Featured writer on Nigerians Saving Nigerians get Nigeria Senate public hearing invitation on the Removal of Fuel Subsidy: SUBMISSION TO THE CLERK, JOINT COMMITTEE- DOWNSTREAM APPROPRIATION AND FINANCE, NATIONAL ASSEMBLY COMPLEX, FEDERAL CAPITAL TERRITORY, ABUJA, NIGERIA By Victor JP Mordi



The Clerk,
Joint committee on Petroleum resources,
Downstream appropriation and Finance,
SB 09 Basement Senate wing- White house,
National assembly complex,
Federal capital territory
Abuja.

Dear Sirs/Madams,
RE:FUEL PRICE INCREASE DEBATE
Thanks for giving me the opportunity to contribute to the economic development of Nigeria and for tackling some of her developmental challenges.
Petroleum Fuel Subsidy is described as any measure that lowers cost of fossil fuel sold within a geographical location. Bearing in mind several factors including but not limited to cost of products and processing, Logistics and local taxes if applicable.
Several factors considered before application of subsidy includes, but not limited to environment, Minimum wage, palliatives, and its benefit to the local economy
NIGERIAN FACTOR
Nigeria’ Government claims that it will subsidize local production import by USD 7 billion or 1.2 trillion naira in 2011 alone which could be deployed for other uses elsewhere has been quite contentious, leading to numerous debates.
Those who are against this pronouncement including my self feel that Government is being conservative with the truth and needs to furnish us with more information on what the true cost of importation is and convince Nigerians about their claim that the economy of Nigeria and its people will benefit from the removal of fuel subsidy.
HOW PETROLEUM IMPORTS ARE FUNDED
Nigerian government has a dedicated 450,000 barrels of oil a day or 13.5 million barrels / 14 super tankers of bunny light set aside as feedstock for its four refineries that she sells on the sport market.
At today’s international price of crude oil, Bonny light is sold at an effective price of USD 106.00 per barrel – one million barrels would have been sold for USD $ 106.00 per barrel multiplied by 13.5 million barrels;
A conservative figure of 1.5 BILLION DOLLARS comes to the coffers of PPMC as proceeds from sales of 13.5 Million barrels of bunny light every month or USD 18 billion dollars a year; Government claims that it spends an additional or cumulative USD $25 billion dollars a year for importing petroleum products out of which a whopping seven billion is inputted as subsidy.
CHALLENGES: One of the basic challenges available to someone defending these proposals is lack of transparency on behalf of government, even in this era of the freedom of information act, is the level of secrecy associated with government’s response to information regarding country of origin of imports and cost of purchase per liter.
However, in light of getting the job done- I am obliged to use data from a free market economy where it’s assumed that refined petroleum pricing is more transparent.
BELOW IS A BREAK DOWN OF HOW UNITED STATES CITIZENS PAY FOR GASOLINE
Gasoline is sold in the United States of America per gallon which is the equivalent of four liters in central Europe- equivalent of what is used in Nigeria
Current price for one US gallon is USD $ 2.65 including taxes – 71% of that covers the price of feed stock crude – 15% for federal and state taxes while the balance, 14%, covers for logistics cost.
Converting what they pay and what we pay is to divide the figure by four and convert to Nigerian naira –and then get the real price of refined petroleum prices excluding taxes
Presently the real price of refined petroleum in the united state is N85 naira per liter as against proposed N145.00 per liter by the Nigerian government.
WHY WE FEEL THERE IS NO SUBSIDY
Considering the fact that the United States of America imports most of what she refines and markets and a fact that Nigeria is a major producer and exporter of Crude oil to the world, in comparison to what other OPEC members sell to her citizens, labor, and freight charges, Government’s claim of subsidy is not tenable.
What Nigerians are being asked to pay for is corruption at the highest order and inefficiency in the system
ADVICE TO GOVERNMENT
Nigerian government must fix our refineries and facilitate the constructions of new ones. For the benefit of our economy – and for Nigerians to derive maximum benefits from 114 additives of oil
When this is done, Nigeria can be in league with other OPEC member countries, where the cost of fuel is
1, Saudi Arabia- N18.00 per liter
2, Kuwait- N32 per liter
3, UAE—N57per liter
4, Venezuela-N7 per liter
5, Quarter- N34 per liter
6, Iran- N17 per liter
7, Algeria-N31 per liter
PARLIATIVES –pending completion of construction of refineries, Nigerian government must put social structures in place that will cushion the effects of high oil prices, like an efficient transportation system, that will be used for transportation of agricultural products to the market, a minimum wage that captures realities and protects the weak in the system from vagaries of high cost of refined petroleum products before removing hands completely from REFINED PETROLEUM IMPORTS- petroleum imports should be open and not via any import licensing regime that Builds a bottle neck \ CARTEL – and eliminate the cabal that has put Nigerians on their knees and impoverishment of Nigerians
PETROLEUM IMPORT LICENSE REGIME
Nigeria government selects list of companies that import refined petroleum products into the country via an import license regime that has been less than transparent,
Import licenses are issued in 40,000 tones per cargo to appointed spot suppliers who in turn supply to the economy; the inefficiency of this arrangement is that in OIL LIFTING- the more the quantity, the cheaper the cost of products and cost of freight; cargoes are deliberately split by PPMC officials, who broker for VITOL HYSON – a company with joint venture with questionable and screwed joint venture. On paper, NNPC issues several import licenses to several PDP chieftains who obviously do not have any knowledge about refined petroleum import – what PPMC officials do is that they broker for its joint venture, leading to sharing of millions of dollars, then all the imports are diverted back to VITOL HYSON, which then brings products from Russia. On arrival of these products, In most cases, it is diverted to a private warehouse under pretext of no berthing place for the vessel. Again, several millions of naira is incurred as demurrage (these corroborates assertion from press briefing given by General Mohammed Buhari denying his support for fuel subsidy imports.)
The other point of corruption is on Payments; since government accepts obligation to defray any extra charges that might incur by suppliers of vessels, if they are not offloaded on time and on any additional bank interest that might arise as a result of non payment for products supplied as at when due – payment invoices are kept for up to one year without payments – which leads to billions of naira on interests with beneficiaries being bank officials, PPMC officials and the cartel. Then, we in turn pay for it as part of the subsidy for petroleum products.
To corroborate my claims, which goes beyond year 2000, the only way Vitol HYSON can file claims for products not issued out in its name is through domiciliation by allortees, mostly to PPMC and financing banks. In the case of starting from the PDP, Obasanjo Administration, NATIONAL MERCHANT BANK was the preferred bank, then managed by Mr. Ben Akabueze –present day commissioner for Finance, Lagos State, South West, Nigeria- I will keep my own lists of allortees private for now, i must mention that most of the financial exposures that brought Nigerian banks to her knees were due to financial exposures by the bank to this cartel, mostly because of nonpayment, for refined products supplied to the government.
Note: One cargo of 40,000 tons of Ago / diesel cost twenty three million dollars as at year 2000.
SHORT TERM SOLUTION
Government must scrap PPMC and concession its network of pipelines to a concessionaire, remove hands completely from petroleum products imports by replacing the imports racketing regime with an open and transparent imports formula that creates room for competition and allow free markets to play.
BILATERAL AGREEMENT
We have a bilateral agreement with Venezuela which supplies heavy crude to Kaduna refinery and petrochemical company limited which could be explored by expanding the agreement to include either offshore refining of Nigerian crude or direct supply by Venezuela of refined petroleum products into Nigeria like it does for Cuba and Libya, then stand as a bridge between the open market and government mega stations.
LONG TERM SOLUTIONS ARE TO REPAIR OUR REFINERIES FOR FACILITATING CONSTRUCTION OF NEW ONES AND
CHALLENGES FACING GROWTH OF REFINING IN NIGERIA
One of the most daunting challenges of growths of the downstream sector of the petroleum industry in Nigeria is
‎1, lack of holistic policy frame work- there is the need for passage of the petroleum industry bills; that must address the issue of incentives for would be investors in that sector, with a clear cut policy on crude allocation to petroleum refining and the strengthening of our commercial laws regarding foreign direct investments in all sectors of our economy
2, Inefficiency of government in areas of maintaining our refineries must be addressed immediately, including the evolution of a solid maintenance culture for our downstream assets.
3, Security challenges of the Niger Delta; the present amnesty program is creating new criminal gangs because Niger delta youths that never took up arms against the state, feel their comrades were rewarded for violence and have in turn, took up arms in anticipation that they too can be rewarded – the amnesty program should be replaced with an encompassing and comprehensive social security structure that covers all youths in Nigeria.
4, vanderlisation of pipelines: a well implemented social security structure is needed in order to restore the status of government as care giver, which will reduce the menace and deflate the quantity of criminal gangs in Nigeria and Niger Delta. Also, eliminate vanderlisation of government properties including pipe lines.

CREATING NEW FUEL ENTERPRENUERS IN NIGERIA
Have you ever imagined that the gasoline powering your car or the diesel powering your generator set at home or LPFO used by industries are from illegal refineries?
Corroborating these assertions, Nigeria’s security agencies have been in the news lately and reeling out several success stories of arresting and smashing several illegal refineries in the Niger delta part of Nigeria
Criminal gangs – either alone or in collaboration with security agencies are in the habit of stealing crude Oil from pipelines of multinational companies and in the process not only vandalize Oil and gas equipments but also cause environmental degradation while stealing oil that is refined illegally for sale in the local or neighboring countries
TURNING CHALLENGE TO OPPPORTUNITY
Have you ever imagined running an amnesty program that will be geared towards turning this challenge into an opportunity for creating new entrepreneurs in Nigeria?
Doing this would involve holistic approach of involving all stake holders –who will now be giving support to formalize their business activities for the good of the Nigerian economy
Just like the amnesty program, all those in possession of private refining equipments and even those capable of acquiring refineries from any part of Nigeria should be allowed to do so.
A standard board will be set up like the NCC that supervises telecommunication services, those recruited should be sent to all the six geopolitical zones. Pipelines presently used for lifting refined petroleum products should be used for pumping crude oil for small refineries around Nigeria. Also, bringing refineries to these regions will eliminate the need for transporting refined products with pipes.
IMMEDIATE ADVANTAGE: Sabotage of pipelines carrying crude oil to Kaduna refinery, including others in warri and Port Harcourt refineries will have been eliminated completely when all players are involved, including criminal gangs.
Nigeria by so doing will not have only reduced our exposure to foreign refined petroleum product imports and vanderlisation but also help in conservation of forex.
CRUDE OIL ALLOCATION: when you allocate crude oil at international prices the new entrepreneurs will not only monetize positively what was earlier stolen, it will also give government access to intelligence and information for flushing out remnant gangs.
CHECKMATING SECURITY CHALLENGES IN THE FEDERAL REPUBLIC OF NIGERIA
There is the need for the immediate institutionalization of a comprehensive social security system in Nigeria that would provide economic safety nets for the weak in our society to a point that no one goes to bed without three square meals (A hungry man is an angry man); Government can learn some lessons from her amnesty program in the Niger delta of Nigeria where some elements of care given have helped to reduce militant activities there; a more encompassing program with a holistic framework would help to eliminate youth’s restlessness not only in the Niger delta but in the geographical entity, called Nigeria.
Nigeria got to where we are on security because she took its eyes off the ball on its responsibility as care giver in chief for the down trodden in our society and in that process created a loop hole that was capitalized on by our enemies who now use innocent citizens in formation of private armies and ethnic militias who compromise security of the Nigerian state.
If given the opportunity to do so, i will be ready to deliver a policy paper on how social security could be used for not only cushioning the effect of a sudden increase in the price of basic economic items, including, but not limited to, price of refined petroleum products and how social security could be used to grow the agricultural and industrial sectors of our economy and in that process solve the problem of JOBS.
WHY NATIONAL ASSEMBLY MUST PROBE INCREASE OF PRICE OF DIESEL AND ITS EFFECT TO THE ECONOMY
Since most manufacturers require diesel as a feed stock for generating their own energy resources in the absence of supply from the PHCN, Diesel becomes the single most cost implicating input for manufacturing in Nigeria and determinant factor for the cost of anything produced including but not limited to the process of agro raw materials, etc.
Initializing a probe into the increase of pump price for diesel will reveal that goods and services produced became expensive and uncompetitive with goods from the Asian tigers and to be specific, China, with its strong policy of cheap labor, cheap energy and artificially devalued Yuan that makes goods manufactured in China cheaper than those produced with diesel, bought for N170 a liter.
The Ghanaian government did confirm that it has received foreign direct investments from Nigeria worth 6.1 billion dollars from Nigeria and mostly companies who flew from our economy but still dump goods and services produced on the Nigerian economy.
Contrary to the claim of the government of deregulating diesel with a positive effect on the economy, any panel of enquiry would reveal that our manufacturing sector shrinked more than ten billion dollars since price increase was effected, with adverse negative effect to the economy.
I will be willing to deliver a position paper on any of the topic presented for your perusals in this public debate

Thank you for your anticipated and most favorable response.

Yours Sincerely,

Victor JP Mordi

2 Responses to “Featured writer on Nigerians Saving Nigerians get Nigeria Senate public hearing invitation on the Removal of Fuel Subsidy: SUBMISSION TO THE CLERK, JOINT COMMITTEE- DOWNSTREAM APPROPRIATION AND FINANCE, NATIONAL ASSEMBLY COMPLEX, FEDERAL CAPITAL TERRITORY, ABUJA, NIGERIA By Victor JP Mordi”

  1. Fred Pilkins says:

    Great post and straight to the point. I am not sure if this is truly the best place to ask but do you people have any ideea where to employ some professional writers? Thx :)

  2. Name Toby says:

    This corruption at the top. God help Nigeria

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