Beyond Fuel Subsidy: What Next? Why Sure Is Not A Sure Route To Infrastructure Development By Jaye Gaskia

INTRODUCTION: At the height of the
tremendous mobilisation and
organising efforts aimed at
preparing Nigerians for resistance
and persuading the government to
change its policy course on subsidy
removal, I had written a paper in
December 2011, titled ‘Governing
by stealth: exploding the myths of
fuel subsidy removal’, attempting to
summarize all the counter
arguments of civil society and its
labour allies against the hiking of
price of petrol.
THE OUTSTANDING ISSUES:
The principal planks of the counter
arguments which remain valid even
today bear some brief mention; first,
there is the whole question around
the nature of the subsidy. The most
important fact here is that around
the reason why the subsidy which is
the difference between the landing
price and the pump price, exist in
the first place. This reason is
fourfold – the parlous state of our
domestic refining capacity, which
necessitates that we have to import
refined products, the floatation of
our currency against major
currencies, as well as the corruption
in the import regime of the refined
products. It is the sum total of all of
these that ensure that the subsidy
exists and continues to build up
after every subsidy removal
exercise. As long as we continue to
depend on importation, and the
value of the naira declines against
the dollar, the landing cost of
refined products will continue to
rise. If this is coupled with a desire
to make the product easily
accessible and affordable because of
its centrality to the economy due to
the parlous state of power
generation and distribution, then
there will always be a subsidy that
will always be on the rise.
Second, is the whole debate around
the actual beneficiaries of the
subsidy? Government assumes and
promotes the false idea that only
the super elites and the cabal
benefit from the subsidy. In fact the
major beneficiary is the
overwhelming majority of ordinary
citizens who have access to petrol
because it is affordable, in the midst
of crushing poverty (61% of the
population according to latest NBS
figures); the overwhelming majority
of whom need to use petrol to
power their businesses [small,
medium and large scale, as well as
formal and informal sectors of the
economy] and earn a living.
In reality as the NASS probes have
now revealed, the cabal and corrupt
government and industry officials
have been corruptly enriched by the
fraud perpetrated and perpetuated
in the import regime and in the
management of the subsidy. But
this is a criminal benefit, which
ought to and should be subject to
prosecution and punishment with
fraudulently collected subsidies
recovered and returned to the
coffers of the federation account.
Third, there is the issue around the
financing of the subsidy, and it is
the issue most directly connected
with the SURE program. If the
subsidy is being financed through
deficit budgeting/public borrowing,
then the only thing that can be
achieved by hiking fuel prices to the
same level as ever increasing
landing cost [which stood at 141
naira per liter as at 31s Dec 2011,
and has now risen to 165 naira per
liter as at 29th February 2012] will
be to stop borrowing! No savings
would be possible to be made, and
therefore there will be no money for
the SURE program. This is basic
economics.
The fourth issue is then directly the
argument around freeing money for
critical infrastructure development,
what then became conceptualized
into the SURE program. And here it
is important to mention that the
SURE program in its original form
[before its withdrawal, is at best a
deceptive collection of programs
into a wish list. A program that will
be implemented requires more
serious approach; it requires a
strategic, operational and
implementation, as well as
investment plan. SURE was none of
these.
The SURE program had no sense of
the strategic linkages of the
infrastructure projects; there was no
prioritization; no costing, and no
timeline for implementation [no
start and end dates for the projects]
. There was also no indication of
what each will cost to implement,
what the total cost for the entire
package is; what part of the budget
the subsidy reinvested fund will
cover; what the funding gap will be;
and how this funding gap will be
filled.
What is even more appalling and an
indication of the shoddiness of its
preparation as well as the inbuilt
deception in the program is the fact
that ongoing projects for which
contracts have been signed were
severally included in the SURE pot-
pori of critical infrastructure
interventions!
Additionally as we now know thanks
to the subsidy probes at the NASS,
the funding regime was based
absolutely on guesses not on
empirical information. No body as at
the time the program was being put
together had any idea about the
true cost of the subsidy fraud, which
we now know cost us well over 2
trillion naira in 2011!
Even now no one is certain what the
actual daily consumption rate for
petrol is, the actual amount we pay
for per day, the actual daily
production rate of existing
refineries; much less a sense of
determining what the actual short
fall in daily supply is, which will
require an actual quantity of refined
products per day!
What is perhaps more shocking with
respect to revealing the mind of the
regime, is the shocking assumption,
that the subsidy program was
designed on the basis of an annual
available funding of 478 billion naira
over a four year period! Why is this
shocking and scandalous? Precisely
because it assumes no reduction in
the quantity of imported refined
product per day, translating into an
assumption or rather more
appropriately, an intention to keep
current domestic refining capacity
at 2011 levels over the four year
period.
The implication of this is that no
additional domestic refining
capacity will be acquired over the
four year period, and we will
continue to be dependent on
importation of refined products, at
current, if not at increasing levels
over the four year period! It also
means that we will have to remain
subjected to higher and ever
increasing pump prices of
petroleum products, based on
increasing landing costs, due to
changes in the value of the naira in
relation to the dollar on the one
hand, and as well due to rising
production cost internationally on
the other hand.
And finally on this issue, where is
the sense of strategic linkage in the
SURE program, between the
refineries to be built under the
program, the private refining
licenses to be issued, and this
assumption that we will remain
dependent at the very least on
current import levels for the next
four years?
Fifth, there is also the set of issues
around the need for all of us to
sacrifice. The fallacy of this
argument is that the overwhelming
majority of Nigerians are already
over sacrificing; and have become
so thoroughly impoverished by their
level of sacrifice; a sacrifice that
actually corresponds to a citizens
subsidy of the opulence and
corruption of the ruling political
elites, the various cabals and high
officials of the civil/public service.
Those who need to sacrifice are the
ones that have refused to
demonstrate a willingness to
sacrifice while urging the rest of us
who are already over sacrificing to
sacrifice more! A critical look at
federal and state budgets reveals
these inconsistencies. Since the
January uprising we have been
regaled with snippets of such
ostentation in the federal budget:
1billion to feed the president in this
year; 1.7 billion to fuel cars in the
presidency [remember that we are
paying from public coffers for them
to fuel their cars, while we are
expected to pay from our own
pockets these deregulated prices for
petroleum products!]; another 1.3
billion naira to fuel generators in the
presidency [does this ruling class
have any shame at all?]; etc etc.
Sixth, the issue around what the
real deficit is, which is the deficit of
trust. No one trusts the Nigerian
government, and all of the things
that have happened since the
January Uprising firmly underlie the
reason why we cannot and should
not trust this government. As a
government they have so perfected
the act of lying and governing by
deceit that they also very often
believe their own lies and act on its
basis.
This regime needs to rebuild trust,
and nothing in all the actions it has
taken so far indicates that it is
willing, able to, or capable of being
trustworthy.
Seventh, there is the claim by
government,[ its supporters, and
does who support deregulation, who
may even be in opposition to the
way the government is going about
it] that government can not
successfully operate refineries, that
government has no business in
operating companies in the
petroleum [downstream &
upstream] and power sectors; and
that it is only the private sector that
can successfully operate these
businesses!
The fallacy in this argument is
obvious in the fact that the
monumental failure of giant
corporations/TransNational
Corpoarations [including Enron,
Lehman brothers, and banks and
corporations across Europe, North
America and Japan/Asia]; as well as
the failure, bankruptcy and collapse
or threatened collapse of whole
national market economies [from
Iceland, through Ireland, Greece,
Portugal, Italy, Spain, etc]; has been
the defining character of the period
since 2007; yet no one has said that
capitalism, and the system of
private ownership of the means of
production, alongside the market on
which it is based has failed!
How can such a system that has
faced such monumental crisis of
existential proportions be still held
up as the only way to run business,
and as the viable alternative to
public ownership and management
of businesses?
Besides, when they shamelessly
make this argument while signing
contracts to build and operate
refineries, independent power
plants, railroads, including oil and
gas exploration contracts, etc with
state owned Chinese firms?
And while they try to white wash
their own incompetence and
ineptitude in managing the
economy, they forget to give
examples from Indonesia, Brazil,
and Venezuela, that have built
successful transnational state
owned operations in the petroleum
sectors. It is obvious that what has
failed is not public ownership, but
incompetence, ineptitude and
impunity in the management of our
political and economic life by a
thieving and looting ruling class!
Eighth, there is the other claim by
the regime and its supporters, that
this debate is not political, it is
purely economic! What can be more
political than a situation where a
government avoids all rational
economic options, and sticks
dogmatically to a set agenda, aimed
at completely ousting the state and
the public administration from the
management of the petroleum
sector?
Refineries can and ought to be
made to work, and yes, those
owned publicly? Those who
mismanage them, sabotage, or
defraud them are committing
economic crimes, and ought to be
prosecuted and punished. Those
who are guilty only of incompetence
and ineptitude should be sacked
and new managements brought in!
Linked with the supposedly non
political nature of the debate, is the
claim that this debate is not
ideological. What can be further
from the truth? The arguments
around the alleged public sector
inefficiency vs alleged private sector
efficiency are purely ideological
given that they are made without
reference to the deep rooted global
crisis of capitalism!
Besides, the insistence by the
government and its supporters that
hiking fuel prices would have no
impact on the poor and would not
contribute to increasing poverty
levels; while also insisting that
making petrol, that is so central to
the economy, available at affordable
and accessible price only benefits
the super rich and the cabal; can be
understood only within the context
of ideological faith and fidelity!
The last myth, the ninth one is the
made prominent by the CBN
governor, around the nature of
subsidies. He, along with the
supporters of the government claim,
that there are two broad categories
of subsidies: subsidizing production
vs subsidizing consumption! They
further claim, that what grows the
economy is a subsidy on
production, and that the petrol
subsidy is a subsidy on
consumption!
How fallacious and desperate can
these people get! Petrol, is in the
Nigerian economic context, a factor,
if not a primary factor of production!
In a context where electricity is
conspicuous only by its absence or
epileptic presence, every sector of
the economy: formal and informal,
manufacturing and commerce;
small, medium or large scale; is
dependent on using generators to
provide power. Over 80% of
generators in use require petrol not
diesel. How can the availability of
such a central product not be a
factor of production? How can a
subsidy to make it accessible not be
a subsidy on production?
WHERE DO WE GO FROM HERE?
Since the January Uprising and the
probes at the national assembly of
the petroleum sector which it has
engendered and energized; several
important revelations has come to
light with respect to the lack and or
complete absence of coordination in
the management of the economy,
inspite of the fact that we have in
place not only an economic team,
but also a coordinating minister of
the economy.
Furthermore, although several mind
boggling revelations have come to
light, there is as of this moment no
serious indication that those
implicated in the fraud will be
prosecuted and punished, and
looted funds recovered!
In addition, although several task
forces [about four so far] have been
set up to tackle specific challenges
that parastatals of the ministry were
established to handle in the first
instance, no such attempt at
seriously interrogating the basis of
the fraud has been undertaken. And
what is the basis of the fraud? It is
the way and manner by which we
questimate daily consumption rate
for PMS and other products. As long
as there is no scientific, strategic
and empirical way of determining
this rate; it would always be
possible to manipulate the figure in
other to benefit importers.
And this can be done simply,
monitored monthly, to get monthly
averages. The total number of
tankers transporting petroleum
products ought to be known, they
ought to be registered, along with
their capacity. Likewise petroleum
products dispensing stations/outlets
ought to be ascertained and
registered along with their
capacities. Tankers should check in
when lifting products and check out
when they have offloaded the
products. Sales at outlets ought to
also be recorded and monitored to
determine daily sales and monthly
averages. We can have the first
empirically proved figures within a
month with seriousness.
Additionally, there is a need for a
strategic plan, with operational and
implementation plans showing how
we intend to improve domestic
refining capacity over a given period
of time [no more than 24 months],
to such an extent that we would
have achieved self sufficiency in
domestic refining. Such a plan, with
a budget, will also include a timeline
for reducing importation as
domestic refining capacity improves
until importation gets to zero. This
is no rocket science, it can be done.
TO CONCLUDE:
The most significant indication of
the seriousness of any government
with respect to the development of
basic infrastructure and delivery of
basic services is the extent of
commitment in its annual budgets
to the development of these. Our
budgets continue to fail woefully on
this score with recurrent to capital
expenditure ratios still in excess of
7:3 in favour of recurrent
expenditures.
No nation grows and develops
human capital in this way. If the
wastage, leakage and fraud in
management of public resources
and budgets are cut and eliminated,
huge amounts of resources can be
freed for development of critical
capital projects. If all the looted
funds in the power and petroleum
sectors are recovered, culprits
punished, impunity in governance
will be dealt a crucial blow, and we
can make our money work for us.
One other issue, our penchant for
extra-budgetary spending is once
again demonstrated in the design of
the SURE program outside of the
budget.
On a final note, if rather than
address and tackle these
outstanding issues, if rather than
take concrete steps to sanitise the
power and petroleum sectors and
implement the recommendations of
the probes, the regime instead goes
ahead to increase electricity tariffs
and prices of petroleum products
from April as it has severally
indicated; then it will have
demonstrated that it learnt nothing
from the January Uprising; and it
would have taken steps to provoke
another Uprising in April!
For let there be no doubt about this:
we shall mobilise Nigerians to return
to the barricades, take over the
streets and OCCUPY NIGERIA, if the
issues are not addressed and
further hardships are imposed on
Nigerians from April.
And let there be no ambiguity about
this too; unless citizens actively
organise and mobilise politically,
and challenge the ruling class
politically; unless we take the bold
step to take power into our own
hands, and proceed to remake
Nigeria in our own interests [the
interest of the majority]; the
fundamental problems of
governance in our country will not,
and cannot be resolved in favour of
the popular masses.

PAPER PRESENTED
BY JAYE GASKIA
NATIONAL CONVENER
UNITED ACTION FOR DEMOCRACY
[UAD]
AT A FORUM ORGANISED BY LAWAN,
NECA HOUSE,
LAGOS: 30TH MARCH 2012.