How can you remove subsidy and still be fixing pump price?

Removing fuel subsidy and reducing pump price from N87/litre to N85/litre are two actions that are in reality meant to be 180 degrees apart.

How can you remove subsidy and still be fixing pump price?

Interestingly, this simple question generated a serious argument and in the course of the argument a friend posted a comment that I believe needs to be reproduced for the sake of education and clarity.

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Nnaemeka Obiaraeri: Xxxxx Xxxxxxx, you have just rambled about and amplified your ignorance about the cost variables and price dynamics of the pms. To show how ignorant most Nigerians are some clowns clicked like on your mumbo jumbo perhaps because your rants seems to support their jaundiced partisan views.

Now let me educate you a little bit to mitigate your ignorance, that is if you will be humble enough to learn. As at 6pm today, the C & F cost of a liter of PMS is N70 . If you add other variable costs that will be needed to move the product through the normal Ship to Ship operations from out bar Lome to various Tank farm locations in Lagos, Warri, or PH or Calabar which average include: Freight; N5 per liter, Clearing N1. per liter, Super Cargo N.02 per liter, Q & Q Inspection N0.02, permits N0.20, STS coordination N0,02, Dermurrage estimate: N1.0 per liter; Operation logistics :N1.0 per liter. Cost of Funds (bank facilities) N2.00 per liter, Foreign Exchange differentials N 3. per liter.

Add up this and it will bring the total FOB cost to bring the product to the Tank farm by the importers to about N84 per liter. Then the man that runs the filling station will hire Trucks to lift the products from the Tank farm to the various stations across Nigeria.

Cost of transportation of this products varies from location to location. To distant regions like Sokoto and Maiduguri, if you find any truck that will even agree to visit the volatile regions they will charge you about N15-18 per liter to lift the products. To the south east, south south or other closer regions they charge between N12-15 per liter to transport the products. If we us the lower transportation cost band of N12, it will bring the total cost of bringing the products to the stations to about N93-96 per liter. Of course the patrol station operator must add his margin of between N8-15 per liter, which will bring the appropriate open market price without profiteering to about N108 in very areas of close proximity.

So you expect a business man whose cost profile is N96 to sell the products at N85 make a loss and go back to his village because it is you, or Kachikwu or Buhari that will feed his family or pay his bill? Afam B. C. Nnaji, I have told you to start cleaning up your friends list. Some trolls on your wall are pitiably ignorant and yet tries to cover up their moronic state with empty verbiage. God bless Nigeria.

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By the way, the issue of pump price reducing came from

FG set to reduce petrol price from January 1st

on December 26, 2015 / in News 8:21 am

The Federal Government would on January 1, 2016 reduce the pump price of Premium Motor Spirit, popularly known as petrol, to N85 per litre.

The Minister of State for Petroleum, Dr. Emmanuel Ibe Kachikwu, who broke the news to journalists,during a tour of the Port Harcourt refinery on Christmas Day said that the Federal government is working to reduce the pump price of petrol to about 85 or 86 naira per litre by Jan 1st.

He said efforts were on to get the refinery to achieve 60 percent production capacity and to supply about 11 million liters of petrol daily.

“If you look at the new PPPRA template that we developed and which I just signed off two days ago, when it is announced you will find out that for now ,and I use the emphatic word of the President for now, the price of the refined product will actually be lower than 87 naira, It will be 85. We will probably announce that in January if the prices hold.

“Like I said, we have done a modulation calculation and it is showing us below N87. I imagine that if PPPRA publishes it today, it will become effective immediately. But the 1st of January that is when we are looking at.”

“What that does for you is that its modulating. If it goes up you move up, if it comes down you come down. So we take away the fact of having to go find funds to pay for these subsidies that we cannot afford.

“More importantly we try to be as close to the pump price that we have now as possible,” he said.

http://www.vanguardngr.com/2015/12/fg-set-to-reduce-petrol-price-from-january-1st/