₦airaland Forum

nairalanda1:
Even then, it still does not change the fact that businesses need to make a profit.

What you are suggesting would worsen our debt. Am sure you would love it.

So if you are a business man, you will be selling things at exorbitant prices where Almajiri people live because you want to make profit.

You are doomed to fail in that business. Where will they get the money to pay for your goods,

Starcrest1:
So if you are a business man, you will be selling things at exorbitant prices where Almajiri people live because you want to make profit.

You are doomed to fail in that business. Where will they get the money to pay for your goods,

Are you an almajiri?

So your costs of doing business go pay themselves like that?


Please, get off my mentions. You wan kee me with lafta.

Kukutente23:
I keep saying it that what's going on is a scam

When subsidy was removed in 2012 under Jonathan which Tinubu and his goons organised against, fuel price went from N87 to N145 which was less than 100% (60% actually). And crude oil was selling at over $110 per barrel while we were importing the fuel.

So how come petrol price is over 600% (656% actually) at N1300 now from the price before subsidy removal (N189) at just around $100 per barrel when the crude and refined products are being sourced locally?

Can anyone explain this mathematics in a way that makes sense

You need to register in the nearest economic class to study the effects of exchange rate.

Starcrest1:
Oya explain to me why minimum wage is #5,000,000 in the US while in Nigeria it's #70,000 but Americans buy fuel #2000 and we are buying it #1300 in Nigeria....

I'm listening....

Minimum wage is 500,000 in what currency in the US?

Gboss247:
Minimum wage is 500,000 in what currency in the US?

5 million naira not 5 hundred thousand.

Minimum wage = 15 dollars × 1400 =#21,000

Working hours = 9hours × 30 days = 270 hours

#21,000 × 270 hours = #5,670,000

nairalanda1:
HOkay...so you want government to set fuel price at N500 per liter. That means that as at now, government would have to increase the amount it pays in subsidy from N695, to N700.

And this won't be the first time government has to adjust costs.

And remember , most of our budget na borrowed money, plus we are servicing loan.

The result is that over time government would have to take loan to keep fuel at N500 per liter for eveyrone.

MOdified

The responses are very comedic.

Essentailly, people want dangote to sell the fuel at N200 so that they can afford it. That leads to a point where dangote won't be able to pay for his refinery to run well, which would lead to mega losses.

And people want a government to pay from a budget half of which is borrowed, and only one fifth of which comes from taxes, to pay the difference. Meanwhile, debt is nearly 200 trillion naira. Would that not lead to more debt.

Someone even asked me if I was a businessman in an area selling to almajiri, won't I cut my prices so that the almajiri can afford it?

I know it is not them making such comments, it is frustration and anger. And some of them are in campaign mode even. But when all is said and done, abusiness has to make a profit.

If you want more debt , vote for atiku o. Even me, I no mind, my fuel bill will go down. But my share and everyone's share of the national debt would go back up.

It's no use arguing with Nigerians. When faced with economic realities, they resort to mockery and adhomiens, and insults.

TINUBU and his 4O thieves have succeeded in brainwashing u

You need to explain to them, they don't understand, expect for what APC WhatsApp ordered them to share. Minimum wage in USA Ialmost N6m per month.

Chai even with subsidy removal

Starcrest1:
5 million naira not 5 hundred thousand.

Minimum wage = 15 dollars × 1400 =#21,000

Working hours = 9hours × 30 days = 270 hours

#21,000 × 270 hours = #5,670,000

The law of money states that the volume of money is inversely proportional to the purchasing power of money
This translates to more money, lesser purchasing power and high prices and vice versa.
Based on your calculation, Americans earns $4,050 minimum in there currency (USD) lives a better than Nigerians who earns more volume of money in there own currency (₦70,000).
Increasing the minimum in naira is one sure way to further devalue the naira, make Nigerians more poorer and the prices of goods and services more expensive.

cyberguy72:
TINUBU and his 4O thieves have succeeded in brainwashing u

Saying a business must make a profit so that it meets running costs, maintenance costs, and is able to pay salaries, taxes, and pensions, as well as pay transport costs and other added costs, and make sure it's profit margins are far above the fluctuations that happen in the oil industry.....means I am brainwashed by tinubu.


Hand back your certificate to your secondary school , son, and go and read Mr Ande and Mr Esan's excellent text on economics. I can't recommend it highly enough.

Mr Anyaele's textbook is also excellent as well.

Gboss247:
The law of money states that the volume of money is inversely proportional to the purchasing power of money
This translates to more money, lesser purchasing power and high prices and vice versa.
Based on your calculation, Americans earns $4,050 minimum in there currency (USD) lives a better than Nigerians who earns more volume of money in there own currency (₦70,000).
Increasing the minimum in naira is one sure way to further devalue the naira, make Nigerians more poorer and the prices of goods and services more expensive.

That is fallacy, the over 400% inflation that we have experienced in the past 5 years was not caused by minimum wage increment but by poor government policies. Infact minimum wages are increased in Nigeria only when the inflation has become too bad.

In the past three years, prices of goods and services has increased by 300% yet government is increasing minimum wage by 100%. That's a sure way to keep people in abject poverty.

Now why would someone earning #70,000 monthly be buying petrol the same price as someone that earns #5,000,000.

I'm not saying Nigerian government should start paying #,5,000,000 minimum wage but going by the inflation rate we've suffered, it shouldn't be anything less than #180,000

nairalanda1:
Saying a business must make a profit so that it meets running costs, maintenance costs, and is able to pay salaries, taxes, and pensions, as well as pay transport costs and other added costs, and make sure it's profit margins are far above the fluctuations that happen in the oil industry.....means I am brainwashed by tinubu.


Hand back your certificate to your secondary school , son, and go and read Mr Ande and Mr Esan's excellent text on economics. I can't recommend it highly enough.

Mr Anyaele's textbook is also excellent as well.

You are missing the point.....DANGOTE wud be given CRUDE OIL by ATIKU at a price far below global price.Dangote would then refine a cheaper fuel specifically for the nigerian NATION....i believe that is not ROCKET SCIENCE.This would not affect DANGOTES profit margin in anyway.

Kukutente23:
Do you know that Saudi petrol price has not moved by a kobo since the beginning of this year?

Fun fact. 1 kobo = 0.000028Saudi riyal

Case study for TINUBU and his corrupt team....they wont want to find out becos they are presently cashout seriously to the detriment of the poor masses.

cyberguy72:
You are missing the point.....DANGOTE wud be given CRUDE OIL by ATIKU at a price far below global price.Dangote would then refine a cheaper fuel specifically for the nigeriaN NATION....i believe that is not ROCKET SCIENCE.

ty
The problem with that is that

1. Government does not set the price of crude, meaning that based on price fluctuations, the amounts that government may spend to keep the price of crude far below the global price may be too high, higher than budgeted for in a single year, leading to more borrowing, on top of the borrowing government has to do to fund the budget, and to keep the already present debt serviced and paid for.

2. Dangote's costs are not just related to crude, he needs to pay maintenance and upgrade costs, which because most of the machines in the refinery are imported and not made in Nigeria, would be very very very high.

3. Finally, government cannot afford to sell crude at half the price to dangote or to anyone else. Putting aside the fact that it would violate the PIA (section 8 I BELIEVE)...it would also reduce the amount of revenue govt gets from crude sold to dangote. The result would be more borrowing to replace lost revenue gotten from selling to dangote at half price.

4. And then there is the issue of smuggling. The minute fuel prices fall in Nigeria, smuggling is going to go up. And most of it is not tankers crossing the border, it's millions of young people carrying large jerrycans across the border. And our border is too large to be policed effectively. No nation with a fuel subsidy has been able to stop smuggling, not even Iran, or Venezuela.

Therein lies the problem, and why what you suggest is not workable, and would lead to the destruction of private refining in Nigeria, with the massive job losses, and massive forex spent on importing AND subsidsing fuel. Naira value would drop, and your debt would rise to beyond N300 trillion and more.

And I am not suggesting you vote tinubu because of the above. Vote Obi who has a plan to direct subsidy savings to those who need it. Simple.

this is where the atiku subsidy policy comes in , dangote or any other local refinery prices will be subsidized for a fixed period with a fixed price , which means that if the subsidy is 300 naira ,Nigerians will only have to pay 900 for dangote petrol . if well implemented , this will be a good development

onatisi:
this is where the atiku subsidy policy comes in , dangote or any other local refinery prices will be subsidized for a fixed period with a fixed price , which means that if the subsidy is 300 naira ,Nigerians will only have to pay 900 for dangote petrol . if well implemented , this will be a good development

And if the EX gantry price goes up to N1400 due to oil price increases because Iran is acting up again, that means that the subsidy would go up to somewhere around 500.

Plus the gantry cost is the cost as the fuel leaves the refinery gate...it does not account for transport costs which can run anywhere between N200-300 Naira per liter, or more.

Also, if oil prices fall, while in theory subsidy becomes cheaper, in practice, available revenue to pay for the subsidy falls. It gets worse if oil prices fall below the budget benchmark for the year.

And remember, dangote's production costs are not dependent on just crude oil prices, they are dependent on a host of other things...like the costs of maintaining, upgrading, and expanding his refinery. Same for every other private refinery.

Also, marketers have to make sufficent profit to operate well. Selling fuel is not a easy business (in the USA, some fuel stations even go out of business, because profitabliity hard). That's why a lot of filling stations have small supermarkets added to them, so that they can make enough money to meet costs.


Finally, our budget is in a bad state. For a very long time, the government has been borrowing money to fund an increashing share of our budget. Also, it is servicing a major loan, and it still has to provide things for the nation. (And the looting issue is not being addressed, worsening the problem). So, any subsidy paid, taking into account the issues I have already raised...would have a bad impact on the budget.

We could worsen our debt, in other words. And more importantly, we could make domestic refining difficult in nigeria, leading to refinery closures, and back to importing over 80% of fuel.


I am not arguing for tinubu or defending him, I am arguing for the right of a business to set its own prices to run effectively.

nairalanda1:
ty
The problem with that is that

1. Government does not set the price of crude, meaning that based on price fluctuations, the amounts that government may spend to keep the price of crude far below the global price may be too high, higher than budgeted for in a single year, leading to more borrowing, on top of the borrowing government has to do to fund the budget, and to keep the already present debt serviced and paid for.

2. Dangote's costs are not just related to crude, he needs to pay maintenance and upgrade costs, which because most of the machines in the refinery are imported and not made in Nigeria, would be very very very high.

3. Finally, government cannot afford to sell crude at half the price to dangote or to anyone else. Putting aside the fact that it would violate the PIA (section 8 I BELIEVE)...it would also reduce the amount of revenue govt gets from crude sold to dangote. The result would be more borrowing to replace lost revenue gotten from selling to dangote at half price.

4. And then there is the issue of smuggling. The minute fuel prices fall in Nigeria, smuggling is going to go up. And most of it is not tankers crossing the border, it's millions of young people carrying large jerrycans across the border. And our border is too large to be policed effectively. No nation with a fuel subsidy has been able to stop smuggling, not even Iran, or Venezuela.

Therein lies the problem, and why what you suggest is not workable, and would lead to the destruction of private refining in Nigeria, with the massive job losses, and massive forex spent on importing AND subsidsing fuel. Naira value would drop, and your debt would rise to beyond N300 trillion and more.

And I am not suggesting you vote tinubu because of the above. Vote Obi who has a plan to direct subsidy savings to those who need it. Simple.

Reply to 1.Who says the owner of a product cannot fix his own price locally. We are not selling to the international market.Reply to 2. Dangote has a template for his gantry price and its FIXED(google is ur friend)its only crude oil price that makes it flunctauates,Reply to 3.PIA act can be amended for the good of the masses.Atiku would not need to borrow any money ...the funds tinubu and his Governors are presently fritering away would be used to cushion the effect of the reduced price of crude given to DANGOTE.REPLY To 4.DANGOTE wud do direct supply to various filling stations which wud be closely monitored.The fact remains that you cannot completely curb smuggling.

cyberguy72:
Reply to 1.Who says the owner of a product cannot fix his own price locally. We are not selling to the international market

.

Yes, but at the end of the day, he is obligated to sell at a price that enables them to meet their production costs, not the price you want it to be, otherwise, out of business he goes.

Reply to 2. Dangote has a template for his gantry price and its FIXED(google is ur friend)its only crude oil price that makes it flunctauates,

He also has to pay maintenance costs, pay for planned upgrade and expansion costs, hedge against any possible need to raise salaries to stay competitite, because that refinery is competitng with international, not local refineries...and he also has to pay taxes, and pension contributions, which may also rise.

So, not just crude oil costs.

And the mainteance costs go up because unfortunately we do not make refinery components here in nigeria. We can't even build a common distilation chamber for eff;'s sake.

Reply to 3.PIA act can be amended for the good of the masses.Atiku would not need to borrow any money ...the funds tinubu and his Governors are presently fritering away would be used to cushion the effect of the reduced price of crude given to DANGOTE.

Your comment here is based on a flawed assumption that governors are looting all the money they send to them. Not only is that not true (yes governors are looting, but to assume they loot everything is a wild idea that has no truth in basis) but they are now paying salaries regulary, and are also paying for some, not all projects.

Like I said, I do not think governors are not looting. Also, as a whole, Nigeria is not earning enough revenue , which is why corruption has to be fought seriously. ANd it is a tragedy that it isn't.

REPLY To 4.DANGOTE wud do direct supply to various filling stations which wud be closely monitored.The fact remains that you cannot completely curb smuggling.

And it does cost a lot of money to transport fuel directly to stations, about N200-300 PER LITER. Unless government is ready to revive NNPC's old fuel pipeline system that could reduce a lot of the costs, this your plan has no way of taking off.

Gboss247:
You need to register in the nearest economic class to study the effects of exchange rate.

What does exchange rate have to do with local crude refining in naira as against imported fuel
I'm taking about the ratios not the price
Can you guys?!!

Kukutente23:
What does exchange rate have to do with local crude refining in naira as against imported fuel
I'm taking about the ratios not the price
Can you guys?!!

Your comments shows the reason why you need to register for an economics class

Gboss247:
Your comments shows the reason why you need to register for an economics class

Keep quiet forthwith
This is beyond your intelligence grade

nairalanda1:
This one seems to think that companies do not need to increase their production costs, that his candidate has a magic money tree that can pay for the increased costs of refining fuel.

When NIgerians want to avoid facing economic reality, they go to mockery mode.

Government's job is not to make things cheap, it is to make the economy suitable for investments to thrive. Yes, that is why GEJ was right in 2012, and tinubu was wrong in 2012, and on taking over in 2023, he tinubu found out the hard way how GEJ was right back then.

But this guy wants government to pay subsidy costs from a budget that is based on borrowing for the most part, so that government borrows more to pay his subsidy, and the debt gets worse and worse

And after he and his descendants would be paying off the debt at a higher rate than we expect now forever

But hey' cheap fuel.

(I am annoyed with him because he is far more intelligent than this).

Sh-ut up and stop defending st-upid-ity.

maivd:
Sh-ut up and stop defending st-upid-ity.

Well, so if the government comes and tells you that they would be setting your prices, assuming you were a businessman, at rates that would make people happy, but make it impossible for you to meet costs of doing business...that is a wise idea, and saying otherwise, is...wrong.

Well, whatever you throw at me, running a business profitably attracts investment, and makes the business able to give good service. It's the law, you know.

nairalanda1:
Well, so if the government comes and tells you that they would be setting your prices, assuming you were a businessman, at rates that would make people happy, but make it impossible for you to meet costs of doing business...that is a wise idea, and saying otherwise, is...wrong.

Well, whatever you throw at me, running a business profitably attracts investment, and makes the business able to give good service. It's the law, you know.

Dangote is monopolistic, and if you know anything about this oil and gas you will know there is no way he should be selling above 500 naira. He is not sourcing crude outside Nigeria and besides petrol is only one by product.

maivd:
Dangote is monopolistic

,

1. There are six other private refineries, including BUA refinery which is coming up soon
2. If subsidy had been removed as late as 2012, there would have been massive investment in new refineries, because refining would have been profitable without subsidy. Not removing subsidy in 2012, created a condition where the only refinery investors would invest in was the dangote one because if it failed, they could recover their costs.
Not so with the other 59 licence holders .(as at 2011)
3. That is why subsidy should have gone earlier.
4. Subsidy for five decades caused NNPC refineries to run at a loss, and provided the nidus for corruption and ineffiency to fester. It also meant that there were no monies for TAM..which led to it not being done for 15 years from 1994-2009, and led to the refineries becoming scrap.

Subsidy should have gone...much earlier. E get why.

and if you know anything about this oil and gas you will know there is no way he should be selling above 500 naira.

Considering that
1. Maintenance and estimated upgrade costs are very very expensive, because the refinery is mostly built with imported machinery, plus he has to pay staff salaries at world level, not at Naija level, and pensions too , and also taxes...and also considering that transport costs from the refinery are too high, there is no way in God's heaven that fuel from that refinery can cost N500, unless the naira appreciated drastically in the last few weeks.

2. And he also has to pay debts. He took loans of over 15 billion dollars to build that refinery. The government loan of 3 billion dollars has been paid, but the 15 billion dollars has not been fully paid.

See the problem?

He is not sourcing crude outside Nigeria and besides petrol is only one by product.

He is. He still buys crude from abroad

Also, he has to make a profit on every thing he sells from that refinery. He cannot make petrol 'cheap'...because one he starts losing money from petrol, it would essentially create financial problems for the entire refinery.

TO sum it up...

Why N500 Petrol is Unsustainable for the Refinery

Crude Oil Costs: The Dangote Petroleum Refinery buys crude oil based on international market pricing tied to the US dollar. Crude is the primary component of refined fuel cost.

Exchange Rates: Because crude acquisition and operational expenses factor in foreign exchange, a 500 naira valuation per litre falls far below the actual cost of crude input, refining, and distribution.

Current Pricing Reality: Market gantry and ex-depot prices for petrol from the refinery trade significantly higher—around 1,200 naira per litre—driven by global crude benchmarks and replacement costs. Selling at 500 naira would mean absorbing more than a 50% loss on every litre produced

Welcome to reality. You don;t have to like it.




The only way for petrol prices to come down would be for NNPC to reactivate it's old fuel pipeline, and connect it to dangote refinery, so that fuel can be piped to various fuel depots across the country, which would help reduce transport costs, and thus the price of fuel. Just not down to N500 per liter.

nairalanda1:
,

1. There are six other private refineries, including BUA refinery which is coming up soon
2. If subsidy had been removed as late as 2012, there would have been massive investment in new refineries, because refining would have been profitable without subsidy. Not removing subsidy in 2012, created a condition where the only refinery investors would invest in was the dangote one because if it failed, they could recover their costs.
Not so with the other 59 licence holders .(as at 2011)
3. That is why subsidy should have gone earlier.
4. Subsidy for five decades caused NNPC refineries to run at a loss, and provided the nidus for corruption and ineffiency to fester. It also meant that there were no monies for TAM..which led to it not being done for 15 years from 1994-2009, and led to the refineries becoming scrap.

Subsidy should have gone...much earlier. E get why.



Considering that
1. Maintenance and estimated upgrade costs are very very expensive, because the refinery is mostly built with imported machinery, plus he has to pay staff salaries at world level, not at Naija level, and pensions too , and also taxes...and also considering that transport costs from the refinery are too high, there is no way in God's heaven that fuel from that refinery can cost N500, unless the naira appreciated drastically in the last few weeks.

2. And he also has to pay debts. He took loans of over 15 billion dollars to build that refinery. The government loan of 3 billion dollars has been paid, but the 15 billion dollars has not been fully paid.

See the problem?



He is. He still buys crude from abroad

Also, he has to make a profit on every thing he sells from that refinery. He cannot make petrol 'cheap'...because one he starts losing money from petrol, it would essentially create financial problems for the entire refinery.

TO sum it up...



Welcome to reality. You don;t have to like it.




The only way for petrol prices to come down would be for NNPC to reactivate it's old fuel pipeline, and connect it to dangote refinery, so that fuel can be piped to various fuel depots across the country, which would help reduce transport costs, and thus the price of fuel. Just not down to N500 per liter.

All these excuses don't count, importation should be encouraged without heavy tarrifs. Dangote muscles importers with everything within his arsenal so he can bleed the country. Maintenance and debt is absolutely his headache....do you know the same Dangote you are supporting is planning to build another refinery in Kenya (that is his business ).

maivd:
All these excuses don't count,

They are not excuses, they are facts.

importation should be encouraged without heavy tarrifs.

Well, as production improves, we would need less and less of importation, and it is already happening.

Dangote muscles importers with everything within his arsenal so he can bleed the country. Maintenance and debt is absolutely his headache....do you know the same Dangote you are supporting is planning to build another refinery in Kenya (that is his business ).

So, you want the refinery to run at a loss because you want cheap fuel? You want jobs to be lost, and investment in other refineries to be built here that could compete with dangote to be lost because cheap fuel?

Okay, I;m arguing with a secondary school student here.

Kukutente23:
I keep saying it that what's going on is a scam

When subsidy was removed in 2012 under Jonathan which Tinubu and his goons organised against, fuel price went from N87 to N145 which was less than 100% (60% actually). And crude oil was selling at over $110 per barrel while we were importing the fuel.

So how come petrol price is over 600% (656% actually) at N1300 now from the price before subsidy removal (N189) at just around $100 per barrel when the crude and refined products are being sourced locally?

Can anyone explain this mathematics in a way that makes sense

Exchange rate problem

Reason it’s always hard for Dangote to excel in other countries
The man is not a business man
His just a very greedy man that’s just taking advantage of Nigerians at every opportunity

With the support of the corrupt government
Dangote can never succeed in a level play ground

Check his investment in other countries

Adonispco:
Exchange rate problem

I'm talking about the ratios
You guys are looking at the figures
If exchange rate explains it then the ratio between the 2012 exchange rate and 2026 should be the same ratio between 2012 fuel price and 2026 which it isn't

Kukutente23:
Keep quiet forthwith
This is beyond your intelligence grade

You have simply described yourself, basic exchange rate is too difficult for you to understand.

lionshare:
See attached price of oil WTI & Brent over a week period yet dangote is increasing price twice within same week.

I thought you people said the monopolist is a blessing to you people in this country?

You people said his refinery will crash the dollar😂, it will reduce price of fuel 😂.

Go and study Dangote's cement, how he made cement that all its raw materials are sourced locally a luxury for only the wealthy.

Nigerians go get sense by force!