nairalanda1:


We were refining petrol in 'substandard' refineries to keep costs down. (The info is on google.).

And the refining cost is a part of why subsidies cost too too much.

See ee h this your argument is somehow. I don't know if you listened to tvc this morning show There's this former Apc member (hon Etta) former acting national chairman he said onces dangote refinery starts production feul price would come down because freight sizes would be eliminated. All these your maintenance things staff salary etc so abroad wey Dem dey import am don't dey factor in those costs before selling to us. I still never understand this Nnpc man Sha

Larry1960:



See ee h this your argument is somehow. I don't know if you listened to tvc this morning show There's this former Apc member (hon Etta) former acting national chairman he said onces dangote refinery starts production feul price would come down because freight sizes would be eliminated. All these your maintenance things staff salary etc so abroad wey Dem dey import am don't dey factor in those costs before selling to us. I still never understand this Nnpc man Sha

The cost of refining and transporting petrol is very expensive.

More than you think.

Dennisbulkan:


Of course they do. The cost of imported fuel would be way above N1,000/Liter without government subsidy. Now federal government said they cannot pay subsidy again, now the price of imported fuel will start rising gradually. The price of commodity is determined by supply & demand.. When Dangote starts supplying the market & the imported petrol keeps coming into our market then we may have excess supply & the price will consequently fall but if the supply of imported fuel drop & it's only Dangote that supply the market, he can control at whatever price he wishes to sell his petrol. It's an open market economy. Nobody can dictate to Dangote at what price to sell his petrol. If Dangote's petrol is too expensive you can keep importing foreign petrol. Dangote's refinery will provide more employment for Nigerians & greatly reduce unemployment directly & indirectly, boost our GDP, reduce our export deficit, reduce foreign exchange & dollar scarcity, that's the benefits Nigerians should expect to get from local production of petrol. Don't expect sudden drop in price, look into the bigger picture.

Thanks for taking time to explain.

DatNiggaDaz:
My brother, read what you wrote again. Why build a refinery with loans when the price of petrol product will not go down. So dangote is only interested in passing the pains to Nigerians making profits to repay back the loans

If that is the case, the loans Dangote took should have been used for something else that will be of benefit to Nigerians at least. Who will payback those loans Nigerians through taxes

Ani you no get sense. What falsehood has the guy posted that is giving you headaches? Has he not spoken the truth? Ehn, Wailer Banton?

LordAdam16:


The refineries need to be sold for the same reason we're removing subsidy.

All the major employees there know people that matter. This is the thing that OBJ, GEJ, AA know.

If the relative of one Emir tells you the refinery is in bad shape immediately after repair, what will you do? Sack. Imprison. Abi u no go enter palace in 4 years time prostrate dey beg for endorsement. By normal civil service rules, your hands are tied.

Critical sectors of the economy should not be in government hands in Nigeria. There was an incident a couple of months back where the Sultan of Sokoto's entourage demanded that Air Peace delay a flight until he arrived to board. Air Peace said no can do. The Sultan's emissaries were spitting fire and brimstone. If na the Nigeria Air wen dem 1 start so, dem no born the MD well to say no to the Sultan.

As bad as our private sector is, the civil service is several magnitude worse.

Sell the refineries. New hires will be by merit. The old hands will be allowed to vest and chill until they retire. When those of us in PDP were proposing all these, una wen dey APC dey oppose for political reasons. Now e don choke everybody.

-Lord

I think under the Petroleum Indistry Act, NNPC has been commercialized. It might therefore prefer to repair the refineries as it did the Port Harcourt refinery rather than dispose of them.

This is Buhari's legacy

grandstar:


I think the under the Petroleum Indistry Act, NNPC has been commercialized. It might therefore prefer to repair the refineries as it did the Port Harcourt refinery.

This is Buhari's legacy

Of course, they'll want to budget funds for perennial repairs.

NNPCL is wildly profitable. Expending a couple of billions on brownfields that'll never see full operation is an easy sell to top management as there'll be kickbacks. The scale of the theft will definitely be a magnitude lower. Rather than billions of dollars. It'd be tens of millions.

But to eliminate that inefficiency completely, it's best to sell at least 2 of the refineries. I'll rather the refineries are sold and if private equity can't make them work, they should rot and be written off.

There are 90 refineries in construction at the moment worldwide. And a refinery is generally shut every 4 years for refits, maintenance, and renovation. Our current slate of refineries never run optimally to pay for these mandatory interregnums.

An independent player would be more motivated to squeeze out every ounce of performance from these refineries than the entrenched interests that have relied on these monuments of profligacy to fund lavish lifestyles for going on 3 generations of Nigeria's elite.

-Lord

SamboAnguissa:


Are the products getting to the various points of sales under this current system by teleportation? You guys are saying transportation costs as if it only applies to local production. Cost of shipping is the only variable in this importation/local production dilemma. Under local production it is totally eliminated. So, why won't that bring about reduction in price?

Well, for one thing, the foreign refiners from which the imported oil is being bought have probably already recovered most of the costs of their investment in physical facilities, while Dangote's refinery won't come close to doing for many years, maybe even a decade. In other words, any "profit" the refinery makes for the next few years will be illusory until the cost of building it has been paid off. Competitors with older plants are likely to have fully amortized their own costs by now.

A second factor is the question of the interest rates at which Dangote borrowed any money he's used to set up the refinery. If his cost of funds was higher than that of foreign competitors, it will be reflected in the minimum he can charge without cross-subsidizing the refinery from his other businesses. Dangote has never been one for running losses without the prospect of obtaining a monopoly, and without government intervention, that is impossible to attain in a market as internationally competitive as this one.

The third factor to keep in mind is the question of scale, and how quickly Dangote can ramp that up. In a business with high fixed costs like this one, the larger the scale of your output, the lower the production cost per unit, but getting to maximal scale won't happen overnight. First you have to build up a customer base with enough orders to keep your plants busy, you have to hire and train enough staff to cover sickness, absenteeism, quitting, etc., you have to sort out your transportation by booking enough shipping (but not booking more than your orders will require) ...

The long and short of it is that there are hard business realities which put the lie to facile notions of Dangote's refinery as being some sort of magic bullet that will cut domestic petrol prices simply by existing.

I just want to laf
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