....and pays you a subsidy of N3000 to cover the 'loss'....meanwhile three months later, the wholesale cost of shoes...have gone up to N12000 because the manufacturer has raised prices to cover factory worker salary raises, and maintenance costs....but you are still stuck at N6000 per shoe...what would you do?

Good afternoon.

Kasssandra:
Ultimately we don't know for now how much it costs to produce one liter of fuel here right now, or in the past (the internet has its limits.)

^^^
I admire your honesty though. I have asked this question of another gentleman on this thread several times and he has always dodged it and avoided giving a truthful answer.

So... do we just assume there is a subsidy on locally refined PMS without any evidence? I have debated this subsidy removal topic with several deregulation zealots but strangely enough, they all cannot say for sure if there is (or ever was) a subsidy on locally refined fuel. This question deserves an answer.

Kasssandra:
The problem is, if you want to run a business effectively, you have to let the business make a profit first.

^^^
Fair point.

Kasssandra:
I see that you are convinced that subsidy works if it is 'done right'...but the problem is, there is no right way of doing subsidy.

^^^
I disagree sir. Subsidies have been successfully and effectively deployed by diverse economies for decades. Social security and unemployment benefits for example. Meal vouchers for indigent children is another example. I could go on and on.

Kasssandra:
If we spent one trillion last year, and then suddenly spend two trillion on subsidy...things go wrong.

^^
Again, fair point. (I assume you are using the example of our fuel import regime here). But this is a failure of execution and not the concept.

Kasssandra:
Finally, subsidy is why we have bad refineries. You run the things at a loss, and pay subsidy to cover the loss, and then pay nnpc worker salaries out of government revenue, not out of revenue made by the NNPC.....that opens the door to a lot of wuru wuru.

^^^
I disagree once again. The failure is in our execution and not the idea or concept of subsidies. To this day, several G7 and G20 countries subsidize their energy industry...and they do so on both the production and consumption sides. Last year, Norway subsidized 80% of household energy bills above a certain kilowatt hour threshold. North America routinely subsidizes its energy companies through indirect subsidies. I could go on and on.

Kasssandra:
I'm going to conclude by asking you a question...and I insist you answer it. If you don't no wahala.

Suppose you were selling shoes. You buy shoes at N10000 wholesale, and you sell at N15000 retail so as to make enough profit to cover your expenses. Government comes in and tells you to sell at N6000...to help the poor get good pairs of shoes....and pays you a subsidy of N3000 to cover the 'loss'....meanwhile three months later, the wholesale cost of shoes...have gone up to N12000 because the manufacturer has raised prices to cover factory worker salary raises, and maintenance costs....but you are still stuck at N6000 per shoe...what would you do?

^^^
I would close shop. I can't remain in business with these numbers.

But at least I have the numbers to tell me exactly what is going on. Imagine if I also made some of the shoes myself in my own factory at home and nobody could tell me exactly how much it costs to make a pair - none of my staff know if the shoes are being made at a loss or at a profit. When I probed further I was told by my "World Bank trained" consultants that "it doesn't matter. Concentrate on the shoes you are importing for resale instead".

What do you suggest I do?

grandstar:
If Tinubu sees its inevitable to deregulate the petrol price, he'll first temporary reduce the subsidy and then, fully deregulate the price by the end of the year, preparing the populace for it. Tinubu has the grassroots appeal and also firmness to deal with protesters.

^^^
And here we are 9 months later...

The man went all the way - full throttle. Time will tell if it was the right choice - as against the phased deregulation you anticipated.

Not sure about the so called grassroots appeal you referred to . His "mandate" is being litigated and there is a significant proportion of voters who consider his presidency illegitimate. As for your comment about "dealing with protesters" ...again, time will tell. In your own post you spoke about the difficulties you were facing in business transactions last year. Things are much, much tougher now for regular Nigerians as we speak...and things are slowly approaching breaking point. Something has to give.

grandstar:
Obi would remove the subsidy and fully deregulate the price within a year. He has the grassroot goodwill to push it through. He can also be firm when he needs to.

^^^
This is meat for 'analysts', 'observers' and 'commentators' but it is not really relevant at this point now. Although the election results are being hotly contested in court, there is a president who has been sworn in. All eyes are on him. What Obi would or would not do is no longer the issue.

grandstar:
Though Atiku promised to deregulate the price, he might have the greatest difficulty doing it. He lacks grassroot appeal and he is perceived as a fat cat. Nigerians would see it as a wicked measure by a man out of touch with the masses. He isn't an orator.

^^^
See my comments about Obi above - same applies to Atiku. And what's this business about him lacking grassroots appeal? He got the second highest number of votes in the election and got the same spread (12 states) as the winner. And to you, Atiku is 'perceived' as a fat cat and the other candidates (especially Bola Tinubu) are not?

Your bias is clear with further comments about Atiku's deregulation of fuel prices potentially being seen as 'a wicked measure by a man out of touch with the masses'. What the hell? Doesn't this apply to Bola Tinubu now?

Atiku isn't an orator? And Bola Tinubu is?

Anyway, the above is all ancient history. There are serious problems with the economy right now - a Naira in freefall and fuel prices consistently threatening to break through the ozone layer. Bola Tinubu has his work cut out for him. We'll see how he performs.

Fujiyama:
^^^
You clearly have an issue with the lawmakers in Abuja and you are fully justified.

I have a couple of questions: if the fuel import subsidy is removed and the system fully deregulated, prices could range anywhere from NGN400 to N800 or even higher. It all depends on the exchange rate and the cost of fuel imports...and we have no power over that here. What happens (in the short term at least) as inflation kicks in? Remember that PMS is also used to fuel tens of thousands of power generators, small scale industrial equipment etc. The ripple effect WILL be significant. Is a fiscal intervention in order? What are your thoughts?

Prophet, it's happening 😥