Some attributing factors to the high cost of petroleum products in Nigeria

[Zonyebuchi]

Subsidy Removal:You know, when there's fuel subsidies, it means that the price of fuel is artificially lowered for consumers whereby our government absorb some production costs. But when this is no longer the same, distributors are are compensated anymore therefore leading to high cost of production and distribution hence, the effects on the final consumers.

Exchange rate fluctuation: When we imports high amounts of petroleum products from overseas and there is high differences in our exchange rate with dollar automatically the cost of importation increase which now affects the pump price of these products to the consumers.

Nevertheless, there are other factors that results to this increase as the case may be. Then from my own points of view, what is your opinion?...

[Lida93]

These attributing factors as you have mentioned and expatiate on as the contributive to the high cost of petroleum in Nigeria are more less issues that ought to have been a past issue but it's quite unfortunate that it rather a recurring issue that each administration decides to play politics with.

Nigeria has three dormant refineries leach located in Kaduna, Rivers, and Warri Delta state but none is in a working condition. Why will a country with these number of refineries still be importing refined petroleum. Only the cost of importation alone in a single year is sufficient to refurbish one of our refineries which means in three years the 3 refineries can be functioning.

I don't want to talk much on this, the solution to the high cost of petroleum in Nigeria is internal and not external, it's not even caused by the dollar rate to the naira.

Fix the refineries, put them on maximum production and that fixes the price of petroleum which in extension will positively affect the cost prices of other goods and services in the country.  Not to mention, the Dangote refinery that's another plus to the Nigeria economy making it 4 refineries in the country so why then keep importing a product you also have the tech to refinery.


Op please move this topic to Naija local board. It is suitable there, and will get a better attention and discussion in that board.

[Charles-Tim]

The subsidy that has been removed since many months ago is what you are just discussing now. Despite inflation that is in Nigeria recently, PMS price stayed at ₦650. AGO continue to increase and had a higher price of ₦1700 but the price reduced recently after Dangote begin selling AGO at ₦1200/₦1300.

[kotajikikox]

Subsidy Removal:You know, when there's fuel subsidies, it means that the price of fuel is artificially lowered for consumers whereby our government absorb some production costs. But when this is no longer the same, distributors are are compensated anymore therefore leading to high cost of production and distribution hence, the effects on the final consumers.

Exchange rate fluctuation: When we imports high amounts of petroleum products from overseas and there is high differences in our exchange rate with dollar automatically the cost of importation increase which now affects the pump price of these products to the consumers.

Nevertheless, there are other factors that results to this increase as the case may be. Then from my own points of view, what is your opinion?...

mate i am not from nigeria and maybe the situation in your country is different from mine but generally the contributing factors of increasing prices of petroleum are geopolitical factors and the costs of extraction and distribution of oil.

Oil are usually received from the middle east so if they are having some conflicts there then it might be a little harder to get more oil thus the increase of prices. It also depends on how hard a company can extract said oil. If extraction of oil requires a much more sophisticated process of extraction then that may be more expensive thus increasing the price of oil. Of course we also have to consider all the other process to be done after extraction.

[jrrsparkles]

Nevertheless, there are other factors that results to this increase as the case may be. Then from my own points of view, what is your opinion?...

Production cost of petroleum products from crude oil is just only few cents and the real reason why you see increase in the prices due to two reasons one is government adding tax rate to compensate their loss made in their quarters or due to the unstable fiat value against USD. And what happened in Nigeria is due to its fiat losing its value against USD so the import is getting expensive along the actual price.

[tabas]

Subsidy Removal:You know, when there's fuel subsidies, it means that the price of fuel is artificially lowered for consumers whereby our government absorb some production costs. But when this is no longer the same, distributors are are compensated anymore therefore leading to high cost of production and distribution hence, the effects on the final consumers.

A fuel subsidy is a good way to reduce the price of the fuel and any other oil products. But this should be mainly given to the public transportation or those people that have been working with the logistics because they already need to have fuel and they're the first one to feel the pain of the rise of the fuel cost. But the government can't always give this subsidy as they need to gather also where they're going to get the fund, in other results, they're going to raise the taxes in some sector to sustain this subsidy.

Exchange rate fluctuation: When we imports high amounts of petroleum products from overseas and there is high differences in our exchange rate with dollar automatically the cost of importation increase which now affects the pump price of these products to the consumers.

This is also one cause of the more expensive local pricing of fuel. When a country doesn't have their oil production, they are importing it and the barrels being bought in USD affects the price of it locally when they have to convert local money to USD and will use that in payment. The economy of a country is truly also reliant to the cost of the fuel as everything is transported but those countries that are producing their own fuel, this is not a problem to them.

Nevertheless, there are other factors that results to this increase as the case may be. Then from my own points of view, what is your opinion?...

Political policies, and nonstop importation.

[Fortify]

Subsidy Removal:You know, when there's fuel subsidies, it means that the price of fuel is artificially lowered for consumers whereby our government absorb some production costs. But when this is no longer the same, distributors are are compensated anymore therefore leading to high cost of production and distribution hence, the effects on the final consumers.

Exchange rate fluctuation: When we imports high amounts of petroleum products from overseas and there is high differences in our exchange rate with dollar automatically the cost of importation increase which now affects the pump price of these products to the consumers.

Nevertheless, there are other factors that results to this increase as the case may be. Then from my own points of view, what is your opinion?...

You have a right to be annoyed with the government in this situation, because the problem they are actually ignoring is politicians are busy getting rich via back handers from oil companies. Who ship away vast amount of raw unprocessed oil while trickling in smaller amounts of refined products like petrol and diesel. What they really need to be doing is building out their refining capacity, so it can support the local population but they'd also earn more from selling these products that are not simply base chemicals. Unfortunately as subsidies have been around for such a long time and have become so ingrained, it requires teasing them away slowly or the populace will snap back against it.

[skarais]

Op please move this topic to Naija local board. It is suitable there, and will get a better attention and discussion in that board.

It seems the OP and some other Nigerian users are unaware that the bitcointalk admin has approved many user requests for the creation of local Nigerian board, so this thread should be there, not on the global board.

I don't know why your country's government removed fuel subsidies, but it is clear that as a result fuel prices have become more expensive. The country's political and economic situation allows the government to revoke subsidy regulations or reduce them, but by removing subsidies without anticipatory steps the economy appears to be getting worse. Society will suffer from it, so the situation will not be good.

[kentrolla]

I believe subsidy was removed couple of months ago and it's not the new thing but the problem statement should be why we cannot control these stuffs? When there are refineries within country why can't I be developed and utilized instead of importing it from other countries? Importing more leads to inflation is the basic economics but what is being done or what can be done to reverse this something we should be discussing now.

[EL MOHA]

I don't know why your country's government removed fuel subsidies, but it is clear that as a result fuel prices have become more expensive. The country's political and economic situation allows the government to revoke subsidy regulations or reduce them, but by removing subsidies without anticipatory steps the economy appears to be getting worse. Society will suffer from it, so the situation will not be good.

Personally I see nothing bad in the removal of the subsidy, reason been that the subsidized resources are not been enjoyed alone in the country but also exported out to other neighboring countries and thereby still causing scarcity of the resources to the intended citizens. But the timing and execution of the removal was bad to me. You need to have put many things in order before going ahead on the idea. The first thing is the review of the citizens working Payment, since you are not going to pay more for the subsidy the citizens should get the benefit of it. The second also the most important thing for the removal is to have the countries own refinery so that they can regulate the price of products and not leaving it in the hand of private owners or other countries refineries.

[moneystery]

i'm not from nigeria, but the fuel problem is roughly the same as in my country. here, our government continues to ensure that fuel distribution and subsidies continue, because 52% of the industry in my country is msmes and you can imagine that if there were no fuel subsidies, what would happen is inflation. and to ensure that subsidies are not too high, so that they burden the state budget, our government is preparing a strategy by increasing domestic fuel production and increasing taxes for secondary sectors. with these various strategies, the government in our country can provide fuel subsidies and distribute them appropriately, and at the same time without burdening the state budget.

[blckhawk]

i'm not from nigeria, but the fuel problem is roughly the same as in my country. here, our government continues to ensure that fuel distribution and subsidies continue, because 52% of the industry in my country is msmes and you can imagine that if there were no fuel subsidies, what would happen is inflation. and to ensure that subsidies are not too high, so that they burden the state budget, our government is preparing a strategy by increasing domestic fuel production and increasing taxes for secondary sectors. with these various strategies, the government in our country can provide fuel subsidies and distribute them appropriately, and at the same time without burdening the state budget.

This problem is probably a rampant thing on most countries except for the oil countries like the Middle Eastern region, it's probably because these oil barons are creating artificial scarcity on oil by hoarding billions of barrels of these oil so they can artificially inflate the price and then when the price is so high, they're suddenly selling everything that they've hoarded, can't do anything about these oil barons though, they're the ones who got the money that they're able pay the people that needs to be paid so they can be protected. It's difficult to sustain fuel subsidy, they might be able to do it in a month or two but for a year, that's a big spending but that can only be done perfectly if the government officials won't be corrupt to pocket away the money or the differences. What we really need if we want to resolve the issue of high price of oil is if we go towards development of other renewable energy that would replace oil, it's definitely something that will make a difference and with less dependence on oil, it will naturally go down but in terms of that innovations, we're so far from that from ever happening.

[Fiatless]

I believe subsidy was removed couple of months ago and it's not the new thing but the problem statement should be why we cannot control these stuffs? When there are refineries within country why can't I be developed and utilized instead of importing it from other countries? Importing more leads to inflation is the basic economics but what is being done or what can be done to reverse this something we should be discussing now.

The reason why most governments remove subsidies is because they cannot afford it. In the case of Nigeria, the government was borrowing to finance subsidies which is not economically healthy. The new government acknowledged that they cannot fund these subsidiaries because it is not sustainable in the long run. Another reason was that the managers of the fuel subsidy policy were corrupt and kept inflating the amount spent on subsidies. In order to block these economic leakages there was the need to stop the fuel subsidy.

Lastly, the country has three large refineries that can supply at least half of the consumption rate of the country but because of low maintenance culture, these key public infrastructures are not operational. The government have refused to privatize them to enable private companies to manage them since the Nigerian government is not good in business.

[harapan]

You have a right to be annoyed with the government in this situation, because the problem they are actually ignoring is politicians are busy getting rich via back handers from oil companies. Who ship away vast amount of raw unprocessed oil while trickling in smaller amounts of refined products like petrol and diesel. What they really need to be doing is building out their refining capacity, so it can support the local population but they'd also earn more from selling these products that are not simply base chemicals. Unfortunately as subsidies have been around for such a long time and have become so ingrained, it requires teasing them away slowly or the populace will snap back against it.

The rise in petroleum products significantly affects Nigeria,no doubt,the high cost of petrol prices in Nigeria is affecting businesses by increasing transportation costs and energy costs,maintenance,and a complete decline in the economy.The government fails to protect the interest of the poor masses which in turn increases
  The taxes collected by the Central and State governments are among the most important factors influencing the cost of petrol  in Nigeria.These tax rates directly affects how much petrol costs in the country making it expensive for the consumers to purchase.

[Gozie51]

Subsidy Removal:You know, when there's fuel subsidies, it means that the price of fuel is artificially lowered for consumers whereby our government absorb some production costs. But when this is no longer the same, distributors are are compensated anymore therefore leading to high cost of production and distribution hence, the effects on the final consumers.

No, I do not agree with this analogy to be a reason for the increase of petroleum products in Nigeria. Subsidy for a product means that government is taking over a certain part of the price of that product while the people pay for the other part and so if the government decides not to pay for it anymore then it means they would let go off there side and allow people pay for all the price. Although, it increases the price but that was because there is no subsidy again. But basically, I think your second part of your point is understandable, the exchange rate. I think exchange rate is a contributing factor to the increase because it increases the price but now that the exchange rate has really gone down yet no reduction in price in petroleum products or any other commodity

I believe it is interest of parties and politics that is holding the price from falling. Some people are feeding fat from Nigerian economy.