By
Ken Henshaw
It
was a torture watching the widely televised town hall meeting on government’s
plan to remove what it terms subsidy on petrol. I am sure the organizers wanted
to present the impression that it was an engagement between Nigerians and
proponents of the policy; on that count, they failed woefully. Aside from few
interventions, there was hardly any thorough and clear position in defense of
the mass of poor Nigerians who will be adversely affected by increased cost of
petrol. Instead, there were escapist caveat and conditionalities, ‘if you must
remove fuel subsidy, you must do this and that’. I was particularly shocked
when Ben Bruce was introduced as the Advocate- in- Chief of poor Nigerians!
When did that transformation happen?
Watching
the Finance Minister Ngozi Okonjo Iweala show slide after slide to prove her
point, I could not help but conclude that we had returned to the era of
economic growth on graphs and bar charts alone, with no corresponding
indicators on the price of Garri or Rice in the market. She argued that the
‘landing cost’ of a litre of petrol is N139, that fuel subsidy in 2011 will
cost the government N1.4trillion; that that figure amounts to 30% of Nigeria’s
revenue, that Nigerians consume between 35million and 40million litres of
petrol daily etc. However, what the Finance Minister carefully failed to
mention however is what constitutes ‘landing cost’ of petrol. That term becomes
relevant in the first place because the government has failed to improve the
refining capacity of Nigeria. So rather than move crude oil directly from the
oil fields in Nigeria to refineries in Nigeria and then to filling stations in
Nigeria, the crude oil is moved from the oil fields, to sea ports where it is
transported across the ocean, to distant lands, where duties are paid, tax is
paid, profit margins are added, jobs are created and salaries are paid. Refined
products are again moved across the ocean at high cost to Nigeria for consumption.
Why does this happen? Because we have failed to build new refineries or service
existing ones. This is not to say that monies have not been allocated and doled
out for the periodic turn around maintenance of the refineries, indeed it has,
and in billions too! But because the government has given those maintenance
contracts to the very same people who import refined products into the country!
Is there any doubt as to why the refineries are not working? And why have new
refineries not been built? Simple, because ‘government has no business in
business” at least that is the view of the Honorable coordinating Minister. So
rather than take the matter of building new refineries as top priority by the
government, with realization that oil is the mainstay of the Nigerian economy,
from 2000, the government licensed 20 new refineries to be constructed by
private investors. None has done as much as placed the foundation 11 years
later!
About
the quantity of petrol consumed daily in Nigeria, I am at a complete loss. A
few weeks ago, it was quoted as 32 million litres. Imagine my shock when the
Finance Minister gave the figure as between 35million and 40million litres!
Wow! Our population must really grow rapidly or someone is being funny with
figures, and why won’t they inflate the figures, the whole cost of subsidy
depends on how much fuel Nigerians consume daily. A few months ago, the
‘Comrade’ Governor Adams Oshimhole, (who by the way was on the government side
in this debate) had cause to question the consumption figure presented by the
government. He had said, “the number is crazy, even if all Nigerians are
drinking petrol the way we drink pure water. How many litres do we
consume? Who is taking what”? I couldn’t have said
it better!
The government was at
least bold enough at the meeting to admit that the consumption figure was
incorrect. The CBN Governor (when he wasn’t threatening and muscling Nigerians
with Economic doomsday) clearly stated that the figure has been inflated on
account of petrol neither imported nor supplied to the filling stations, but
for which monies are paid. He barely fell short of admitting that the
government has not really been subsidizing Nigerians, but itself and its
friends. After all, who grants licences for the importation of petrol?
Sanusi also mentioned
smuggling of petrol into neighbouring countries as another factor that has led
the increased consumption figure. According to him, Nigerian petrol is sold in
Benin Republic and elsewhere and that this has been facilitated by bribery of
government officials who aid and abet the process. And so? Does it make
economic sense to punish Nigerians with increased fuel prices because
government officials are corrupt and because the government has failed in its statutory
duty of guarding the borders? I couldn’t help but recall that this same
argument had in the past provided basis for the Obasanjo administration to
increase the price of fuel. Are they now admitting that effort under the
supervision of Mrs Iweala failed too? How are we then sure this new effort will
work? Does it not make economic sense to say that when prices go up in Nigeria,
prices in Benin Republic will go up even higher? Doesn’t it also follow that if
that is the case, there will be higher profit in sending imported fuel to Benin
Republic rather than Nigeria? If that happens, will we not return to the same
old situation of petrol scarcity which will drive up the cost of petrol in
Nigeria?
It was also
interesting listening to the Finance Minister on litres of petrol Nigerian car
owners need. She obviously did this in an effort to show that the beneficiaries
of fuel subsidy are higher income earners. If that was the intension, I was not
convinced. For one she dwelt only on petrol usage by car owners and its effect
on transportation. She carefully failed to mention the fact that perhaps equal
or higher quantity of petrol is used daily in Nigeria to power millions of generators
for living houses and businesses. Why? Because government has failed to provide
power.
When Mrs Allison
Madueke talked about the thousands of jobs that will be created when the
subsidy ends, again she failed to mention the millions of jobs that will be
lost when the price of petrol goes up. Does it not make economic sense to say
that barbers, tailors, hairdressers and millions of small scale businesses will
either fold up when they can no longer afford to power their businesses or they
will increase prices for their services accordingly? Does she not also know
that 90% of Nigerians who live on less than N320 a day will not be able to
afford higher costs?
I couldn’t help but
note that Mrs Allison cited the example of China as a country that closed it
borders for twenty years only to emerge economically more viable and almost at
par with the United States. Wow! That was a real shot on the leg! When China
closed its borders as the Minister recalled, the government of China took
charge of all aspects of the economy, regulated every sector. Isn’t that the
exact opposite of what Madam Allison is proposing?
At least twice in the
debate, mention was made of success in the deregulation of the
telecommunications industry. What was not mentioned is that NITEL lies dead
now, that revenue that should have accrued from it is lost, that thousands of
staffs have lost their jobs. It was also not mentioned that the profits from
the new telecom carriers are not ploughed in Nigeria but are drained to other
countries!
After that it was the
turn of the revered Central Bank Governor. I score him a pass in inciting fear.
All the talk of how the Nigerian economy will collapse like Greece etc if fuel
subsidy is not removed, did the trick. But on second thought, is he not aware
that any person who lives on less than $1 a day as 70% of Nigerians are according
to him is living in a collapsed economy? The truth is that for the vast
majority of Nigerians, the economy collapsed long before the global financial
crisis, and as they say, ‘he that is down needs fear no fall’. For these
Nigerians, increased fuel prices will not only mean a worsened economy, but
outright annihilation.
Sanusi further
provided details as to how the ‘landing cost’ of petrol got so high. According
to him, the government also has to pay for real and phantom demurrage by
importers. Well isn’t this happening because the ports have become a cesspool
of ineptitude and corruption? And who is to blame other than the government.
As the government has
done severally in the past, Sanusi also blamed the entire situation on a
‘cartel’ in the oil industry that is adept at circumventing the process at
every point. To this I ask again, since you know the cartel, why not just deal
with it in accordance with the law? Because I could swear I saw one or two of
them sitting at the front row observing the proceedings! Talk of insincerity.
Speaker after speaker
reeled what they considered facts as to how foreign investors will flock into
Nigeria as soon as deregulation takes place. Again we are back to the same old
rhetoric about foreign investment, that same elusive agenda that kept President
Obasanjo globetrotting for a good chunk of his term in office. So where are all
the foreign investors?
It is not my place to
educate our esteemed economists in government on the rudiments of investment,
but I dare to do so. Investment thrives in an environment where it is secure.
No investor wants to put his money in a clime where security is very much a
challenge, where they run the risk of being kidnapped or worse still have their
facilities bombed. On that count, Nigeria is not a favourite destination.
Again, investors consider factors such as power supply and other
infrastructure. No investor want to set up a business in a place where he will
have to generate his own power, drill his own water etc. Given these facts, if
any investor where to brave the challenges and set up a refinery in Nigeria,
does it not follow that his production cost will be much higher than in other
parts of the world? Does it not also follow that fuel prices may go up rather
than go down as a result of higher production cost which itself is occasioned
by government’s failure to provide basic infrastructure and security? I am sure
our distinguished government officials are aware of this facts but choose to
keep it off the table of discourse.
Perhaps the most
interesting part of the meeting was when the government officials sought to
showcase what government will do with the extra income. Extra income? Is there
going to be extra income accruing to the country when subsidy is removed? The
government says yes. But the same government officials say Nigeria has been
borrowing to finance the subsidy, Sanusi even gave figures. Now, think about
it. If we have been borrowing to fund subsidy, it simply means that government
will stop borrowing for that purpose, but will not be saving extra income.
Someone is definitely not telling the truth.
The government says it
plans to fund power supply, agriculture, maternal health, etc. To this I cannot
help but reflect. What happened to the billions pumped into the power sector
all these years? When it was revealed that there was corruption, who was put on
trial? And Agriculture, maternal health? All you have to do is take a look at
all the loans Nigeria has received on behalf of these sectors, what has come
off it? The government is quick to respond that this time will be different,
that Nigerians should trust the current team of ‘experts’. Maybe Nigerians
should trust them the way we trusted them when crude prices went record high,
the way we trusted them when with the excess crude account, the way we trusted
them when they promised that $1billion will be saved annually and channelled
into health care after the debt buy back deal in 2005. Talk of trust.
The government promises
this time will be different. A team of ‘reputable’ Nigerians will be drafted
into a committee which will oversee the use of the subsidy savings. To this I
am certainly not swayed, going by their definition of reputation in the last
national merit award jamboree!
All the debaters on
the government side spoke so much about confidence in this new team of experts
headed by Finance Minister Ngozi Okonjo Iweala. They begged Nigerians to trust
them. Trust? Let’s go a bit into history. In 2005/2006 when Nigerians were
opposed to paying $12 billion at one go to the Paris Club of creditors, to
write off debts which at best could be described as odious, they asked
Nigerians to trust them. The same Ngozi Okonjo Iweala was Finance Minister at
the time. Nigerians were promised that about $1billion will be saved annually
from that exercise and that money will be plough into the same sectors which
they are mentioning again! So what happened to that effort? Just to jolt your
memory a bit, remember the following quotes?
“The recent debt relief extended to
the country by the Paris Club was another indication that the country's
economic reforms were working”
PRESIDENT
OLUSEGUN OBASANJO
Daily Independent, Thursday, July 7, 2005,
Page A3
“The link between debt-relief-induced resource availability for the
improvement of economic and social infrastructure such as access to health,
education and water on one hand and the attainment of the Millennium
Development Goals (MDGs) in 2015 on the other is a natural one.”
Debt Management Office of Nigeria
“There is nothing like freedom-freedom
from debt and the image that the debt relief and exit from Paris Club debt give
to Nigeria . The debt relief has brought benefits to Nigerians and that it
first represents a direct saving on debt-service repayment, interest,
surcharges and other fees. It also improves the country's worthiness in the
global community and builds credible financial confidence for transactions.
More investment would start to flow into Nigeria knowing we are no more
classified as a bad and doubtful debt country. The debt relief is expected to
create jobs and new wealth with new investments, which would translate into
improved standard of living”
PRESIDENT
OLUSEGUN OBASANJO
The Comet, Friday, July 22, 2005.
“It has become increasingly obvious
that efforts towards the achievement of the MDGs cannot be separated from the
issue of granting substantial debt relief”.
ALAHJI ATIKU
ABUBAKAR (TURAKIN ADAMAWA)
VICE PRESIDENT, FEDERAL REPUBLIC OF
NIGERIA
“
The debt relief will now provide the
Federal Government and the state enough funds to embark on viable development
projects with direct bearing on the citizenry. I am totally not in support of
the Federal and state governments hence forth going for foreign loans for a
project that can never see the light of the day in addition to projects that
are not viable or those that cannot bring economic gains”
ALHAJI MOHAMMED
DANJUMA GOJE
EXECUTIVE GOVERNOR - GOMBE STATE
Daily Independent, Friday, July 15, 2005. Page
A5
“This great and singular achievement
will reduce the debt servicing burden on the National Treasury, thereby
translating into the availability of more financial resources that could be
channeled into vital areas such as education, health-care delivery,
agriculture, water and power supply.”
OTUNBA GBENGA
DANIEL
EXECUTIVE GOVERNOR - OGUN STATE
Thisday, July 28, 2005 page 48
“
The fact that we have this debt
reduction and we will be able to pay-off the balance of whatever is left will
leave Nigerians free, to start on a new slate I mean it will be like a second
independence, a rebirth, if you will, given us the freedom to focus squarely on
our economic activities. It means that generations who would have been paying
these debts in future will not have to pay it. And I think that is something
that our children will appreciate and thank the President and thank the team
and thank every one who has contributed to these all”.
DR. NGOZI
OKONJO-IWEALA
HONOURABLE MINISTER OF FINANCE
NTA Live Network Programme, June 30, 2005
“The real gain of $18 billion debt
relief granted Nigeria by the Paris Club is the generation of economic
activities in the private sector of the country. With this development, Nigeria
could now experience new improved and greatly enhanced private capital flow
into the country”.
AMBASSADOR ISAAC
ALUKO-OLOKUN
SSA NEPAD (EXTERNAL)
Thisday, Sunday, July 17, 2005.
“The $18 billion written off Nigeria
's debts which is almost two third of the nation's total debts, could be the
largest ever debt write–off by the Paris Club. The debt relief package should
help the country's goal of reducing poverty by making available some one
billion dollars of debt service payment for improvement in social services
including health and education. The comprehensive debt treatment, if fully
implemented, has significant implications for debt sustainability, ongoing
economic reforms and poverty reduction efforts, as well as removing the debt
overhang, which has created uncertainty for private sector investment in the
country”
ALHAJI MANSUR
AHMED
DG, NIGERIAN ECONOMIC SUMMIT GROUP (NESG)
Nigerian Tribune, Thursday, July 14, 2005.
Page 11
"The deal will help to change the
lives of millions of people in Nigeria . It will mean more schools, more
teachers and better health services for a country which has the biggest
population in Africa . The deal is major step in bringing about a better future
for a country in which seven million children receive no schooling at all and
one in five dies before their fifth birthday”
RIGHT HONOURABLE
HILARY BENN
INTERNATIONAL DEVELOPMENT SECRETARY – UK
"If
the money is to be used for immunisation, she (Mrs. Amina Ibrahim, SA to
Finance Minister expected to monitor the utilisation of the funds to be so
freed) and her team would make sure that
children are actually being immunised. If it is for the purchase of books for
school children, it would be tracked to be sure that the pupils actually
receive the books. If it is for building of classrooms, it would be so
identified,"
DR. NGOZI
OKONJO-IWEALA
HONOURABLE MINISTER OF FINANCE
Six years after the
furore, the government admits we are back in crisis, external debt has risen to
$5.633billion and domestic debt stands at N5.313trillion. I ask, what became of
the $1billion savings? The economic team pleads “no comment”!
In all, what the
advocates of oil subsidy removal have failed to show is what the actual cost of
subsidy will be if government where to sit up to its duties, if all the
channels of fraud and leakages are sealed. They have also failed to admit that
it is the failure of government that Nigeria after over 5 decades of oil cannot
refine to meet domestic needs. They certainly failed to prove how ordinary
Nigerians will survive the crunch which will be engendered by increased fuel
prices. What they definitely failed or chose not to understand is that for the
ordinary Nigerian, the ‘temporary pain’ which they claim the policy will bring
simply cannot be endured. Nigerians have been pushed to the wall for too long
only two choices are left; drill the wall and disappear forever, of fight back.
Your guess is as good as mine.
Finally, an advice to
government. Fight corruption, arrest, prosecute and get offenders to return
what they have looted, cut the huge recurrent profile like the N1billion
proposed for feeding the President and Vice President in the 2012 budget and
those costs which makes the National Assembly consume 25% of Nigeria’s total
overhead budget as Sanusi once informed us. I dare say, there will be savings
enough to ‘build critical infrastructure’ and ‘create safety nets’.
(Henshaw is National
General Secretary, United Action for Democracy, (UAD))
