₦airaland Forum

jpphilips:
Governments give their citizens tuition loans to go to school, give mortgage loans to own houses and also car loans, a secondary school drop like you is suggesting that the facility should be given to innoson to buy buses so you will be employed as a conductor in one of those buses.

Meanwhile, in other climes, Toyota alone will boast of selling over 10,000 cars in one year in a country whose responsible Govt provided car grants for the citizens, that volume of sales will encourage Toyota to commence car assembly, that in place, a chain reaction of different supply chain contractors and labour will materialize, multiplied by all the car makers in the country.

The mortgage given to citizens will stimulate the real estate market, chain reaction of building materials manufacturers will create all the labour needed to stimulate the economy, if your only Idea of Government grant is to give to innoson so he will give buses to the citizens, then your thought process is fvcked up!!

adanny01:
I am average at the moment with fuel at N87 if the government makes petrol N200, they made me poorer. Note that i wasnt poor but the government made. Does that sound like a good government to you? Dont forget, its not that i am buying a car, i own one and used to maitain it with my income, but suddenly i cant afford to maintain it not because my income changed or my responsiblities to family has changed. Remember its just not me alone but the entire middle class down to poor Nigerians.

adanny01:
About this, you can tell me that, but no government can tell me or any Nigerian that. It tells me the kind of person you are, a person who does not give a hoot about the poor and will even take from them. Thats the kind of mind those cabals have, you have it, hence your stance. This statement of yours will not just be irresponsible but outright rudeness assuming you are a government official.

gohome:
You are average at the moment, you will become poorer if your Naira becomes weak. 25% of your worth was wiped away because your Naira was devalued. You have to defend the Naira. You will become poorer if you continue to enjoy free PMS. Deal with the cancer and live. Get a new skill and get employed in the real sector that will boom. Make Harsh choices now. A stitch in time saves nine.

gohome:
Answer

ohzee(f): I believe the reason that the price of diesel is high is because it is not lucrative to import it. The marketers simply ignore it and all rush for the beautiful bride called PMS because of the subsidy they will get from govt. This creates artificial relative scarcity of diesel and the price remains high.





Answer

[b]The price of crude oil is not directly proportional to the price of diesel. In other words if the price of crude oil is reduced by 40 percent, the price of diesel will only reduce by 5% or less The reason being diesel is a necessary by product from the very cherished PMS. It's prices are determined by refining margins amongst other factors. These margins are calculated from the composition of crude refined

The price of diesel has dropped in several countries but risen in others. From July 2013 to July 2014 (oil price peak), the retail price of diesel dropped by 3.6 percent in Germany. In Japan, prices increased by 9.7 percent during the same time. The United Kingdom had some of the highest prices for automotive diesel, reaching 1.93 U.S. dollars per liter in July 2014. Today in the UK, the price of diesel is 1.91 U.S. Dollars.

With all due respect do some reading and appreciate international commodity pricing. It's is not as simple as buying and selling tomatoes and pepper. The internet has a huge database base.[/b]




Reply to Wirinet Comments


wirinet:


You are being myopic in this your analysis, you are not looking at the bigger picture. This petroleum subsidy issue is mired in so much mystery and confusion that nothing definite can be known unless there is a forensic audit of NNPC and the whole process.
We need to know exactly how much fuel is consumed, how much it cost to buy from foreign refineries, how much it costs to ship to Nigeria, how much it costs to distribute to various depots and how much it cost to dispense in your cars.What are the costs of corruption and innefficiencies in the system, then we will be in a better position to debate whether we should retain subsidy or not.

This analysis has been done by so many Nigerians. It has been done by your neighbors, Ghana, Togo etc. It has been done by your felow African brothers like Kenya SA. The world bank too has done this shockingly. The Average Price (landing cost) of crude oil is +/- 1.1 dollars per liter. It can vary based on Transportation, grade of refine products and taxes.


wirinet:

Having said that, i am not a fan of deregulation in a critical sector like the petroleum sector. There is never deregulation in the real sense of the word in any country in the world, government always regulate to some extent all industries in order to prevent abuse, monopoly and to protect public interest. It is the degree of regulation we should be debating about. "Deregulation" is good in situations with efficient market economy with strong institutions, but had been proven to be disasterous in countries with inefficient or underdeveloped markets with very weak institutions. All you will produce is monopoly or Oligarchy and the masses being at the mercy of a few powerful cabals.

gohome: If you do not deregulate, you wont build efficiency in Nigeria. Refining margines are very small with the volatile oil market you have. Big players like Shell BP Total etc would not build refineries if you do not let you government hands off. When Dangote's refinery is ready he will sell to Ghana, Togo and the likes if your Govt does not hands off. Fuel is not cheap. it is 220 Naira per liter. Get use to it.


wirinet:

This is what we have in almost all sectors of the Nigerian economy that had undergone deregulation. This is why deregulated Diesel and aviation fuel will never be cheap and available. This is why DSTV, MTN, Etisalat, etc can charge the masses very high tarrifs with very poor services. This is why deregulated NEPA is worse than regulated NEPA. I can go on and on. Before Thatcher deregulated or privatized the British economy, she made sure that the public run enterprises were running optimally and efficiently and very efficient regulatory bodies were in place.

gohome:

Thats the good thing about deregulation.

MTN better than NITEL
DSTV better than NTA
NESCO better than NEPA.

If you choose to use NITEL because MTN service is not good, go ahead. If you choose to watch NTA, go ahead. If you choose to use NEPA instead of solar and inverter, or NESCO go ahead.

NESCO is an independent power company in Jos that supplies 24 hours light to its customer


Reply to Shiftmarket Comments




gohome: I will say it again. Corruption is one of the problems. Maybe the major problem, but it is not all the problem.

The best way to fight corruption is to totally remove what fuels the corruption. It is that simple. Also 100 billion, 350 billion, !1 Trillion, we do not have the money to pay for subsidy.





gohome: If you can trust them with 4 trillion annual budget, then trust them with 1, 2 300 billion. y dont you go collect the 4 trillion Naira because you dont trust them with it and put in your house. You want to waste 300 billion on petroleum subsidy and blame your government for infrastructural decay, No power, No light, external and internal debt, non payment of salary etc. You want your kids to be out of school, you want your wife to die in the hospital because you do not have good medicare, but you want to fuel your Gen in a leaking house? SMH





gohome: Subsidy removal has nothing to do with scarcity. PMS subsidy does not exist in 90 percent of the countries in the world, yet no scarcity. Why should it be scarce in Nigeria. No subsidy in Ghana, Niger, Togo, Benin, Kenya, SA, No scarcity. PMS is available worldwide if you want to have it at 1.1 dollars per liter. The only reason for Diesel scarcity is the fact that marketers refused to lift. If MTN refuses to give you service, Etisalat will. If OandO refuses to give you diesel, Capital Oil will. Deregulate the downstream sector is the only way. 3% of your budget goes to your National Assembly. Let them pass law and implement policies to guide against capitalism excess. Go and read about the meager between ATT and Tmobile.





Reply to Wirinet Comments

[b]450,000 for domestic consumption does not fall from the sky. You have to produce it. It cost 30 dollars per bbl to produce it. Depending on the oil price, you will likely lose 9 billion dollars a year. This is minus the so called subsidy. With an infrastructural decay that needs hundreds of billions to solve, you want to pay subsidy? You are in a country where the government expenditure per person to tax is the highest in the world and you want to still pay subsidy. Your economy (mass transit, banks and industries) runs with diesel not PMS.

What is the population of the UAE? You are 170 million boy. It is not affordable.

Your budget is a mere 4 trillion. Guess what the budget of New York City with 8.9 million people alone is 15 trillion. Your government is poor, it needs money from anywhere. Help it.

Help it create a level playing field to unlock new opportunities. If we show investors we can buy fuel at 200 to 250 naira a liter, you will see them come. We then will be talking about 200K direct jobs easy and another 5 million indirect jobs.

Your country is poor. You need to start paying 30% tax so your government can run your country.

Buhari will not pay a dime on PMS subsidy. Petrol will sell at 1.1 dollars per liter. Unless he wants to throw away 9 billion dollars (465000 bbl) another form of subsidy. You won't die. My grandma in the village buys petro at 210 per liter, food are transported via diesel, mass transit is via diesel, industry via diesel. Nothing will happen

Because 9 million people with a budget the same as yours can afford it doesn't mean we can.

The UAE is 8 million migrant and 1.4 millions citizens. Budget is in excess of 4 trillion Naira. Economy is so diversed that only 4% of oil revenue go to Dubai city budget. If AkwaIbom gets 4 trillion annually, let me see how it won't be Dubai with free fuel.

i really do not know how to explain to these guys that we cannot afford it. No country with a population of 150 million plus pay subsidy on PMS.

Let them keep hiding under masses. Borrowing money to enrich few rich men. Sometimes I feel like disowning this country. People you try to help are the same people killing you.

[/b]

Yomieluv:
If subsidy is true,why is the government afraid to remove it?

And what are the benefits of subsidy removal?

Rich4god:
Price of PMS in Venezuela is less dan 50naira per liter.... For those of you thinking its difficult to go below the present 97 naira..Abi no b d same refinery dem dey use refine dia own oil... The problem is our govt and corruption...

gohome:
I like your approach. trust is a good way to start. Let us see what his policies are. Buhari has said so many things, but none has been said about the solution to the downstream sector. None to my hearing. Will he fix the refinery? Will be build new once? What capacity will we refine in Nigeria? Will he stop subsidy? Will he phase it. What are the timelines. Till infinity? What are the cost? Where will the money come from. These are basic project management questions. I have heard no answer to the question. Wishing and acting are to different things. You can talk the talk, but how will you walk the walk. It is easy to critic GEJ and OBJ. This is your best solution, it is not mine. My best solution is to get the cancer out. I dont believe in romancing problems. PMS removal would not kill us. No one has prove why the good and services should go up. If you do not pay for the removal of subsidy by buying PMS just like 90% of countires around the world, you will pay for it by a devalued Naira.

gohome:
Innoson doesn't buy, he builds. Loans to citizens in the form of low interest rate encourage people to invest in Real estate market is investing in a real sector (Construction). Every kid knows this. Anything that will build manufacturing is gold to any economic planning. Do you know the gain of manufacturing a pin in an economy. No way PMS subsidy will do that. I am done with you.

ichuka:
Asuming we produce 2.4m brrls/day and we dnt hve compete refinaries on ground.we cn give 250,000brrls to a refinary in another country to refine 70% of PMS for us and let them take the remaining 30% of other refined products for there refining cost and logistics.
so now whats the volume of 70% PMS in 250,000brrls?
=70/100*250,000=175,000brrls/day of PMS.Convert to litres=175,000*165=28,875,000ltres/day of PMS.
So if Govt.sells @50naira/ltre they cn make up to 144million naira dairly.
Nigerians will b grateful to buy @that price and Govt.will be happy,@least they cn off set some of there debts with there partners and start total upgrade of our refinaries.

VULCAN:
I want to congratulate jpphillips, 989900 and others who have some REAL knowledge of what happens behind the scenes in the Nigerian downstream oil and gas sector. You have responded well to the OP's weak attempt to convince us of the need to "immediately" remove The Subsidy.

Having read almost every post here I gleaned a few things about the OP

1. He is completely ignorant of the workings of our downstream sector. To load his first post with petrol price figures from 2012 was his first albatross. It proved that he was working from a predetermined answer back to the question. More evidence of this is his over reliance on info from Google. If ur fully involved in a thing when you talk people will know.

2. He has no form of understanding of the causes or potentially destructive results of galloping inflation in a country that is import dependent. Relative to its size Nigeria produces nothing- whether goods or services. The City of London props up the entire British economy via its financial sector. Man, for now oil is all we got. Three times or so he says that an increase in petrol price from N87 to N220 will have no effect on Nigerians. Obviously he avoided Macroeconomics class in school.

3. He is a very callous being. Anybody who can't afford to run their car at N220 should park it according to him.

4. He is very deceptive. He skillfully ignored the fact that EVERY thriving Western economy has subsidies(in one form or another) in place for the betterment of the lives of their people.

5. He is bereft of any deep thinking on this matter.
I might have been swayed if he had a superior strategy and tactics to make his immediate subsidy removal work but all he does is present emotional pleas about whether we want our unborn kids to suffer. Beer parlour arguments I must say. Nothing of substance just fluff in his arguments. Pity.

My prayer for you is that God will not permit your type position of National Influence because you're obviously too immature to take us to the next level.

Let me stop here for now. But before I continue I would like peeps to present here some more workable ideas (that dont involve the destruction of the masses)for our enlightenment.

gohome:
Answer

ohzee(f): I believe the reason that the price of diesel is high is because it is not lucrative to import it. The marketers simply ignore it and all rush for the beautiful bride called PMS because of the subsidy they will get from govt. This creates artificial relative scarcity of diesel and the price remains high.





Answer

[b]The price of crude oil is not directly proportional to the price of diesel. In other words if the price of crude oil is reduced by 40 percent, the price of diesel will only reduce by 5% or less The reason being diesel is a necessary by product from the very cherished PMS. It's prices are determined by refining margins amongst other factors. These margins are calculated from the composition of crude refined

The price of diesel has dropped in several countries but risen in others. From July 2013 to July 2014 (oil price peak), the retail price of diesel dropped by 3.6 percent in Germany. In Japan, prices increased by 9.7 percent during the same time. The United Kingdom had some of the highest prices for automotive diesel, reaching 1.93 U.S. dollars per liter in July 2014. Today in the UK, the price of diesel is 1.91 U.S. Dollars.

With all due respect do some reading and appreciate international commodity pricing. It's is not as simple as buying and selling tomatoes and pepper. The internet has a huge database base.[/b]




Reply to Wirinet Comments


wirinet:


You are being myopic in this your analysis, you are not looking at the bigger picture. This petroleum subsidy issue is mired in so much mystery and confusion that nothing definite can be known unless there is a forensic audit of NNPC and the whole process.
We need to know exactly how much fuel is consumed, how much it cost to buy from foreign refineries, how much it costs to ship to Nigeria, how much it costs to distribute to various depots and how much it cost to dispense in your cars.What are the costs of corruption and innefficiencies in the system, then we will be in a better position to debate whether we should retain subsidy or not.

This analysis has been done by so many Nigerians. It has been done by your neighbors, Ghana, Togo etc. It has been done by your felow African brothers like Kenya SA. The world bank too has done this shockingly. The Average Price (landing cost) of crude oil is +/- 1.1 dollars per liter. It can vary based on Transportation, grade of refine products and taxes.


wirinet:

Having said that, i am not a fan of deregulation in a critical sector like the petroleum sector. There is never deregulation in the real sense of the word in any country in the world, government always regulate to some extent all industries in order to prevent abuse, monopoly and to protect public interest. It is the degree of regulation we should be debating about. "Deregulation" is good in situations with efficient market economy with strong institutions, but had been proven to be disasterous in countries with inefficient or underdeveloped markets with very weak institutions. All you will produce is monopoly or Oligarchy and the masses being at the mercy of a few powerful cabals.

gohome: If you do not deregulate, you wont build efficiency in Nigeria. Refining margines are very small with the volatile oil market you have. Big players like Shell BP Total etc would not build refineries if you do not let you government hands off. When Dangote's refinery is ready he will sell to Ghana, Togo and the likes if your Govt does not hands off. Fuel is not cheap. it is 220 Naira per liter. Get use to it.


wirinet:

This is what we have in almost all sectors of the Nigerian economy that had undergone deregulation. This is why deregulated Diesel and aviation fuel will never be cheap and available. This is why DSTV, MTN, Etisalat, etc can charge the masses very high tarrifs with very poor services. This is why deregulated NEPA is worse than regulated NEPA. I can go on and on. Before Thatcher deregulated or privatized the British economy, she made sure that the public run enterprises were running optimally and efficiently and very efficient regulatory bodies were in place.

gohome:

Thats the good thing about deregulation.

MTN better than NITEL
DSTV better than NTA
NESCO better than NEPA.

If you choose to use NITEL because MTN service is not good, go ahead. If you choose to watch NTA, go ahead. If you choose to use NEPA instead of solar and inverter, or NESCO go ahead.

NESCO is an independent power company in Jos that supplies 24 hours light to its customer


Reply to Shiftmarket Comments




gohome: I will say it again. Corruption is one of the problems. Maybe the major problem, but it is not all the problem.

The best way to fight corruption is to totally remove what fuels the corruption. It is that simple. Also 100 billion, 350 billion, !1 Trillion, we do not have the money to pay for subsidy.





gohome: If you can trust them with 4 trillion annual budget, then trust them with 1, 2 300 billion. y dont you go collect the 4 trillion Naira because you dont trust them with it and put in your house. You want to waste 300 billion on petroleum subsidy and blame your government for infrastructural decay, No power, No light, external and internal debt, non payment of salary etc. You want your kids to be out of school, you want your wife to die in the hospital because you do not have good medicare, but you want to fuel your Gen in a leaking house? SMH





gohome: Subsidy removal has nothing to do with scarcity. PMS subsidy does not exist in 90 percent of the countries in the world, yet no scarcity. Why should it be scarce in Nigeria. No subsidy in Ghana, Niger, Togo, Benin, Kenya, SA, No scarcity. PMS is available worldwide if you want to have it at 1.1 dollars per liter. The only reason for Diesel scarcity is the fact that marketers refused to lift. If MTN refuses to give you service, Etisalat will. If OandO refuses to give you diesel, Capital Oil will. Deregulate the downstream sector is the only way. 3% of your budget goes to your National Assembly. Let them pass law and implement policies to guide against capitalism excess. Go and read about the meager between ATT and Tmobile.





Reply to Wirinet Comments

[b]450,000 for domestic consumption does not fall from the sky. You have to produce it. It cost 30 dollars per bbl to produce it. Depending on the oil price, you will likely lose 9 billion dollars a year. This is minus the so called subsidy. With an infrastructural decay that needs hundreds of billions to solve, you want to pay subsidy? You are in a country where the government expenditure per person to tax is the highest in the world and you want to still pay subsidy. Your economy (mass transit, banks and industries) runs with diesel not PMS.

What is the population of the UAE? You are 170 million boy. It is not affordable.

Your budget is a mere 4 trillion. Guess what the budget of New York City with 8.9 million people alone is 15 trillion. Your government is poor, it needs money from anywhere. Help it.

Help it create a level playing field to unlock new opportunities. If we show investors we can buy fuel at 200 to 250 naira a liter, you will see them come. We then will be talking about 200K direct jobs easy and another 5 million indirect jobs.

Your country is poor. You need to start paying 30% tax so your government can run your country.

Buhari will not pay a dime on PMS subsidy. Petrol will sell at 1.1 dollars per liter. Unless he wants to throw away 9 billion dollars (465000 bbl) another form of subsidy. You won't die. My grandma in the village buys petro at 210 per liter, food are transported via diesel, mass transit is via diesel, industry via diesel. Nothing will happen

Because 9 million people with a budget the same as yours can afford it doesn't mean we can.

The UAE is 8 million migrant and 1.4 millions citizens. Budget is in excess of 4 trillion Naira. Economy is so diversed that only 4% of oil revenue go to Dubai city budget. If AkwaIbom gets 4 trillion annually, let me see how it won't be Dubai with free fuel.

i really do not know how to explain to these guys that we cannot afford it. No country with a population of 150 million plus pay subsidy on PMS.

Let them keep hiding under masses. Borrowing money to enrich few rich men. Sometimes I feel like disowning this country. People you try to help are the same people killing you.

[/b]

kaboninc:
Brother, you're a genius!

gohome:
Thank you. You are one too. Saw your superb replies to Jp on the other thread. I read every single one. Wanted to teach him a lesson, but I have been busy with work.

Thank you once again

jpphilips:
At what cost will you get your 250,000bbls and where will you get it from?

ichuka:
@what cost does NNPC gives 450,000bblrs of crude daily to our refineries?
And remember our refineries ant working. so,what do they do with the 450,000bbrls of crude daily?

kaboninc:
They have a crude swap/offshore processing agreement

ichuka:
Crude Swap?Hmmm!
With whom?if i may ask.and what are the terms of such an agreement?
Do you know a litre of of refined crude has over 26 end products?
And 450,000bbrls =74,250,000litres.my brother we don't need 74.3million litres of refined products daily.let them give us what we need(PMS,AGO,DPK and LPFO)and use the rest to pay for freight and refining.
Subsidy is one of the biggest fraud in Nigeria.

ichuka:
@what cost does NNPC gives 450,000bblrs of crude daily to our refineries?
And remember our refineries ant working. so,what do they do with the 450,000bbrls of crude daily?

PassingShot:
You will be surprised that even after the "subsidy" is removed, fuel will not sell for more than 100 naira a liter. You know why? It's because most of what is claimed as subsidy for fuel consumed locally is false. No subsidy in the true sense of that word.

PassingShot:
These people will bury their head in shame soon when they find out that we still buy fuel at about the same price now even without "subsidy".

We have been scammed by Jonathan and his cohorts but soon the whole world we tremble when revelations start to come out!

PassingShot:
To start with, GEJ failed woefully in the way and manner he tried to remove the subsidy (if there really was).

You don't wake up one morning to announce such removal and increase in pump price without sensitizing the nation; without discussing with major stakeholders.

And the partial removal that he did, what did we get in returns?

The SURE-P program, as has been revealed just last week that the employee figure was inflated from 12k to 35k, is another evidence of the scam.

The buses that were promised, where are they today? The refineries, where are they?

Bottom line:
1. I believe there was no true subsidy in the first instance. What we had was an imaginary subsidy.

2. If there truly was subsidy, GEJ could have handled the removal in a more responsible manner than just announcing through the radio, on January 1st 2012, that subsidy was removed. No where in the whole world will such action go unchallenged. He needed to have discussed it with major stakeholders the need to remove subsidy. IBB, Abacha and even OBJ removed some subsidy and we witnessed how they handled it.

3. Nigerians, by rejecting the subsidy, were able to reduce/limit their loss had we allowed full subsidy removal.

4. Now that majority of Nigerians believe we have a more trust-worthy president in Buhari, they will accept a subsidy removal (if there was any) and even at that, the fuel pump price will still remain around 100 naira per liter.

Watch and see.

989900:
Go thru the below at your leisure, not perfect (slight adjustments here and there could be made for exchange rates and the like), it will help your perspective.

December 10, 2011, if you stopped at the Mobil filling station on Old Aba Road in Port Harcourt , you would be able to buy a litre of petrol for 65 naira or $1.66 per gallon at an exchange rate of $1/N157 and 4 litres per gallon. This is the official price. The government claims that this price would have been subsidized at N73/litre and that the true price of a litre of petrol in Port Harcourt is N138/litre or $3.52 per gallon.

They are therefore determined to remove their subsidy and sell the gallon at $3.52. But, On December 10, 2011, if you stopped at the Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, you would be a able to buy a gallon of petrol for $3.52/gallon. Both gallons of petrol would have been refined from Nigerian crude oil. The only difference would be that the gallon in New York was refined in a US North East refinery from Nigerian crude exported from the Qua Iboe Crude Terminal in Nigeria while the Port Harcourt gallon was either refined in Port Harcourt or imported. The idea that a gallon of petrol from Nigerian crude oil cost the same in New York as in Port Harcourt runs against basic economic logic. Hence, Nigerians suspect that there is something irrational and fishy about such pricing. What they would like to know is the exact cost of 1 litre of petrol in Nigeria .

We will answer this question in the simplest economic terms despite the attempts of the Nigerian government to muddle up the issue. What is the true cost of a litre of petrol in Nigeria ? The Nigerian government has earmarked 445000 barrel per day throughput for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. We will limit our analysis to this volume of crude oil. At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding /development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel.

Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 168 litres. The price of 1 barrel of petrol at the Depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution cost are $1.50 per barrel. The Distribution Margins (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges etc) are N15.49/litre or $16.58 per barrel. The true cost of 1 litre of petrol at the Mobil filling station in Port Harcourt or anywhere else in Nigeria is therefore ($5 +$12.6+$1.5+$16.6) or $35.7 per barrel . This is equal to N33.36 per litre compared to the official price of N65 per litre. Prof. Tam David West is right. There is no petrol subsidy in Nigeria . Rather the current official prices are too high. Let us continue with some basic energy economics.

The government claims we are currently operating our refineries at 38.2% efficiency. When we refine a barrel of crude oil, we get more than just petrol. If we refine 1 barrel (42 gallons) of crude oil, we will get 45 gallons of petroleum products. The 45 gallons of petroleum products consist of 4 gallons of LPG, 19.5 gallons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet Fuel/Kerosene, 2.5 gallons of Fuel Oil and 5 gallons of Bottoms. Thus, at 38.2% of refining capacity, we have about 170000 bbls of throughput refined for about 13.26 million litres of petrol, 6.8 million litres of diesel and 2.72 million litres of kerosene/jet fuel.

This is not enough to meet internal national demand. So, we send the remaining of our non-export crude oil volume (275000 barrels per day) to be refined abroad and import the petroleum product back into the country. We will just pay for shipping and refining. The Nigerian government exchanges the 275000 barrels per day with commodity traders (90000 barrels per day to Duke Oil, 60000 barrels per day to Trafigura (Puma Energy), 60000 barrels per day to Societe Ivoirienne de Raffinage (SIR) in Abidjan, Ivory Coast and 65000 barrels per days to unknown sources) in a swap deal. The landing cost of a litre of petrol is N123.32 and the distribution margins are N15.49 according to the government. The cost of a litre is therefore (N123.32+N15.49) or N138.81 . This is equivalent to $3.54 per gallon or $148.54 per barrel. In technical terms, one barrel of Nigerian crude oil has a volume yield of 6.6% of AGO, 20.7% of Gasoline, 9.5% of Kerosene/Jet fuel, 30.6% of Diesel, 32.6% of Fuel oil / Bottoms when it is refined.

Using a netback calculation method, we can easily calculate the true cost of a litre of imported petrol from swapped oil. The gross product revenue of a refined barrel of crude oil is the sum of the volume of each refined product multiplied by its price. Domestic prices are $174.48/barrel for AGO, $69.55/barrel for Gasoline (PMS or petrol), $172.22/barrel for Diesel Oil, $53.5/barrel for Kerosene and $129.68/barrel for Fuel Oil. Let us substitute the government imported PMS price of $148.54 per barrel for the domestic price of petrol/gasoline. Our gross product revenue per swapped barrel would be (174.48*0.066 +148.54*0.207+172.22*0.306+ 53.5*0.095+129.68*0.326) or $142.32 per barrel. We have to remove the international cost of a barrel of Nigerian crude oil ($107 per barrel) from this to get the net cost of imported swapped petroleum products to Nigerian consumers. The net cost of swapped petroleum products would therefore be $142.32 -$107 or $35.32 per barrel of swapped crude oil. This comes out to be a net of $36.86 per barrel of petrol or N34.45 per litre.

This is the true cost of a litre of imported swapped petrol and not the landing cost of N138 per litre claimed by the government. The pro-subsidy Nigerian government pretends the price of swapped crude oil is $0 per barrel (N0 per litre) while the resulting petroleum products is $148.54 per barrel (N138 per litre). The government therefore argues that the “subsidy” is N138.81-N65 or N73.81 per litre. But, if landing cost of the petroleum products is at international price ($148.54 per barrel), then the take-off price of the swapped crude oil should be at international price ($107 per barrel). This is basic economic logic outside the ideological prisms of the World Bank. The traders/petroleum products importers and the Nigerian government are charging Nigerians for the crude oil while they are getting it free.

So let us conclude this basic economic exercise. If the true price of 38.2% of our petrol supply from our local refinery is N33.36/litre and the remaining 61.8% has a true price of N34.45 per litre, then the average true price is (0.382*33.36+0.618*34.45) or N34.03 per litre. The official price is N65 per litre and the true price with government figures is about N34 per litre (even with our moribund refineries).

There is therefore no petrol subsidy. Rather, there is a high sales tax of 91.2% at current prices of N65 per litre. The labor leaders meeting the President should go with their economists. They should send economists and political scientists as representatives to the Senate Committee investigating the petroleum subsidy issue. There are many expert economists and political scientists in ASUU who will gladly represent the view of the majority. The labor leaders should not let anyone get away with the economic fallacy that the swapped oil is free while its refined products must be sold at international prices in the Nigerian domestic market.

The government should explain at what price the swapped crude oil was sold and where the money accruing from these sales have been kept. We have done this simple economic analysis of the Nigerian petroleum products market to show that there is no petrol subsidy what so ever. In the end, this debate on petrol subsidy and the attempt of the government to transfer wealth from the Nigerian masses to a petrol cabal will be decided in the streets. Nigerian workers, farmers, students, market women, youths, unemployed, NGO and civil society as a whole should prepare for a long harmattan season of protracted struggle. They should not just embark on 3 days strike/protests after which the government reduces the hiked petroleum prices by a few Nairas. They must embark upon in a sustainable struggle that will lead to fundamental changes. Let us remove our entire political subsidy from the government and end this petroleum products subsidy debate once and for all. It is time to bring the Arab Spring south.

Izielen Agbon Izielen Agbon writes from Dallas, Texas. izielenagbon@yahoo.com

He is former HOD , Petroleum Eng Dept, former ASUU chairman University of Ibadan, trained many operators in nation's energy industry with pratical experience on our practices and policy focus in the last 20yrs

http://saharareporters.com/2011/12/15/real-cost-nigeria-petrol-dr-izielen-agbon

jpphilips:
gohome post=34160169]



The reason you gave is baseless and any person who is close to the downstream sector will think you have completely lost it.
I must be inebriated to argue that part with you again, it is your right to believe any Nonsense you wish to believe, next you will argue whether Jesus was crucified or shot to death.
Such childish discussion is not worth my time.




Most of the things you say here are baseless and has no bearing with the reality on ground, trust me most people dont care to read them, so save your strength.
You said your solution to "cabalocracy" is making laws, have you made the laws yet? But you are pushing for subsidy removal without putting the law in place, whatelse is putting the cart before the horse? You see how you always shoot yourself in the foot.
In your tiny mind, you think it starts and ends with making laws abi? You forget that for a law to be effective, there should be an existing implementation framework that will implement the laws, do you have it yet? and you want to remove subsidy? sorry for you!!







I have warned you to stop using UK and US to juxtapose the Nigerian economy, they are not a reflection of each other but you wont listen, Your Igele wearing, Harvard trained, World bank frustrated, Yale certified Finance minister was literally drenched in her own sweat, looking practically helpless last week while the cabals dealt her some serious blow!!
That is what happens when you use the western model to confuse the Nigerian economy, Let me give you a shocker (not that you deserve the information anyways).

The ECA (Excess crude account) that compounded this problem guess who created it? A UNN trained street economist with a first class, in 2004, exactly 11 years ago in the person of prof. chukwuma souldo, Iweala allowed so much political interference in the account that she practically lost control of its management.

To manage the account was a very big problem for her, in 2012, she managed to balkanize the account into three
FGF, NIF and SF, see where it has landed us. Soludo with this account stabilized our economy at $38/bbl the lowest oil price of the Obasanjo administration, faced with two economic Melt down, according to Soludo, our economy was practically immune to the worst financial trauma ever in history after the great recession.

Soludo as the coordinator of the economy at the time was able to hold the economic front for nearly one and half years, before he broke and devalued from 131 to 155 naira, this was the same government that paid off nearly all our debts to the tune of $12b, Initiated the NIPP to the tune of $16b our only hope of getting electricity right.

Compare with the Igele wearing, harvard trained, world bank frustrated, Yale certified failed finance minister, just a drop in crude price, (jonathan's lowest was $41/bbl with a peak of $115/bbl) this amounted to ECR of $40/bbl at $75 benchmark.

By August 2014, iweala has broken, Nigeria declared recession in less than 2 months of this crisis, the flood gates of borrowing was opened today, we are indebted to the tune of $63.7b, five months into the crisis, (Jan 2015) Nigeria borrowed to pay salaries, the Naira went loose from 155 to 202 against the dollar, thanks to Iweala's western model of solving Nigeria's problem. Why am even comparing a god with a mere mortal?

The learning point here is that the street Economist laid the foundation of Nigeria's 11years future while the Igele wearing, Harvard trained, world bank frustrated, Yale certified finance minister could not consolidate on Soludo's gains neither could she improve on it for the better, because she is stuck with the western model of economics. A word is enough for the wise!!




I was the one that told you how the devaluation affected the marketers, it is an insult to say I dont know. As we speak, out of the 59b released, 31b, was earmarked as the Forex differential in this last subsidy, if iweala understood my point and did the needful, i dont give a fvck about your opinion. you think the Nigerian economy run on google.






I doesn't matter who I am, what matters is how well I understand the situation, I don't expect you to know that anyways!!

omenka:
Interesting!

I have just a few questions.


1). How much were previous administrations paying for subsidy??


2). How much did Jonathan pay on assumption of duty as the president and in subsequent years as president??


3). What necessitated the geometric increase in the expenditure on subsidy soon after Jonathan took over?? It was about 300billion on the budget but burgeoned to nearly 2trillion at the end of the fiscal year. Was there a corresponding increase in the demand of products to have warranted such increase in "supply"?? Did Nigeria get thirstier for petroleum products??


4). Was there any supplementary budget passed by the NASS to accommodate the increase as stated in #3??


5). There were about 40 importers of products prior to Jonathan's regime. After he took over, the list went over the roof to about 150!! What was the reason behind this??


#waiting.

Cc: gohome.

Esdb3:
You are following influenced figures you really do believe nigeria makes just 4 trillion?

And Not all 170million people will depend on the government. We have other sources that we make wealth from that we are not tapping into. see we are blessed just take away corruption and we will even agree to pay tax then.

trillville:
Please as ridiculous as this statement may sound, stop using figures to make any case for or against the removal of subsidies because we have no idea how much Nigeria's total earnings is. If I have no knowledge of the amount of money I have, how do you expect me to properly budget?

Subsidies may have to be removed at some point, but a perception that the government is fighting corruption needs to be created first and also a reduction in the cost of governance before any sensible government should consider removing subsidy.

This may not be the logical way to go based on our economic situation, but it is the political solution to our crisis. Please read Ben Bruce's advice to Buhari.


What evidence other rhetoric repeated by politicians that the removal of subsidy will lead to companies building refineries in Nigeria.

Are you aware that there is a glut in refining capacity on earth as at now?

By the way, a friend may offer to patch my roof for me at no cost to me.

VULCAN:
I want to congratulate jpphillips, 989900 and others who have some REAL knowledge of what happens behind the scenes in the Nigerian downstream oil and gas sector. You have responded well to the OP's weak attempt to convince us of the need to "immediately" remove The Subsidy.

Having read almost every post here I gleaned a few things about the OP

1. He is completely ignorant of the workings of our downstream sector. To load his first post with petrol price figures from 2012 was his first albatross. It proved that he was working from a predetermined answer back to the question. More evidence of this is his over reliance on info from Google. If ur fully involved in a thing when you talk people will know.

2. He has no form of understanding of the causes or potentially destructive results of galloping inflation in a country that is import dependent. Relative to its size Nigeria produces nothing- whether goods or services. The City of London props up the entire British economy via its financial sector. Man, for now oil is all we got. Three times or so he says that an increase in petrol price from N87 to N220 will have no effect on Nigerians. Obviously he avoided Macroeconomics class in school.

3. He is a very callous being. Anybody who can't afford to run their car at N220 should park it according to him.

4. He is very deceptive. He skillfully ignored the fact that EVERY thriving Western economy has subsidies(in one form or another) in place for the betterment of the lives of their people.

5. He is bereft of any deep thinking on this matter.
I might have been swayed if he had a superior strategy and tactics to make his immediate subsidy removal work but all he does is present emotional pleas about whether we want our unborn kids to suffer. Beer parlour arguments I must say. Nothing of substance just fluff in his arguments. Pity.

My prayer for you is that God will not permit your type position of National Influence because you're obviously too immature to take us to the next level.

Let me stop here for now. But before I continue I would like peeps to present here some more workable ideas (that dont involve the destruction of the masses)for our enlightenment.

nafiachi:
Guys there is only one simple answer to all ur questions on subsidy, IT is FRAUD.
In one of the ops question and answer quote it said the marketers all rush to import PMS because subsidy is paid for it. ?
Now, I am a plantain and banana seller, going all the way to benue to buy plantain @ #10, plus transport and my profit I intend to sell @ #20, but the govt says abeg sell @ #13 to the people we'll pay u the remaining #7, to me that is fair enuff, but when I am told sell @#13 we'll give u #50 then that is lucrative.
Point is this the marketers are into this subsidy thing because they make more than normal, now it is left for the govt to correct the corruption in that deal not remove the subsidy all through, I believe that was the position we had in the Occupy Protests.