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Deconstructing ‘Subsidy’ in An Effort to Attain Critical Mass

Firstly, the reason I wrote this article was to enlighten people on what the issue really means in the simplest terms possible. Many articles have been written on the subject, and after doing a little research myself, it has become apparent that from the very beginning, Fuel Subsidizing itself was and is a SCAM for which neither the federal Government nor the NNPC and other relevant agencies would admit to. Let us continue.

Deconstructing Subsidy:

Wikipedia defines subsidy as “an assistance paid to a business or economic sector”. And a subsidy becomes necessary when a particular industry is in decline or when an increase in a price of a said product makes it financially inaccessible to the masses, and there arises a need to subvent it, either to empower or to hire more labor or simply to make if more affordable. In this case, making it more affordable.

Given the Nigerian scenario, the subsidizing of AGO/fuel inadvertently means that it is unaffordable. Yes? We would arrive at the answer to that question in a short while. But before we go on let us briefly examine the issue of production and refineries.
There are 4 major oil refineries: the Warri Refinery & Petrochemical Plant, the New Port Harcourt Refinery and the old and defunct Kaduna Refinery. Two of these refineries both operate at 30% capacity. And let us not forget to mention that that these refineries were built to handle a capacity of more than a 100 million barrels of crude per day.
The Reality
Recently the National House of Assembly passed a motion to suspend the removal of fuel subsidy, a seeming victory for a good chunk of the Nigerian populace, some of whom took to the streets in protest of its removal. And if I was in Nigeria, I definitely would have protested too, being a bonafide Nigerian.


The gas station price goes for =N=75 per litre after subsidy that is. But our beloved Federal Government (FG) had decided that subsidy was unnecessary, and that funds accrued from subsidy removal would be re-injected into the economy to stimulate growth in other sectors.
So after the subsidy removal the pump price should be =N=138 per litre. Same as can be obtained in say, a gas station in New York.
Lets not forget that the same petrol/AGO is probably coming from the same source, probably Qua Iboe Crude Terminal in Port Harcourt, but what is obtainable off a gas station in New York is probably refined at a refinery in the North Eastern part of the U.S. while whats obtained off the street of Lagos or Port Harcourt is refined in Port Harcourt.
The question now is: Why should we pay the same amount a consumer across the Atlantic pays when the same petrol he buys was bought from a local refinery of ours and imported into his country.
As Nigerians, we must ask ourselves is, what is the real price of a litre of petrol in Nigeria.

The Real Cost of Petrol – Lets Do the Math

At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe consists of development cost($3.5/bbl) + production/refining cost($1.5/bbl).
**Where 1 barrel = 168 litres = 42 Gallons
Which means that for $5, Qua Iboe raw crude is obtainable and can be transported to the refining gates at Port Harcourt or Warri.
Which means $5 = 168 litres of unrefined crude.
i.e $1 = 33.6 litres of unrefined crude.

Now the cost of petrol = $12.6 per barrel(after refining and pipeline transportation) + $1.5 per barrel(pipeline distribution costs)
= $14.1 per barrel
Lets take the distribution margins into consideration. These include (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges and the likes). All these amount to $16.58 per barrel.
Therefore the true cost of petrol = $(5+16.58 + 14.1) per barrel
= $35.68 per barrel. i.e approximately $35.7
Therefore $35.7 per barrel
Lets take the measurments from the top 1 barrel = 168 litres = 42 Gallons)
Therefore $35.7 for a barrel or 168 litres. In =N= (35.7x157) = 5604.9
----=N=5604.9 for 168 litres
therefore 1 litre=5604.9/168
=33.36
Phewww!!
So finally the true price of locally refined 1 liter of petrol is =N= 33.36
You must be asking “what the true cost of imported refined crude is”, because our refinery do not operate at full capacity. Okay. Lets go one step further.
We must understand that every time we refine a barrel of crude oil, we get 45 gallons of petroleum product that 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
5 Gallons of Bottoms
Now, the FG having earmarked a total of 445,000 barrels per day for local consumption knows that the refineries operating at a capacity of %38.2 cannot handle the bulk of all the crude being obtained. Which means that out of the 445,000 barrels per day, the refineries can only refine/process %38.2 of the total amount of crude.
%38.2/100 *445,000 = 169,990 barrels
Only 169,990 barrels of crude can be refined locally. Which leaves us about 275,000 barrels to be exported and refined outside the country.
So what do they do?



The Scam

Now, For convenience purposes the Federal Government employed a method called a “SWAP DEAL”. A swap makes the whole process easier. Instead of exporting crude to an outsided refinery and then importing back into the country, the ‘Swap Deal’ is an exchange transaction they entered into with certain ‘commodity traders’ in west Africa. The deals go as thus:
275000 barrels per day
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
65000 barrels per day to unknown sources
The FG only pays for shipping and refining.
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.
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 takeoff 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 dilapidated 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 labour 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.


(Critical)Mass Consolidation

Having seen the real figures and how we have been manipulated by the Federal Government and its agencies, by deceiving and misleading the masses into believing that “Subsidizing” is a reality, which it really isn’t. Forcing a policy upon the masses is hardly the democratic way of going about things, especially by-passing the House of Assembly/Representatives – the mouth piece of the people.
It makes one wonder if the World Bank and IMF (all covert agencies to keep us in poverty if you ask me) are blind to the reality of the subsidies, which have been the very source of our economic maladies. One also wonders who the beneficiaries of the billions of dollars accrued over the years truly are. When you think about it, you begin to understand the reality and magnanimity of the kind of enemy we are fighting. The masses versus a macabre and sinister cabal worth tens of billions or possibly hundreds of billions of dollars in accrued oil petro dollars. We fight a wealthy and dangerous enemy. Not an enemy strong enough for GEJ alone to fight, that is if he even has the slightest comprehension of the goings-on in the very clandestine agencies. E.g NNPC, NAPIMMS etc
My brothers and sisters, If we must rise and make a change, It must be now. For how long shall we be tricked, ponied, bullied and deceived. For once we stood in one voice and we sang a resounding warrior song: #OccupyNigeria, and it had resounding effects, with our brothers & sisters abroad resonating in consonance.
We can do it again. This time, no just saying No to a by-product of corruption, but to corruption to itself. Take this as a clarion call, a call to freedom. Let us #occupy until these devils have no were to turn. If we don’t it for ourselves, lets do it for our children. Hear ye, hear ye!
**I throway Salute

-Davidi Umbra

Facts and figures from AllAfrica.com
Culled from Izielen Agbon's Facts of fuel subsidy.

The Literacy of our Illiteracy:

Sona Mentis, sona corpus (Sound mind, sound Body):


The soundness of the mind and the ultra-development of the socio-economic health of any nation is the incorruptible logic behind the first fruits of her politics.


The literacy of any entity in whatever community is measured wholly or in part, with relative value to the economic growth index scale and the increase in developmental marginal social prospect indices, that the psychological endowment, of the literacy entity, earned from whatever educational context, tends to affect, positively, the life expectancy value or longevity of the community.

- Sound mind, sound community.


A sleazy psyche ("Carry-Go"),

In consonance with the aforethought, we cannot bribe the school of thought into deluding itself, that the present overriding cancerous social culture of the youths of Nigeria, is not amongst one of the indispensable economic dividends of the vice-psyche and vigilante intuitional orientation of a very (supposedly) literate class.

Funded by the professors of our political plutocracy, this castrated curriculum of: “if u can’t beat them join them”, in the jolly band of bullying for the big buck, have become the largest university in the nation, graduating thousands of disgruntled youths into the disenchanted forest of socio-economic docility, equipping them with the most potent of literacy tools as they contribute readily to the gross underdevelopment of the society by the re-disenfranchising of their very own heritage. No greater sacrilege, thanks to the new “literacy awakening” campaign.
I tire.

Social stupor.

ScienceDaily: Psychology News

ScienceDaily: Psychology News

STRIP-CLUB ETERNAL

"uber gogo!" cries the gogo dancer on team soho,
strapped with dodo, yuki miyoko summons the teams ugochi,
whirl winding up motors the turnado lifts and lapses,
gutter roaches spin in pole dances as pole dancers strike romances,
males in pants pee as ugochi breaks free, the necromancer of love and the ill-romantic
flat-heeled and dicy, and holding up the love match sticks
she strikes a can of worms reaping em eternal gashes,
her sword shines blue-blacky as the shaman tests his testes,
blood-red hes sporting as the ugochi's sword-slashes,
revealing matters of wife-beating mixed with complex mathematics,
clients freeze as the summon ceases to breathe,
blistered with hate from a union of sores and prostrates,
ugochi nara, overlordess and infedelity's mistress,
fades to black with sores, and a blue-black sword.

Music & Me

Just downloaded Rakim's Album


Bought Rakims albums off iTunes the other day and had a good listen. And as much I appreciate the metamorphosis of hip hop today, I have this to say - its not what it used to be. Call me a chip-off-the-old-block, but if you grew up like I did and saw the transition happen, you wouldn't blame me.

I guess I just miss the days when it wasn't about the newest acquisition of a Maybach, or much less, tearing the roof off, no dis-respect to the Otis duo(Jay-z & Kanye), but back then it was all pure. Just good music. Free of all the materialism and hoop-la that surrounds the genre today.

Rakim is one of those MC's you listen to and can't help but listen and think. Its not just about bumping your head to a bouncing bity-ti-bop. Its intelligent rhyme schemes and poetry. One of my more recent favorite Rakim featuretts is "The Watcher" by Jay-Z also ft. Dr. Dre. Heres a listen if you care:

For those of you young hip-hop heads, heres an extract of Wiki:
William Michael Griffin Jr. (born January 28, 1968), known by his stage Rakim (or simply Ra), Rakim Allah, R.A.K.I.M., and The Master, is an American rapper. also known as the god-mc is one of the most skilled emcees of all time. Eric B. & Rakim's classic album Paid in Full was named the greatest hip hop album of all time by MTV,^[5] while Rakim himself was ranked #4 on MTV's list of the Greatest MCs of All Time.^[6] Steve Huey of Allmusic stated that "Rakim is near-universally acknowledged as one of the greatest MCs -- perhaps the greatest -- of all time within the hip-hop community."^[7] The editors of About.com ranked him #1 on their list of the Top 50 MCs of Our Time (1987–2007).^[8] Rakim began his career as the emcee of the rap duo Eric B. & Rakim.