₦airaland Forum

franciskaine:
what is subsidy and why is there subsidy in the first place? What are we really subsidising?

I'm perturbed that learned Nigerians still buy this nonsense talk called subsidy. A govt that can borrow to build railways cannot borrow to build refineries? What is the limiting factor? Why can't they borrow and build refineries? If a refinery is let's say $5bn dollars, why can't the govt borrow or even take from our external reserve and build one refinery? After building, sell to a genuine private enterprise that can run and and maintain it effectively. Why this argument of always removing subsidy to build one. Even if their scam subsidy is removed and the price of fuel sold for #500, no refinery wil be built. They prefer taking our crude out and bringing back petrol to make more pecuniary gains.

It's nonsensical for a country that has a comparative and absolute advantage in a God given commodity to sell same commodity at an int'l market price to its citizens. Goods manufactured in America cannot be sold same price to you here. Variations in transport cost and taxes must have been added to it. Saying the price of fuel in Nigeria should be in tandem with global price is rubbish. Let dem build new refineries.

1.Government guaranteed the loans to build Dangote refinery, remember.?

2.We can't borrow to build new refienries. We've already borrowed so much due to oil falling below our breakeven of $140 per barrel.

3.If we borrow to build refineries, we have to still maintain them. Of course we cannot keep on borrowing...

4.Anyway...see my response to your other quote of my comment.

We don't have the money to pay for subsidies, and we already spend 70% of our budget on debt servicing. , and oil is still too low. Borrowing to build 4 new refineries would make matters worse.

theoldpretender:
Well, it is true...

EG...GSM

2003: mtn sim cost : N10000

TODAY : mtn sim cost : N1000 or less.

All because Obasanjo allowed MTN and them charge whatever price they wanted. And back then service was awful (It used to be diffiuclt to call Airtel line with MTN and vice versa...Airtel was known as Econet back then)

As a result , MTN, ECONET (NOW airtel), and GLO and later 9mobile...made huge profits, and invested it in new equipment to make prices come down...which attracted more investors, and as a result prices dropped (and we went from the Internet being available only in cafes in 2001 to being available at home today)

The reason why susbdiy must go is that it is preventing petroleum marketers from making a profit...which can be invested in things like refineries, infrastructure like pipelines, gas processing, etc.




A new refinery costs $10billion...and that's intial budget...costs rise as time goes on.

Plus...Dangote refinery is mostly funded by loans...which were guaranteed by the past and present government.



Intially when fuel subsidy is removed...the prices will go up, but then, like GSM, more investment will come in, more refienries would be built...but with private money..and prices would come down...and crucially, we would stop importing.

Plus new exploration for oil would be funded with private money (No more $400million government money on oil search up North).

As for power, when the DISCOS were set up, they were not allowed to set prices by the enabling law. (Electricity bill prcies are set by the government body NERC, not the DISCOS)

That means they are constantly running at a loss (and that is complicated by the debts both the government and the people owe them) meaning no money for improvements...meaning continued darkness.

As explained below..



Sauce

the argument of making comparison of both the oil and telecom sector does not add up.

Nothing special about the telecom sector and the gains made so far. It's common economics and has nothing to do with special policies of the govt. Nigeria runs a market economy and it's normal to allow private investors establish businesses and make profit in the longrun. You don't gain whr u don't sow. Govt gave licenses to telecom investors like MTN and Co. Fact is that telecommunications or ICT is a magnetic wave that was going round the world. You av no option that to accept them coming in and maximazing national profit. Why dint the govt give MTN and Co capital b4 dey invested in Nigeria? They invested first and later profit came in.

This marketers don't want to invest but want the govt to increase the price so they can maximize profit at the detriment of the masses. They are only out to estort Nigerians in the guise that we don't have functional refineries. What does it really cost to build a modular refinery? Private investors in Nigeria can do dat, they just don't want to do it cos it will deny them the excess money they make through importation and subsidy.

theoldpretender:
1.Government guaranteed the loans to build Dangote refinery, remember.?

2.We can't borrow to build new refienries. We've already borrowed so much due to oil falling below our breakeven of $140 per barrel.

3.If we borrow to build refineries, we have to still maintain them. Of course we cannot keep on borrowing...

4.Anyway...see my response to your other quote of my comment.

We don't have the money to pay for subsidies, and we already spend 70% of our budget on debt servicing. , and oil is still too low. Borrowing to build 4 new refineries would make matters worse.

but we are borrowing to build rail networks across board?

franciskaine:
the argument of making comparison of both the oil and telecom sector does not add up.

Nothing special about the telecom sector no gains made so far. It's common economics and has nothing to do special policies. Nigeria runs a market economy and it's normal to allow private investors establish businesses and make profit in the longrun. You don't gain whr u don't sow. Govt gave licenses to telecom investors like MTN and Co. Fact is that telecommunications or ICT is a magnetic wave that was going round the world. You av no option that to accept them coming in and maximazing national profit. Why dint the govt give MTN and Co capital b4 dey invested in Nigeria? They invested first and later profit came in.

This marketers don't want to invest but want the govt to increase the price so they can maximize profit at the detriment of the masses. They are only out to estort Nigerians in the guise that we don't have functional refineries. What does it really cost to build a modular refinery? Private investors in Nigeria can do dat, they just don't want to do it cos it will deny them the excess money they make through importation and subsidy.

1. The telecom investors had funds to invest BECAUSE they were allowed to make profits first. (and as an added bonus, the banks lent to them freely because the telecom investors sources of funding..customers...were steady...you cannot use a phone unless you recharge)

2.Petroleum marketers cannot invest in the down stream because subsidy prevents them from making a profit. Subsiy forces them to sell below the import and manufacturing cost of fuel...meaning they are running at a loss all the time. THAT is why we don't have new refienreis. Who wants to produce fuel in his refienry at 160 naira per liter...and sell it at N145 , LOSING N25 per liter at least? Would you do that?

3.You want a market economy for telecom, and at the same time you want a socialist economy for petroleum marketers...abeg, don't be self contradictory.

franciskaine:
but we are borrowing to build rail networks across board?

Yes, we borrow because our breakeven price for oil is $140, while the actual oil price is $60

The breakeven price is the price of oil at which we earn enough to have a balanced budget.

IT is the price of being an oil dependent economy!

theoldpretender:
Yes, we borrow because our breakeven price for oil is $140, while the actual oil price is $60

The breakeven price is the price of oil at which we earn enough to have a balanced budget.

IT is the price of being an oil dependent economy!

funny. We don't have leaders yet. I'm sure Nigeria is not as rich as it's today in the 70s and 80s whrn we built our refineries.

theoldpretender:
1. The telecom investors had funds to invest BECAUSE they were allowed to make profits first. (and as an added bonus, the banks lent to them freely because the telecom investors sources of funding..customers...were steady...you cannot use a phone unless you recharge)

2.Petroleum marketers cannot invest in the down stream because subsidy prevents them from making a profit. Subsiy forces them to sell below the import and manufacturing cost of fuel...meaning they are running at a loss all the time. THAT is why we don't have new refienreis. Who wants to produce fuel in his refienry at 160 naira per liter...and sell it at N145 , LOSING N25 per liter at least? Would you do that?

3.You want a market economy for telecom, and at the same time you want a socialist economy for petroleum marketers...abeg, don't be self contradictory.

oh! So ECONET and MTN started making profits first b4 investing? This is laughable.

theoldpretender:
1. The telecom investors had funds to invest BECAUSE they were allowed to make profits first. (and as an added bonus, the banks lent to them freely because the telecom investors sources of funding..customers...were steady...you cannot use a phone unless you recharge)

2.Petroleum marketers cannot invest in the down stream because subsidy prevents them from making a profit. Subsiy forces them to sell below the import and manufacturing cost of fuel...meaning they are running at a loss all the time. THAT is why we don't have new refienreis. Who wants to produce fuel in his refienry at 160 naira per liter...and sell it at N145 , LOSING N25 per liter at least? Would you do that?

3.You want a market economy for telecom, and at the same time you want a socialist economy for petroleum marketers...abeg, don't be self contradictory.

that you even believe this marketers are dealing with loss is funny. Yet oil billionaires spring up daily. So so funny.

Whr did u hear me mention socialist economy for fuel? I'm saying u must invest b4 reaping profit. They should stop selling dat subsidy scam to us. The govt should be serious with their policy. U can't be borrowing to build rail and at the same time shy from borrowing to build refinery that will also benefit the people.

Ok

theoldpretender:

That's the truth...

The problem is, deregulation=increase in price, which is all the ordinary Nigerian would see...and which would lead to riots..which would lead to Bubu leaving power early.

And whoever takes over, would promptly bring back subsidy.

See what happened to GEJ in 2012...and what he did was partial removal of subsidy. All his fellow politicans in both PDP and APC took note

It can be removed . 2016 shows it can be removed.

The country suffered the mother of all petrol scarcity that year. It was so bad that when the government increased the price to 145, and petrol became widely available, the populace heaved a sigh of relief. Even the NLC tried to galvanise people to protest but we're ignored.

Similar method should be used now. Government should allocate a certain amount every quarter, am amount it won't go over. The money should be paltry like a 100billion. Once the hundred billion is used up, government simply refuses to subsidise any further in the name of fiscal discipline.

Of course it would lead to protest and so but trust me, it this happens continually every quarter, at a point the populace will give in.

By the third quarter, government should intentionally not punish erring petrol stations that sell above the market or pretend to punish and then release

Trust me, the citizenry will have in..

It kan bkom any amount but dey shud giv us nepa first

Yar Adua.

GeneralShepherd:
So Buhari made the largest single jump and we still spend money on subsidy.

Next Level oshe!

If not for the illiterate that you are, you'd have understood the weirdest and freakiest was 70kb to 5 naira by that USELESS old fool shonekan

theoldpretender:
Hmmm

The truth of the matter is that if Buhari wants to create jobs, and improve the economy, he has to remove subsidy completely.

Yes, we will pay N300 for fuel, and we would have to walk to work most of the time.

Yes, lots of people will suffer, and yes, transporters will increase prices, food prices will go up.

BUT

1.There would be increased investment in things like refineries, gas processing , PIPELINES....which means more JOBS.

2.There will be an end to SUBSIDY SCAMS permanently.

3.EVENTUALLY....PRICES WILL COME CRASHING DOWN

4.More importantly....GOVERNMENT SAVES MORE MONEY

5.And Nigeria keeps on prospering.

We cannot afford subsidy anymore. I'm sorry, but with oil at $60 when we need it at $140 per barrel....it is sensible we remove subsidy.


P.S...Anyone who quotes me to insult me will be reported to the mods. Thank you.

Do you have SENSE at all?

SouthSouth1914:
Nigeria is a fraud! Built in a faulty foundation.. but God bless Ya’Adua...

CharlesJok3r:
We all miss Yar’Adua .

YarAdua is a DOLT who did almost NOTHING of substance in office for 2 years (apart from initiating the Amnesty program in the Niger Delta).

Meanwhile, why would petrol cost the same across a country as huge and diverse as Nigeria? Why would someone buy gasoline in Elema (just down the street from the refineries) at the same price as the dude in Kaura Namoda in Sokoto State? Why do we continue to give out private refinery licenses when we know that virtually no bank will project finance a refinery that is compelled by law to sell its products at BELOW the cost of production (this making a loss from Day One onwards)?

franciskaine:
Nigeria runs a market economy and it's normal to allow private investors establish businesses and make profit in the longrun.

Does a market economy give subsidies?

Explain why we have to pay a higher subsidy now that the price of the product is cheaper in the international market and Buhari has increased the local price to 145 when during the Jonathan era when it was selling for a far higher price in the international market and the local price was 87 naira

obafemee80:
https://i2.wp.com/autojosh.com/wp-content/uploads/2019/03/IMG_20190313_102034_060-600x400.jpg

https://i1.wp.com/autojosh.com/wp-content/uploads/2019/03/IMG_20190313_102011_382-600x398.jpg

AutoJosh wants you to see how the price of a litre of petrol has increased in the space of 50 years -from the military era to this present time - and why we should start thinking of other alternatives in order to reduce our dependence on the readily available but costly motor fuel.

During the Millitary Rule :
General Yakubu Gowon
From 6kb to 8.45kb

General Murtala Muhammad
From 8.45kb to 9kb

General Olusegun Obasanjo
From 9kb to 15.3kb

Shehu Shagari
From 15.3kb to 20kb

General Muhammadu Buhari's Millitary Rule
From 20kb to 20kb

General Babangida's Millitary Rule
From 20kb to 39.5kb to 42kb to 60kb to 70kb

Ernest Shonekan's Interim Government
From 70kb to ₦5

Sanni Abacha's Millitary Rule
From ₦5 to ₦3.25kb to ₦15 to ₦11

Abubakar's Millitary Rule
From ₦11 to ₦25 to ₦20

Democracy :

Olusegun Obasanjo's 8 years
From ₦20 to ₦30 to ₦22 to ₦26 to ₦42 to ₦50 to ₦65 to ₦75

Yar’Adua
From ₦75 to ₦65 (Price drops)

Goodluck Jonathan
₦65 to ₦141(1st Of January New year present)
Back to ₦97 (after labour strike)
Then ₦87 (with the 2015 Election approaching )

Muhammadu Buhari
From ₦87 to ₦145+ (Present price)

The federal government of Nigeria currently pays about ₦2.4 billion per day subsidising the fuel . It is believed that if the Federal Government should stop subsidizing the price of PMS today, the actual selling price of PMS would rise to ₦165 per litre.

What do you think?

https://autojosh.com/see-the-timeline-of-petrol-price-increments-in-nigerian/

budaatum:
Does a market economy give subsidies?

the healthcare in America is what?

franciskaine:
the healthcare in America is what?

Is healthcare in America allowed to follow the rules of a market economy where the providers charge whatever they want?

budaatum:
Is healthcare in America allowed to follow the rules of a market economy where the providers charge whatever they want?

you are asking me whether market economy allows for subsidy. I just gave u an instance using the American healthcare system. No nation practice 100% capitalism or 100% socialism.

nutripot:
Can I GET YOUR NUMBER. i WANT Video advert on facebook please

Hello

franciskaine:
you are asking me whether market economy allows for subsidy. I just gave u an instance using the American healthcare system. No nation practice 100% capitalism or 100% socialism.

I admit, your instance surprised me, though I never respected your market economy reason. Nor am I against subsidies, in education, for instance, free to university level.

Our subsidy on oil ensures low usage (a tenth of some countries in the west in fact) as we only get what subsidy is paid on. Removal of subsidy would increase the amount imported and sold and used, and it being energy boosting the economy with the fuel subsidy, fuel tax even, going on education instead. I don't expect you to be convinced though.