Friday, January 13, 2012

A Magnificent Shame

Following the scandal which attended the purchase of Peugeot 407s by the NASS a few years ago, I wrote an article based on my own research which demonstrated that the contract for the supply of those vehicles had been inflated by several hundred million naira. Of course, this is Nigeria, and nobody goes to jail for corruption unless they’ve seriously pissed off whoever happens to be Boss Hogg at that point in time so the storm passed very quickly and quietly.

Shortly after winning his election in 2011, Goodluck Ebele Jonathan (GEJ for short) our new resident Boss Hogg, declared that the subsidy on imported petroleum products was going to have to go. He and his economic team headed by Finance Minister Ngozi Okonjo-Iweala (NOI for short) and CBN Governor Sanusi Lamido Sanusi (SLS for short) told us that the subsidy was crippling the government’s ability to spend on capital projects. The old arguments which had been trotted out by then-President Olusegun Obasanjo’s (OBJ for short) economic team which was headed by (surprise-surprise) NOI against the retention of the subsidy were dusted off and trotted out to do their thing once more.

We couldn’t subsidise consumption, there was corruption in the system, removing the subsidy would lead to deregulation and we would see a sudden and sharp improvement in the ability of the government to execute projects. Removing the subsidy would be the magic bullet that would solve all our economic woes.

Naturally, people kicked against removing the one thing that allowed the entire country benefit from the staggering wealth produced by the Niger-Delta and largely salted away in the foreign accounts of a few well-connected people over the years. So, we were told that the date hadn’t been set, nut the government was looking at April 2012 or thereabouts.

On January 1 2012, the PPPRA announced that the subsidy on petrol (PMS for short) had been removed, PMS had therefore been deregulated and would now be sold at ₦141 per litre or such other price as the agency would announce from time to time. My immediate reaction was to wonder how you "deregulated" a product but still set its price, but that is just a little corner of the picture. There was widespread outrage at the timing of the announcement and the incredible deception of the government. Transportation costs immediately skyrocketed, stranding several people who had travelled for the holidays. Commodities prices doubled. By January 2, people were in the streets protesting loudly against the callousness of the government’s decision.

Since then we’ve been treated to the usual governmental hogwash, culminating in the most useless Presidential gesture towards hard times since “Let them eat cake”. GEJ got on national TV and announced that basic salaries of office holders would be cut by 25%. Without going into the fact that it’s actually the horrendously hedonistic allowances of these people that bloat their salaries and not the basic pay, GEJ didn’t really say anything of substance in his speech.

NOI appeared on TV to tell us that we were massively in debt, facing hard times, and removing the subsidy would free up funds to tackle national development. I don’t know about the rest of you, but as far as I’m concerned, a Finance Minister who can draw up a budget allocating ₦1 billion to the feeding of the President and VP and their families in 2012, ₦300 million to buy cutlery, ₦200 million to water a garden, and ₦48 million to buy newspapers and magazines for the VP and then turn around and tell the country we need to prepare for austerity measures simply can’t be taken seriously.

SLS then came on air and told us all (with nary a blink in his eye) that he’d been raising alarms about corruption and rot in the subsidy regime for over a year. He told us that there was massive fraud going on, with people falsifying documents and transhipping petrol and so on. And then he threw up his hands and wailed that there was so much money involved, people could be bribed and there was more or less nothing the government could do to stop these fiends.

Ignoring the fact that the CBN Governor himself had just told the world that the administration he worked in lacked the will power to tackle corruption, the proposed solution surely flew in the face of common sense. We all remember when OBJ told us people were stealing money from toll gates and the solution was to demolish the toll gates. Surely, the proper thing to do was to launch an investigation into the theft, and prosecute a few people, thus letting everyone know that stealing from the FG would not be tolerated? I marvelled at the special brand of lunatic logic that one had to possess in order to see his solution as the right one. However, before anyone could debate the matter, all toll gates on federal highways were demolished at the cost of ₦360 million. I did however believe that with the transition of OBJ’s administration, that insane way of thinking was behind us for good. I was sorely mistaken.

We have been told that the subsidy bill for 2011 was ₦1.3 trillion. However, what was budgeted to cover the subsidy was ₦248 billion. From SLS’ pronouncements, we can safely conclude that the higher figure is the result of monumental, staggering corruption. Surely the proper thing to do is to tackle the corruption and bring any perpetrators to book? Wouldn’t that save the country billions and make the subsidy immediately more affordable?

But no, the government’s solution is to abolish the fund altogether. We have been told that there is a powerful “cabal” bent on retaining the subsidy for their own evil ends. We are told that we’ve been borrowing to fund the subsidy and this can no longer continue. Accordingly, this administration is basically telling us that it has been borrowing to finance corruption and not only is it aware of what is going on, it has no intention of solving the problems it has identified, and would rather abdicate its responsibilities altogether.

Now, I am economist, I hated maths in school and it hated me right back. I’m just a simple fellow with a simple brain but thanks to the marvels of modern science, I can rely on software to crunch really big numbers for me, so here goes.

If we assume an average production in 2011 of 1.5 million bpd of crude oil, sold at the government’s budgeted price of $70 per barrel (and we all know the real figure is higher than that) we can calculate that Nigeria earned around $38 billion selling crude oil in 2011. That’s ₦5.7 trillion using ₦150 to a dollar. Our total budget for 2011 was (wait for it) ₦4.4 trillion or thereabouts. That means that even using the government’s traditionally lower than actual price, we should have a surplus of over ₦2 trillion in last year’s budget from crude oil sales alone. This calculation doesn’t take internally generated revenue into account, and I have it on good authority that the FIRS had what one would call a phenomenal year. So, by my rudimentary calculations, although overshooting the budgeted subsidy in 2011 by almost over a trillion buckaroos is extremely alarming, we actually earned enough dosh to cover the amount and have a bit left over.

So, I challenge SLS and NOI with their fancy degrees and letters after their names to tell me that I am wrong. I want them to explain how we’re operating a deficit budget despite earning staggering sums of money. Did the world crude market tank in 2011? Did Nigeria's crude production fall to around 10,000 bpd? Didn’t we collect any income or corporate taxes? I want them to tell me that there is some justification for the rapacious borrowing that has seen our sovereign debt rise to over $33 billion dollars, our foreign reserves fall to $27 billion, and seen the ECA balance drop to $0.00. I want them to tell us all how they justify paying our federal legislators more money than the President of the United States of America.

I especially want them to explain the magnificent shame of Nigeria being the only oil producer in the world which relies on imported petrol.

Can they?

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I love my country, enjoy a cold beer once in a while, rabidly support Arsenal FC, but I don't get Diet Coke...