₦airaland Forum

deeptechcool:
Can you please use this analysis to explain why Nigerians buy cement at the highest rate in the world despite having limestone in abundance?
I want to learn.

QuotaSystem:
Mostly due to overhead costs due to poor infrastructure, compared to other parts of the world.

When we start transporting cement by rail for instance, you can expect prices to fall. Same with stable power supply that will drive down costs and also reflect in cheaper prices.

deeptechcool:
Now use this analysis to explain why we won't buy petroleum at the highest rate when the refinery is completed.

COMPAQ:
We use trucks currently to move produce around the country. So if Dangote does the same, nothing would have changed to influence the price.

However the fact that we are no longer paying dollar related refinery salary cost, dollar related logistics and pipeline cost, dollar related shipping cost will help ease pressure on local petrol pricing, even if naira devalues.

Asides the feedstock, all of Dangote's other costs will be in Naira and not immediately influenced by devaluation.

Besides we are unlikely to pay the highest costs in the world because the petrol price in many countries has a heavy tax element but in. In UK, almost 50% of the price you pay is a tax. Same for most of Europe, but to lesser degrees. Thats why a litre of petrol is £1.24 in UK (N658), while in US where tax element is very small, its $0.60 (N230).

If diesel which is more expensive than petrol and unsudsidized and fully deregulated and has expensive shipping and foreign refinery cost in it is still N230, then locally refined petrol cannot go beyond that.

Godarz:
The only thing that would cripple the refinery is us selling at lower prices than the cost of production.

Which is what crippled NNPC refienreis....because people prefer cheap fuel

Niger has a running refienry...and it sells fuel from that refinery at N350 per liter. Costly, but at the same time, enough to make it profitable, and also make Niger an exporter of fuel to Mali, Burkina and here.

Foreign interests would want Dangote refinery to succeed...ESPECIALLY as DANOGTE TOOK loans from foreign banks to build the refienry...big foreign banks. A failure of the refinery would hit those banks hard.

Agboriotejoye:
This guy again
I thought I already educated you that our refineries didn't go down because of low prices but because of mismanagement by the military govt of IBB who gave a standing order that all maintenance works should not take place without his express approval. This led to inability to carry out maintenance works as and when due.
There's a belief in certain quarters that the order was deliberate to kill our local refinery systematically and was part of backhand agreements which led to IMF loans then.
If this belief is true, then the guy you're discussing with may have a point after all

COMPAQ:
We use trucks currently to move produce around the country. So if Dangote does the same, nothing would have changed to influence the price.

However the fact that we are no longer paying dollar related refinery salary cost, dollar related logistics and pipeline cost, dollar related shipping cost will help ease pressure on local petrol pricing, even if naira devalues.

Asides the feedstock, all of Dangote's other costs will be in Naira and not immediately influenced by devaluation.

Besides we are unlikely to pay the highest costs in the world because the petrol price in many countries has a heavy tax element but in. In UK, almost 50% of the price you pay is a tax. Same for most of Europe, but to lesser degrees. Thats why a litre of petrol is £1.24 in UK (N658), while in US where tax element is very small, its $0.60 (N230).

If diesel which is more expensive than petrol and unsudsidized and fully deregulated and has expensive shipping and foreign refinery cost in it is still N230, then locally refined petrol cannot go beyond that.

9jaRealist:
If you bothered to read the OP article...
It clearly says that Dangote will be selling products in Naira.
>

Ghostmode2two:
You people should not be deceived because even the fuel we import from abroad is being refined in refineries owned by Nigerians. Check my signature please

Mightyjohn11:
the same govt that want to help dangote refinary by selling in naira to him are also they one's who used heavy tax on innoson mottors beacuse he is frm the east....confused set of people

Tekrify:
How many of refineries are owned by Nigerians.. Dumb statement

COMPAQ:
Your assessment of the problem is very flawed and not correct. The most flawed part is the part of backend agreement with IMF. We need to stop looking for cheap scapegoats for our problems. Countries like Singapore, Malaysia, Vietnam, China, Brazil, that operate sound principles and thrive dont relate with IMF abi.

There are alot of factors that contribute to the success and failure of something. Its possible that with proper management of our refineries,we could make subsidised petrol work, but the point is from an economics point of view, is subsidy even a policy we should he adopting? Considering how much of our resources go into it. If I earn N1000 and use N350 to subsidise, its not the same as another country that earns N800 and uses N20 to subsidise because their population is only 10mln.

Think of the issues like a proper educated economist, not a casual observer.

Besides IBB left government over 25 years ago. We've had democracy since 1999. So why have refineries not worked since then?

Blessed4sure:
Really? You probably mean Discos don't need gas.

Cos, perhaps more than 60% of our electricity is generated by gas-powered thermal stations (Egbin, Sapele, Afam, etc.).

Thermally-powered Gencos use gas mainly. It's the hydro-powered plants (Kainji and others) that don't use gas.

Agboriotejoye:
Sorry sir.
But our currency was actually doing well before IMF came along during the time of sale IBB and asked us to deregulate. It was also part of the loan deal then that we privatise most of our industries. Part of that loan agreement as well was opening up our economy to "foreign investors".
So I'm not just picking on IMF for nothing. They simply latched on our corrupt government enterprise to make our economy a consumer economy that favours them.
That said, as at 1999 when democracy came on, or refineries were comatose or close to being. OBJ who never believed in govt enterprises wanted them sold off which he eventually did only for yaradua to reverse it.
The point I'm making is that since the time of IBB, no govt has shown AÑY seriousness to get our refineries working.
So what I'm saying is not exactly new.
On the question of subsidy. When our refineries were working in the 70/80s, we don't pay subsidy on fuel. It was same IBB (again) that started the era of subsidy.

iwaeda:
https://www.vanguardngr.com/2021/02/updated-fg-to-sell-oil-in-naira-to-15bn-dangote-refinery/amp/

Badb0y4lyf:
Some one said they will sell to him in it equivalent to naira is it official rate or black market rate now im sure it official rate I'm sure dangote would export some of the petroleum products to other africa countries and will sell in dollars that inflow in bank would be sold at black market rate. Nigeria is just a scam. Dangote is an artificial billionaire on a level plain ground he would just be your regular everyday aboki.

Why don’t YOU join this “scam” by exporting something yourself, earning forex and reselling same at black market rate?!
SHOCKING there are people who think that someone would invest $12-15 billion in a project , just to become a forex trader. SMH

QuotaSystem:
Dangote's refinery will definitely be a game changer for the Nigerian economy.

What a genius strategy. Imagine a scenario where other African countries would be looking for Nigerian Naira in order to purchase Nigerian Petroleum Products. It would increase the organic demand for our currency thereby boosting its value significantly.



This does not make sense. There is no way Dangote's petrol would be more expensive because not only has the issue of landing cost been eliminated since we're no longer importing, but the market has also been deregulated (which is why we suffer price hikes whenever price of crude or USD rises).

You're right about elimination of subsidy which will save us significant amounts of money, but even greater benefits would come from saving millions of USD daily that would have been wasted to import refined petrol (a whopping 41% of our forex saved); further boosting our foreign reserves and the value of the Naira. The multiplier benefits from job creation and development of allied industries to support the refinery and petrochemical plant are better imagined.

Finally, the disgraceful economic anomaly wherein the 6th largest oil producer in the world is one of the biggest importers of petrol from less endowed countries, and continuously suffers whenever crude prices rise instead of enjoying the largesse like fellow oil producers, will finally come to an end thanks to Dangote's refinery. I wish him the best and I'm excited for Nigeria.

COMPAQ:
First of all Walter Smith modular refinery is working not so?

Secondly most of those who for modular refinery license did so for fraudulent reasons. They thought they would be allocated oil, which they would in turn sell without doing any refining.

Operating a refinery, even a modular one, is very technical and requires a lot of planning and brain work, which Nigerian business men don't like. They always like easy buy and sell business, what there is little thinking required. And that goes for most Nigerians too. All we know is how we can get shop, so we can be trading. Or to build house for easy rent. Nothing creative.

COMPAQ:
I don't have any issue with privatization or deregulation and neither should you. Deregulation gave us MTN, Airtel and co. Deregulation gave us zenith ,GTB and Co. The opening up of the economy has brought jobs, investment, innovation, taxes etc. Where would we be without these companies.

Not sure if that claim that we didn't have subsidy in the 70's and 80's is correct. But even if it is, we could afford it then. Population then was maybe 65mln. Now we are at 200mln. Number of cars on the roads has probably increased 4times since then. Meanwhile in real terms value of our dollar earning has reduced to almost a third in that time. What $1 could buy/build in 1975 will require about $3 now sue to inflation.

As far as I'm concerned anyway, we are throwing away our resources by subsidising petrol. The biggest beneficiaries are those in the big cities of Lagos and Abuja etc with 2or more cars. If you drive into Lagos island in the mornings. In traffic you see the plenty jeeps heading into VI and Marina with just oga and driver, guzzling petrol. Are you telling me those people can't afford N200 petrol.

For those who argue that it increases transportation of food etc, most all trucks that carry goods long distances use diesel which is already deregulated.


Even kerosene that the so called 'masses' use was deregulated a few years ago and heaven did not fall. Life still goes on.

Godarz:
That shows you don't understand how subsidy works.

In brief, until 2017, everyone imported fuel, and sold to makreters at a price below the cost of importation...and government paid them the difference...a subsidy.

Also, NNPC , when they had refinereis, refined fuel and sold it at a price below the production cost to end user....and government paid them the difference , a subsidy

Subsidy payments also include things like transport costs.

The problem is, after a while, paying subsidy was putting a strain on our revenues...forcing us to take more loans to meet up with needs. NNPC no longer had enough cash to repair and maintain refineries, and build new ones, and many marketers and importers were engaging in sharp practices like lying on how much fuel they imported, smuggling fuel out of the country, and selling fuel outside the country, because subsidy meant they could not make enough of a profit.

Now, Government made NNPC the sole importer of fuel. As at now, NNPC pays N186 to import one liter of fuel, and sells it at N162..MEANING they lose N24 PER LITER...which is partly covered by them subsidizing the thing from their pocket...with some help from government.

But the current regime is proving unsustainable.

Modarun:
you are very naive bro. NNPC doesn't have enough cash to pay , but have $3Billiin USD to prospect for oil in the North. Y'all are brainwashed and decieved by the lies of the govt.

Godarz:
I know this is a nice comment from some people to scare other people...but for now, oil is still going to be our major source of energy.

Note that I speak as someone who is a fan of cleaner energy...to the point that I dream of building large solar farms in the Sahara...if Bill Gates and Elon Musk would just give me the kudi...also electric cars are one of the few things that make me overexcited with joy...

But the thing is, for now, we don't have alternatives for petrol in the transport sector. Sure, there are electric cars available...but that means a severe increase in the amount of electricity to be produced...which may short term require burning fossil fuels. (Nuclear is the long term way...but a lot of people absolutely hate nuclear power). There is no clean energy equivalent for air transport, rail transport and sea transport...and even now, most cars run on fossil fuels.

So oil is still very important for now. Unless someone discovers nuclear fusion...now that would be a game changer.