₦airaland Forum

Sunnybobo3:
Considering present realities, do you think fuel refined in Nigeria would be cheaper than one imported?

Yes
Ask me why

The over head cost will be low
No import tarrif
No custom tarrif
Low logistic cost
Cheap and available labour
Nearness to market
Nearness to raw material
Simple refining system and faster roi

It will be cheaper

Simple economics

tonychristopher:
Yes Ask me why
The over head cost will be low No import tarrif No custom tarrif Low logistic cost Cheap and available labour Nearness to market Nearness to raw material Simple refining system and faster roi
It will be cheaper
Simple economics

if the market is not monopolistic in nature!

Eddygourdo:
Sorry to say this but the op is very dull. U talk about comparative advantage without indicating and arguing out what makes any situation or business perspective disadvantageous to Nigeria. To have a comparative advantage in any sector is purely dependent on good policy governance and policy implementation. The countries u mentioned how did they achieve advantages except through what I listed above. Let's stop telling stories and giving excuses for our failures as leaders and followers in managing our resources and Turning them into dividends for the benefit of the average Nigerian. Any theory can be proven to be true as u just did beautifully. But not all theories are true nor validatable. Cheers

You do not comment on a post after reading the first paragraph. If you had read it all, you would have seen the irrelevance of your post. As long as the NNPC remains the way it is and the legislature refuse to pass the PIB, we'll be going round and round in circles.

Sunnybobo3:
Nobody is arguing or doubting the ability or capacity to refine crude in Nigeria. Based on the present political economics reality on ground, at what cost will a litre be refined in Nigeria?

A lot of factors
Labour cost
Type of refinary
Profit margin
Policy and tax regime
Economies of scale


But know it will be cheaper


Toyota is cheaper in Japan than Nigeria ..why
Economies of scale and comparative advantage

Simple

These things are elementary economics we dont need Adam smith here brother

baralatie:
if the market is not monopolistic in nature!

Yes ..I forget the open market

Market forces also

Pavore9:
l am still imagining how the garri brought in from Umunede, Delta state will be cheaper in my village market in lmo state than the garri processed in my village!

You just gave a perfect local example.

tonychristopher:
Yes
Ask me why

The over head cost will be low
No import tarrif
No custom tarrif
Low logistic cost
Cheap and available labour
Nearness to market
Nearness to raw material
Simple refining system and faster roi

It will be cheaper

Simple economics

It is not as simple as you make it sound. In reality, practical is always different from theory.

First of all, there are no import and custom tariffs on imported PMS. Nigeria has a shortage of skilled manpower in the oil industry and labour is not cheap in Nigeria (Oil workers are paid more in Nigeria than in developed countries).

Cost of logistics in Nigeria is Obe of the highest in the world

The only thing you got right there is proximity to raw material and market.

Nearness to raw material brings me to the next question, will crude oil be sold to the refineries at international price or will the price be subsidised? Let's take it from here. ...

tonychristopher:
A lot of factors
Labour cost
Type of refinary
Profit margin
Policy and tax regime
Economies of scale


But know it will be cheaper


Toyota is cheaper in Japan than Nigeria ..why
Economies of scale and comparative advantage

Simple

These things are elementary economics we dont need Adam smith here brother

Is the above about Japan not against your argument?

Japan imports nearly all if not all the materials used in manufacturing Toyota and yet it's cheaper in Japan than those countries where the raw materials are sourced.

Tooth pick is cheaper imported from China than produced in Nigeria

Pavore9:
l am still imagining how the garri brought in from Umunede, Delta state will be cheaper in my village market in lmo state than the garri processed in my village!

Comparative advantage of Umunede over your village in garri production allows cost of production plus transportation of the garri to be still cheaper than producing it in your village where inputs like energy, labour etc are higher...

Sunnybobo3:
It us not as simple as you make it sound. In reality, practical is always different from theory.

First of all, there are no import and custom tariffs on imported PMS. Nigeria has a shortage of skilled manpower in the oil industry and labour is not cheap in Nigeria (Oil workers are paid more in Nigeria than in developed countries).

Cost of logistics in Nigeria is Obe of the highest in the world

The only thing you got right there is proximity to raw material and market.

Nearness to raw material brings me to the next question, will crude oil be sold to the refineries at international price or will the price be subsidised? Let's take it from here. ...

Jesus
Even in maths for you to solve a complex problem simplify it....

I have experience here ...I maintain my stand there is no big deal in refining crude

We have the capacity and biafrans did it creek boys did it

Stop this grammar.....its simple approach brother

baralatie:
let us see its practicability;
1.there are three refineries with a combined capacity of 18million litres a day.
if those three refineries are sold out to different Coys plus dangote refineries coming up.
the competition will force the price/ litre down to a sustainable limit.

Theoretically yes but practically depends on many factors.

Next question, assuming you are right above, do you think private investors who set up refineries in Nigeria can sell fuel to Nigerians at a price much lower than what it's sold for in our neighbouring countries?

Sunnybobo3:
It is not as simple as you make it sound. In reality, practical is always different from theory.

First of all, there are no import and custom tariffs on imported PMS. Nigeria has a shortage of skilled manpower in the oil industry and labour is not cheap in Nigeria (Oil workers are paid more in Nigeria than in developed countries).

Cost of logistics in Nigeria is Obe of the highest in the world

The only thing you got right there is proximity to raw material and market.

Nearness to raw material brings me to the next question, will crude oil be sold to the refineries at international price or will the price be subsidised? Let's take it from here. ...

OK let us start the market is priced at international rate.

seighapaul:
You just gave a perfect local example.

l wonder! How can it be cheaper after adding cost of the transportation of the over 200km journey, bribes paid along the way to policemen whey no dey take eyes see trucks that are ferrying farm produce!

tonychristopher:
Jesus
Even in maths for you to solve a complex problem simplify it....

I have experience here ...I maintain my stand there is no big deal in refining crude

We have the capacity and biafrans did it creek boys did it

Stop this grammar.....its simple approach brother

Dude, nobody is talking about refining crude here. You are not talking to an illiterate either, I can hold my own anywhere.

Refining crude is very simple, the issue here is 'AT WHAT COST'.

Sunnybobo3:
Theoretically yes but practically depends on many factors.

Next question, assuming you are right above, do you think private investors who set up refineries in Nigeria can sell fuel to Nigerians at a price much lower than what it's sold for in our neighbouring countries?

good!
don't forget the price in Nigeria right now is subsidized!
the local market is 40 million / day.selling at a price to meet optimum and rapid return over will be the investor best marketing strategy.waiting for price index of neighbouring countries will be irrevelant unless the investors have monopoly of local market.

The God of heaven will surely make life miserable for all those that has refused to allow our systems to work well in Naija. They gather the money in self aggrandisement but God will help them to waste it ..Why shouldnt our refineries be working..we should be exporting refined oil to neighboring countries instead of importing the product from other nations . May God help GMB to stand up to the daunting task

baralatie:
OK let us start the market is priced at international rate.

Good, considering that the cost of doing business in Nigeria is high due to dearth of infrastructure, high cost of labour and logistics, do you think the the cost of refining a litre of PMS would be cheaper or more expensive in Nigeria than in developed countries?

ricsman:
they are sick already
d defeat of PDP was a virus
change is here!!!
God help d decision makers

Do you know about a company called Oando PLC?...biggest beneficiary of subsidy scheme...do you know the owners

Whynotthetruth:
Comparative advantage of Umunede over your village in garri production allows cost of production plus transportation of the garri to be still cheaper than producing it in your village where inputs like energy, labour etc are higher...

But that is not the case, Let me take the case of lgbariam, a farm settlement in Anambra state which is eve closer to Delta State than where l come from. garri is more or less the same price in Umunede! They massively cultivate cassava, they have local labour mostly from Abakilaki (Ebonyi state) and both ends predominantly use firewood for the frying of the garri, me abi alumni in garri frying!

Sunnybobo3:
Good, considering that the cost of doing business in Nigeria is high due to dearth of infrastructure, high cost of labour and logistics, do you think the he cost of refining a litre of PMS would be cheaper or more expensive in Nigeria than in developed countries?

the cost of downstream business does not affect upstream oil and gas.follow my other comments
virtually all the factors of doing business in the upstream and refining process have all manner of govt backing!
so investors in the upstream are heavily shielded!

baralatie:
good!
don't forget the price in Nigeria right now is subsidized!
the local market is 40 million / day.selling at a price to meet optimum and rapid return over will be the investor best marketing strategy.waiting for price index of neighbouring countries will be irrevelant unless the investors have monopoly of local market.

Thanks for the answer above but you obviously are not aware of where I'm driving at.

Now, if you have a refinery today in Lagos and the price of PMS in Benin, Togo, Ghana etc is in the region of 140 naira to 145 naira per litre while it's 130 naira in Nigeria, will you sell in Nigeria or find a way to export to those neighbouring countries where you'll make more profit?

baralatie:
the cost of downstream business does not affect upstream oil and gas.follow my other comments
virtually all the factors of doing business in the upstream and refining process have all manner of govt backing!
so investors in the upstream are heavily shielded!

Refining is downstream, isn't it?

Remember we've already agreed the refineries buy crude at international price

Sunnybobo3:
Refining is downstream, isn't it?

not exactly! sourcing of refined products and distribution is downstream sourcing of crude,storage,refining and all in transport is upstream

who wan lose?

baralatie:
not exactly!
sourcing of refined products and distribution is downstream
sourcing of crude,storage,refining and all in transport is upstream

Refining and distribution are downstream. Check again.

To add to my post above, remember we have already agreed that the refineries buy crude at international oil price.

Sunnybobo3:
Dude, nobody is talking about refining crude here. You are not talking to an illiterate either, I can hold my own anywhere.

Refining crude is very simple, the issue here is 'AT WHAT COST'.

Leave that to market forces to determine
We have educated people ruling us ..its not about education its about common sense application bro

Op, good article, but ihave questions that I would like you or any other person knowledgeable to answer.
1. How much is a litre of refined petrol directly from international refineries?
2. How much does it cost to ship down to Nigeria?
3. How much does is it cost for clearing, import duties and other sundry expenses at the port?
4. How much does it cost to transport and distribute?
5. What is the actual total amount per litre after adding all expenses.
6. How much is govt subsidizing?
Nb: for the questions above, we need genuine information not the one fabricated by NNPC, or fake ones being bandied on the internet.
7. Can't the govt itself arrange to import refined petrol wholesale or make international refineries supply the country itself, instead of using independent marketers who keep grabbing the whole nation by the balls when it deems fit?

Where is jpphilips to dissect this?

tonychristopher:
Leave that to market forces to determine
We have educated people ruling us ..its not about education its about common sense application bro

The market forces are not just local forces, this is an international commodity we are talking about and you can't treat Nigeria in isolation here. PMS can never be significantly cheaper in Nigeria than it is in Benin, Togo, Cameroon, Niger, Chad etc and you won't have scarcity in Nigeria. Impossible!

The op isn't the writer.

Lildreezy:
very insightful article. u should be out next petroleum minister.


this was one of the reasons I said that Jonathan and Dezianni had a foresight on how to operate a 21st century crude oil industry with the advent of the PIB.. but too many folks were blind to see it. If Buhari is who people wish he'd be, passage of that PIB should be a front burner of his agenda, else... everything is hogwash!

Sunnybobo3:
Thanks for the answer above but you obviously are not aware of where I'm driving at.

Now, if you have a refinery today in Lagos and the price of PMS in Benin, Togo, Ghana etc is in the region of 140 naira to 145 naira per litre while it's 130 naira in Nigeria, will you sell in Nigeria or find a way to export to those neighbouring countries where you'll make more profit?

I get your point but refineries don't sell products that way.
at the refinery end the final cost of product is "stable".it is the cost of lifting and discharge to the downstream operators that differ.that is where you have Benin 140/145 and Lagos 130(just saying)
but in the private hands it is dangerous to stockpile product over time because of 10(the losses on the installation is immense,so the best business is to pump the products with turnover sales in shortest times possible.(as long as it is not a monopolised market).hence the closet Mark et like Nigeria enjoys a more sustainable product price regime.