N85 POST SUBSIDY FUEL PRICE, UNREALISTIC HOGWASH.

Icheoku says Nigerians have never been told a bigger fat white lie or rather Fulani lie as the promised pegging of price of premium motor spirit aka fuel (gasoline) to 85 Naira, following the forthcoming fuel subsidy removal. Subsidy presupposes the  paying part of a price or taking the edge off something in order to make it much easily affordable by the intended beneficiaries. So if subsidy is removed and this formerly prepaid portion is reinstated, requiring payment in full of purchase price, how then can this new price still be lower than what obtained when subsidy existed? Icheoku says if fuel could not be purchased at N85 with fuel subsidy in place, what kind of mathematical magic is the government planning to bring to bear, to simultaneously remove the subsidy and still peg the price to N85? 

Icheoku does not know about you but this math does not add up; except of course, Nigerians are being asked to just believe and the miracle will just work itself out? Only in the dreamland of Gulliver's Travelers' Island of Lilliputians would this pan out and pan out as promised - simplistic fantasy. This feat, if achieved, will make Nigeria the cheapest place on planet earth to purchase gasoline; and not even in Saudi Arabia, the oil well of the world, would gasoline then be retailed so low. Venezuela, another country whose citizens enjoy heavily subsidized gasoline, will be jealous with envy. So can someone in the know, who has a clue on how the government plans to achieve this, please shine more light on this abracadabra proposition, to enable Nigerians have a clearer understanding of what they are expecting in the new year when the subsidy finally goes south. 

A cursory check of gasoline (fuel) prices around the world, using data from Bloomberg Business Report analysis 2013, shows Nigeria ranked 55 out of 63 countries of the world where gasoline prices were cheapest in a survey. It is interesting to note that then gasoline was retailing in Nigeria at $2.34 per gallon on the average. So at plus minus N200 to a dollar, and at four liters (3.78541) to a gallon, it showed that gasoline then retailed at N468 per gallon or N117 per liter. At the same period the study was conducted, the most expensive gasoline country in the world was Turkey at $9.89 per a gallon; Norway $9.63; Italy $8.87; France $8.38; Hong Kong $8.15; UK $8.06; Ireland $8.05; Germany 7.96; Israel $7.67; Japan $6.70; Brazil $5.40; South Africa $5.06; India $5.00; China $4.74; US 4.56; Russia $3.47;  Nigeria $2.34; Iran $2.15; UAE $1.77; Egypt $1.14; Saudi Arabia $0.45cents and Venezuela $0.06cents. 

This was with subsidy still in place and now suddenly the Nigerian government of President Muhammadu Buhari, who equally doubles as the country's petroleum minister, is flying a kite that with fuel subsidy removed, the price of gasoline will still be as low as N85 per liter? So query if it was N117 per a liter when subsidy was in place, how could it possibly be brought down to N85 per liter when subsidy is removed? Icheoku is trying to do the math but regrettably so far, it does not seem to add up. A matter made worse with the plummeting world oil price currently hovering below forty dollars; which President Muhammadu Buhari during his campaign stomp speeches promised to stabilize back to its glorious days of optimum high prices? But unfortunately it has also turned out to be another dummy among the many of his unfulfilled campaign promises which he sold to Nigerians. 

For the purposes of this oped, we will peg global oil price at $40 dollars per barrel (42 gallons of crude oil). Now an optimally functioning refinery, with modern catalytic converter/breaker, can abstract 12 gallons of diesel fuel and 19 gallons of gasoline (PMS) and other byproducts such as bitumen, kerosene, 4 gallons of aviation fuel etc from just one barrel of crude oil. So at N340 per gallon, plus or minus N280 for diesel fuel, etc how profitable would operating a refinery in Nigeria be? If the government plans to import the refined products, who will bear the extra cost incurred in order to sell at N340 per gallon (N85 per liter  multiply by four).  Running and operating a refinery is cost intensive including overhead cost (salaries, allowances and benefits of staff both local and expatriate), cost of crude oil,  cost of power or its generation, cost of transportation of both crude and refined products, logistics, turnkey and turnaround maintenance; and of course necessary addictive to refining out the derivatives. 

So assuming a barrel of crude oil is purchased at $40 and to get it refined and take the product to the pump, another $25 was added, thus bringing the total cost to $65. At N250 per dollar that will be N16,250, just to get one barrel of crude oil to the Nigerian customers at the pump. Now retailing at N340 per a gallon, that will be N6,460 from 19 gallons of refined out gasoline (PMS, fuel); at N320 for diesel fuel, that will be N3840 from 12 gallons of refined out diesel fuel; give and take N100 for aviation or jet fuel bringing in another N1,600 from 4 gallons of it; then add bitumen and lubricants or heavy oil plus minus N1,000. So based on this estimates, a total of N12,900 is realizable from one barrel of crude oil which was brought to Nigerian consumers at a cost of N16,250? Query, from where does the government plan to amortize the differential of N3,350? Who pays for the deficit and how does it get written off? This is what the subsidy supposedly cushions and now what?

Icheoku is not a board certified oil industry expert nor a statistician, but using commonly available data, it is very easy to arrive at an empirical deduction that the promised N85 per a liter of gasoline will not see the light of the day. It is neither  feasible nor attainable; and will, like virtually all his other campaign promises, most likely see its sunset before its sun ever rises. It is virtually a mathematical impossibility but for which Icheoku will gladly apologize and rejoice alongside many other Nigerians, in the event it pans out. But hey, Icheoku can't wait for the magic-wand of the lean and mean Cassius of Daura to make gasoline readily available and much easily affordable by many Nigerians. But given that he has severally disappointed on so many other promises, excitedly looking forward to this one coming to fruition would be a sure way of inviting a heart-attack in the new year. So until then, Icheoku says to Nigerians to gird your loins as the climbing will be arduous and tortuous; and this is but the beginning of that onerous journey. But Nigerians were warned except that they did not heed the warning, so Sai Buhari; Sai four more years in 2019.