The Verdict according to Olusegun Adeniyi. Email,olusegun.adeniyi@thisdaylive.com
After 25 years of talking about the removal of subsidy on premium motor spirit (PMS), President Goodluck Jonathan effectively ended the discussion last Sunday. While the jury is still out as to whether his decision was borne by courage or sheer foolhardiness, there can be no doubt about the fact that he has put his presidency on the line on this matter.
I am one of the advocates for the deregulation of the downstream sector of the petroleum industry which includes, but not limited to, the removal of subsidy on PMS. But the current narrative has been framed as no more than a measure to generate more money for the three tiers of government to share. It is therefore little surprise that the administration is not only losing those who may be sympathetic to the idea of deregulation but has also hardened those who oppose it. Notwithstanding the committee of eminent Nigerians established with what is clearly a dubious mandate (since all revenues will go to Federation Account and be shared, raising questions as to where this so-called 'subsidy savings' not in the 2012 appropriation bill is coming from), there is bound to be problem in the weeks and possibly months ahead.
While subsidy is in itself not a bad policy, in a rent economy like ours, it is a big incentive for monumental corruption as we have seen over the years. In any case, smart subsidy is one that is targeted at production and not consumption. But while there are compelling reasons for the removal of fuel subsidy, the conversation cannot be about raising more revenues for government as it has become today, especially when the monies that have accrued over the years have not been well managed. The current decision therefore has far reaching implications and I will highlight a few.
One, coming at a period the country is already under siege from Boko Haram, the expected reaction to government action can only create an atmosphere of disorder which may breed more insecurity. Two, removal of subsidy has significant socio-economic impacts so there is need for some honesty here. A study conducted by NISER in the late nineties on the possible effects of 10 percent increase in pump price on a broad range of sectors (from agriculture to transport, communication and the hospitality industry) gave varying degrees of the hardship Nigerians would bear. When you juxtapose that against a more than 100 percent upward adjustment in pump price then it is safe to conclude there are difficult days ahead for a great majority of our people. We are seeing evidence of that already with a disproportionate increase in transport fares and prices of foodstuffs across the nation.
Three, this could be the single most devastating blow to organised corruption in Nigeria involving a collusion between the private sector (bankers, marketers, shippers etc) and top government officials. These vested interests will definitely fight back in a subtle but lethal manner because if the policy succeeds Nigerians will then get to know how much fuel we have actually been consuming and then there will be questions about the hundreds of billions of Naira that have gone into the pockets of some fat cats in the private sector and their collaborators in government. Four, a regime of non-subsidy will free the Federation Account from the abracadabra accounting of the NNPC. The Auditor General of the Federation, Mr Samuel Ukura, in his 2009 yearly report currently before the National Assembly has raised some interesting posers about the management of that account. Five, there is a serious issue of trust and credibility here. Three ministers (Dr Ngozi Okonjo-Iweala, Mrs Diezani Allison-Madueke and Mr Labaran Maku) as well as the GMD of NNPC, Mr Austin Oniwon, assured Nigerians that the policy would not commence until negotiations are completed and the 2012 appropriation bill was passed and signed into law. Why then should Nigerians trust the promise of palliative from these same officials? Reforms like this need trust-building and effective communication to succeed. Government has demonstrated neither in this instance.
The foregoing should elicit serious concerns but let us deal with the immediate issue. On August 14, 2000 under President Olusegun Obasanjo, then Secretary to the Government of the Federation, Obong Ufot Ekaete, inaugurated a 34-member committee to review all aspects of petroleum products supply and distribution. Chairman of the committee was Chief Rasheed Gbadamosi while members were Mr Ray Ekpu, Prof. E. Edozien, Dr. Pat Utomi, Mr Adams Oshiomhole, Mallam Wada Maida, Mr Funso Kupolokun, Prof Dotun Philips, Dr Rufus Giwa (now late), Mr S. O. Luwoye and Alhaji A. Umaru. Others were Mr Lucas Damulak, Mr Joseph Akinlaja, Alhaji Umaru Ndanusa, Alhaji Umar Abba Gana, Chief Nkem Ekwechi, Alhaji A. Chanchangi, Chief A. E. Ilodibe, Pastor E. A. Ogun and Mrs Emily Imokhuede. There were also Chief Richard Uche, Alhaji G. Hamma, Dr Imo Itsueli, Chief M. O. Onoja, Mr S. A. Okoye, Mr Sylvester Ejiefor, Rev. T. Adeboye, Dr Samaila Kewa, Mr. G. D. Loma, Mr C. O. Iwuozor and Mr O. O. Ogunkua.
The committee was expected to recommend, among others, a structure of petroleum products supply and distribution system that would be self-financing and sustainable as well as a phased reforms and price adjustments that would prevent the trauma and economic disruption usually associated with adjustments to petroleum products pricing.
In the course of its assignment, the committee received memoranda from critical stakeholders and industry experts before visiting facilities like the Atlas Cove Complex, the Mosimi Main Depot and Ejigbo Satellite Depot. Members also visited the four refineries before making its recommendation in a 110 page report which contained the majority consensus signed by 28 members and a minority 'Labour Group Report' authored by Oshiomhole, Damulak, Hamman Gidado and Isa Aremu. Interestingly, Labour was not opposed to deregulation. Their position was that the policy must be preceded by certain actions and that "the nation must depart from quick-fix non-sustainable 'solutions' to problem that require painstaking refocusing and re-engineering such as Nigeria's intractable products supply and distribution."
In concluding this piece next week, I will draw on the findings and recommendations of these two sides which the federal government may still find useful as it tries to navigate this tricky issue. Incidentally, it was the report of that committee which led to the establishment of the Petroleum Products Pricing Regulatory Authority (PPPRA) that is now clearly redundant. Back to the present. Setting up the Alfa Belgore committee to negotiate with Labour after implementing fuel subsidy removal is a classic abuse of the term 'consultation'. You don't consult after taking decisions.
That is why the president has to act quickly to restore public confidence. Major General Muhammadu Buhari pointed the way forward last week when in his post-Supreme court ruling statement, he suggested a shared sacrifice that will include political office holders. According to Buhari , "immediate steps should be taken to drastically reduce the cost of governance in the three tiers of government. Salaries and especially allowances should be drastically reduced; security votes should be abolished – not increased as the 2012 Budget has done. Votes for the Armed forces, Police and Security Services should be transparent and accountable; foreign travel and estacodes should be stopped for at least six months other than for the Presidency, Ministry of Foreign Affairs and medical emergencies. Government House expenses in all the states should be drastically reduced, foreign travel suspended for a while. The National Assembly should give a lead in reducing their allowances substantially and stopping their foreign travels."
I align myself with this position which becomes even more imperative today as it doesn't make sense for Nigerians to pay outrageous amount at the pump only for the money to end up in the pockets of some officials and their 'ghosts'. Sometime last December, the Director General of the Budget Office of the Federation, Dr. Bright Okogu, said the federal government’s wage bill has risen to N1.5 trillion and that it could further go up to N1.7 trillion by this year. During her post-budget briefing in Abuja, Coordinating Minister for the Economy who also holds the Finance portfolio, Dr. Okonjo-Iweala, noted that the Budget Office recently discovered that the Police Pension Board was paying N1.5 billion annually when in actual fact it required just N500 million for the payment of pension to retired officers. What that means in effect is that what goes to these honourable ‘ghost pensioners’ is twice the actual amount needed to service genuine ones assuming we believe even that figure was not padded. If we extrapolate that further, it means the nation may have been subsiding fraud by about two times the actual amount it needs to pay the real workers.
Yet this kind of scam is everywhere. For instance, a recent THISDAY investigation reveals that in the budget for capacity training programmes in one of the federal government agencies, a whooping N200 million was diverted into some private pockets with names of fictitious beneficiaries on the voucher. This leakage is, however, not restricted to the federal government. Three weeks ago, Speaker of the Delta State House of Assembly, Mr Victor Ochei announced that some 250 ghost workers who have been receiving salaries from the Delta State Government since the state was created in 1991 have been discovered. Ochei said the discovery became possible following the introduction of the biometric data machine for staff of the Assembly. According to him, as at June last year when he was elected the speaker, the House had about 600 staff, adding that, “with 600 staff in this complex, this place would naturally vibrate. But we realize that most of these staff live as far as Lagos State and their colleagues daily sign the attendance register for them and at the end of the month, the state government pays salaries into their accounts which they would simply go and withdraw from wherever they are with their ATM."
The president, backed by the governors, has demonstrated uncommon resolve in the fuel subsidy matter. He must also join hands with the governors to demonstrate greater resolve in ending the graft and waste in our public service if they must earn the trust of Nigerians on this issue. But we are already getting ahead of ourselves here. With Labour calling out Nigerians on strike, it doesn't appear as if we have seen the end of this subsidy struggle. However, I want to implore those in authority to recognise that in times like this applying high-handed tactics against protesters is a sign of weakness, not strength. And it will most likely backfire. For those who love this country, these indeed are troubling times.
After 25 years of talking about the removal of subsidy on premium motor spirit (PMS), President Goodluck Jonathan effectively ended the discussion last Sunday. While the jury is still out as to whether his decision was borne by courage or sheer foolhardiness, there can be no doubt about the fact that he has put his presidency on the line on this matter.
I am one of the advocates for the deregulation of the downstream sector of the petroleum industry which includes, but not limited to, the removal of subsidy on PMS. But the current narrative has been framed as no more than a measure to generate more money for the three tiers of government to share. It is therefore little surprise that the administration is not only losing those who may be sympathetic to the idea of deregulation but has also hardened those who oppose it. Notwithstanding the committee of eminent Nigerians established with what is clearly a dubious mandate (since all revenues will go to Federation Account and be shared, raising questions as to where this so-called 'subsidy savings' not in the 2012 appropriation bill is coming from), there is bound to be problem in the weeks and possibly months ahead.
While subsidy is in itself not a bad policy, in a rent economy like ours, it is a big incentive for monumental corruption as we have seen over the years. In any case, smart subsidy is one that is targeted at production and not consumption. But while there are compelling reasons for the removal of fuel subsidy, the conversation cannot be about raising more revenues for government as it has become today, especially when the monies that have accrued over the years have not been well managed. The current decision therefore has far reaching implications and I will highlight a few.
One, coming at a period the country is already under siege from Boko Haram, the expected reaction to government action can only create an atmosphere of disorder which may breed more insecurity. Two, removal of subsidy has significant socio-economic impacts so there is need for some honesty here. A study conducted by NISER in the late nineties on the possible effects of 10 percent increase in pump price on a broad range of sectors (from agriculture to transport, communication and the hospitality industry) gave varying degrees of the hardship Nigerians would bear. When you juxtapose that against a more than 100 percent upward adjustment in pump price then it is safe to conclude there are difficult days ahead for a great majority of our people. We are seeing evidence of that already with a disproportionate increase in transport fares and prices of foodstuffs across the nation.
Three, this could be the single most devastating blow to organised corruption in Nigeria involving a collusion between the private sector (bankers, marketers, shippers etc) and top government officials. These vested interests will definitely fight back in a subtle but lethal manner because if the policy succeeds Nigerians will then get to know how much fuel we have actually been consuming and then there will be questions about the hundreds of billions of Naira that have gone into the pockets of some fat cats in the private sector and their collaborators in government. Four, a regime of non-subsidy will free the Federation Account from the abracadabra accounting of the NNPC. The Auditor General of the Federation, Mr Samuel Ukura, in his 2009 yearly report currently before the National Assembly has raised some interesting posers about the management of that account. Five, there is a serious issue of trust and credibility here. Three ministers (Dr Ngozi Okonjo-Iweala, Mrs Diezani Allison-Madueke and Mr Labaran Maku) as well as the GMD of NNPC, Mr Austin Oniwon, assured Nigerians that the policy would not commence until negotiations are completed and the 2012 appropriation bill was passed and signed into law. Why then should Nigerians trust the promise of palliative from these same officials? Reforms like this need trust-building and effective communication to succeed. Government has demonstrated neither in this instance.
The foregoing should elicit serious concerns but let us deal with the immediate issue. On August 14, 2000 under President Olusegun Obasanjo, then Secretary to the Government of the Federation, Obong Ufot Ekaete, inaugurated a 34-member committee to review all aspects of petroleum products supply and distribution. Chairman of the committee was Chief Rasheed Gbadamosi while members were Mr Ray Ekpu, Prof. E. Edozien, Dr. Pat Utomi, Mr Adams Oshiomhole, Mallam Wada Maida, Mr Funso Kupolokun, Prof Dotun Philips, Dr Rufus Giwa (now late), Mr S. O. Luwoye and Alhaji A. Umaru. Others were Mr Lucas Damulak, Mr Joseph Akinlaja, Alhaji Umaru Ndanusa, Alhaji Umar Abba Gana, Chief Nkem Ekwechi, Alhaji A. Chanchangi, Chief A. E. Ilodibe, Pastor E. A. Ogun and Mrs Emily Imokhuede. There were also Chief Richard Uche, Alhaji G. Hamma, Dr Imo Itsueli, Chief M. O. Onoja, Mr S. A. Okoye, Mr Sylvester Ejiefor, Rev. T. Adeboye, Dr Samaila Kewa, Mr. G. D. Loma, Mr C. O. Iwuozor and Mr O. O. Ogunkua.
The committee was expected to recommend, among others, a structure of petroleum products supply and distribution system that would be self-financing and sustainable as well as a phased reforms and price adjustments that would prevent the trauma and economic disruption usually associated with adjustments to petroleum products pricing.
In the course of its assignment, the committee received memoranda from critical stakeholders and industry experts before visiting facilities like the Atlas Cove Complex, the Mosimi Main Depot and Ejigbo Satellite Depot. Members also visited the four refineries before making its recommendation in a 110 page report which contained the majority consensus signed by 28 members and a minority 'Labour Group Report' authored by Oshiomhole, Damulak, Hamman Gidado and Isa Aremu. Interestingly, Labour was not opposed to deregulation. Their position was that the policy must be preceded by certain actions and that "the nation must depart from quick-fix non-sustainable 'solutions' to problem that require painstaking refocusing and re-engineering such as Nigeria's intractable products supply and distribution."
In concluding this piece next week, I will draw on the findings and recommendations of these two sides which the federal government may still find useful as it tries to navigate this tricky issue. Incidentally, it was the report of that committee which led to the establishment of the Petroleum Products Pricing Regulatory Authority (PPPRA) that is now clearly redundant. Back to the present. Setting up the Alfa Belgore committee to negotiate with Labour after implementing fuel subsidy removal is a classic abuse of the term 'consultation'. You don't consult after taking decisions.
That is why the president has to act quickly to restore public confidence. Major General Muhammadu Buhari pointed the way forward last week when in his post-Supreme court ruling statement, he suggested a shared sacrifice that will include political office holders. According to Buhari , "immediate steps should be taken to drastically reduce the cost of governance in the three tiers of government. Salaries and especially allowances should be drastically reduced; security votes should be abolished – not increased as the 2012 Budget has done. Votes for the Armed forces, Police and Security Services should be transparent and accountable; foreign travel and estacodes should be stopped for at least six months other than for the Presidency, Ministry of Foreign Affairs and medical emergencies. Government House expenses in all the states should be drastically reduced, foreign travel suspended for a while. The National Assembly should give a lead in reducing their allowances substantially and stopping their foreign travels."
I align myself with this position which becomes even more imperative today as it doesn't make sense for Nigerians to pay outrageous amount at the pump only for the money to end up in the pockets of some officials and their 'ghosts'. Sometime last December, the Director General of the Budget Office of the Federation, Dr. Bright Okogu, said the federal government’s wage bill has risen to N1.5 trillion and that it could further go up to N1.7 trillion by this year. During her post-budget briefing in Abuja, Coordinating Minister for the Economy who also holds the Finance portfolio, Dr. Okonjo-Iweala, noted that the Budget Office recently discovered that the Police Pension Board was paying N1.5 billion annually when in actual fact it required just N500 million for the payment of pension to retired officers. What that means in effect is that what goes to these honourable ‘ghost pensioners’ is twice the actual amount needed to service genuine ones assuming we believe even that figure was not padded. If we extrapolate that further, it means the nation may have been subsiding fraud by about two times the actual amount it needs to pay the real workers.
Yet this kind of scam is everywhere. For instance, a recent THISDAY investigation reveals that in the budget for capacity training programmes in one of the federal government agencies, a whooping N200 million was diverted into some private pockets with names of fictitious beneficiaries on the voucher. This leakage is, however, not restricted to the federal government. Three weeks ago, Speaker of the Delta State House of Assembly, Mr Victor Ochei announced that some 250 ghost workers who have been receiving salaries from the Delta State Government since the state was created in 1991 have been discovered. Ochei said the discovery became possible following the introduction of the biometric data machine for staff of the Assembly. According to him, as at June last year when he was elected the speaker, the House had about 600 staff, adding that, “with 600 staff in this complex, this place would naturally vibrate. But we realize that most of these staff live as far as Lagos State and their colleagues daily sign the attendance register for them and at the end of the month, the state government pays salaries into their accounts which they would simply go and withdraw from wherever they are with their ATM."
The president, backed by the governors, has demonstrated uncommon resolve in the fuel subsidy matter. He must also join hands with the governors to demonstrate greater resolve in ending the graft and waste in our public service if they must earn the trust of Nigerians on this issue. But we are already getting ahead of ourselves here. With Labour calling out Nigerians on strike, it doesn't appear as if we have seen the end of this subsidy struggle. However, I want to implore those in authority to recognise that in times like this applying high-handed tactics against protesters is a sign of weakness, not strength. And it will most likely backfire. For those who love this country, these indeed are troubling times.
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