· FACTS YOU MUST KNOW: SUBSIDY MADE SIMPLE (SMS)
1) DEFINITION
To subsidise is to sell a product below the cost of production. Since the federal government has been secretive about the state of our refineries and their production capacity, we will focus on importation rather than production. So, in essence, within the Nigerian Fuel Subsidy context, to subsidise is to sell petrol below the cost of importation.
2) THE UNSUBSTANTIATED CLAIMS OF THE FEDERAL GOVERNMENT
The Nigerian government claims that Nigerians consume 34 million litres of petrol per day. The government has also said publicly that N141 per litre is the unsubsidised pump price of petrol imported intoNigeria
3) ANNUAL COST OF IMPORTATION
1) DEFINITION
To subsidise is to sell a product below the cost of production. Since the federal government has been secretive about the state of our refineries and their production capacity, we will focus on importation rather than production. So, in essence, within the Nigerian Fuel Subsidy context, to subsidise is to sell petrol below the cost of importation.
2) THE UNSUBSTANTIATED CLAIMS OF THE FEDERAL GOVERNMENT
The Nigerian government claims that Nigerians consume 34 million litres of petrol per day. The government has also said publicly that N141 per litre is the unsubsidised pump price of petrol imported into
3) ANNUAL COST OF IMPORTATION
Daily Fuel Consumption: 34 million litres
Cost at Pump: N141.00
No. of days in a regular year: 365 days
Total cost of all petrol imported yearly intoNigeria
Litres Naira Days
34m x 141 x 365
= N1.75 trillion
4) COST BORNE BY THE CONSUMERS
Nigerians have been paying N65 per litre for fuel, haven’t we? Therefore, cost borne by the consumers =
Litres Naira Days
34m x 65 x 365
= N807 billion
5) COST OF SUBSIDY BORNE BY THE GOVERNMENT
In 2011 alone, government claimed to have spent N1.3 trillion by October – the bill for the full year, assuming a constant rate of consumption is N1.56 trillion.
Consequently, the true cost of subsidy borne by the government is:
Total cost of importation minus total borne by consumers, i.e. N1.75 trillion minus N807 billion = N943 billion.
Cost at Pump: N141.00
No. of days in a regular year: 365 days
Total cost of all petrol imported yearly into
Litres Naira Days
34m x 141 x 365
= N1.75 trillion
4) COST BORNE BY THE CONSUMERS
Nigerians have been paying N65 per litre for fuel, haven’t we? Therefore, cost borne by the consumers =
Litres Naira Days
34m x 65 x 365
= N807 billion
5) COST OF SUBSIDY BORNE BY THE GOVERNMENT
In 2011 alone, government claimed to have spent N1.3 trillion by October – the bill for the full year, assuming a constant rate of consumption is N1.56 trillion.
Consequently, the true cost of subsidy borne by the government is:
Total cost of importation minus total borne by consumers, i.e. N1.75 trillion minus N807 billion = N943 billion.
Unexplainable difference: N617 billion
The federal government ofNigeria
6) BOGUS CLAIM BY THE GOVERNMENT
A government official has claimed that the shortfall of N617 billion is what goes to subsidising our neighbours through smuggling. This is pathetic.
The federal government of
6) BOGUS CLAIM BY THE GOVERNMENT
A government official has claimed that the shortfall of N617 billion is what goes to subsidising our neighbours through smuggling. This is pathetic.
Article circulated by text messaging in Abuja, pictures from google
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