Thursday, 20 December 2012

Article: Fuel Price Hike, Subsidy Scam, The Cabal And The Rest Of Us


Fuel Subsidy Protest In Nigeria

  
By Jaye Gaskia

In the course of the past year, and more precisely since about June 2011 when the Minister of Finance and Coordinating Minister of the Economy [MoF/CMoE] presented the Medium – Term Expenditure framework to the National Assembly [NASS] indicating the intention of the then newly elected government of President Goodluck Ebele Jonathan [GEJ] to end the policy of fuel subsidy, I had been writing extensively on the fuel price hike-fuel subsidy issue.

Events and revelations since our January Uprising, which was after all triggered by the implementation of that policy, and which was organised as a resistance to the fuel price hike; and in particular some of the most recent events, compel me to once again write on this issue.

My motivation in writing yet again on this issue, and during this period is two-fold; the first is the necessity to reflect on happenings with respect to the issue since the January Uprising; while the second is necessitated by an obligation to explore and explode some of the subsisting and newly fashioned myths around the fuel subsidy crisis.

My contention remains [and events since January have confirmed their accuracy] that a lot of lies, evolving into myths have been spurn by a regime so enmeshed and entangled in the pervasive corruption that has undermined the petroleum sector in particular, and the national economy in general to cover up the grand looting of the treasury that is going on, and throw discerning citizens off the track of the real and actual culprits.

Let me explain;
·         The regime claimed and still claims that a cabal [whose composition it refused to reveal until the January Uprising and the various probes forced its hands] is responsible for the mess in the petroleum sector; that it is the sole beneficiary of the subsidy regime; and furthermore that the regime was powerless against it! From these the regime concluded that the cabal [which was committing crimes] could only be dealt with by ending the subsidy regime and hiking the pump price of PMS as a consequence.

In this scenario, a cabal implicated in large scale endemic and persistent economic crime, would have been left unidentified, unpunished and actually allowed to continue to make profits from the lucrative petroleum products importation business. This was the scenario initiated by the January 1st commencement of implementation of the policy and consequent announcement of hiked fuel prices. If we had not fought in January, without the January Uprising, the outcome of this policy thrust would have been that fuel marketers and their collaborators and benefactors in government would have continued to import refined products unscrutinised; while solely determining the quantity to be imported and therefore becoming the sole determinants of the Daily Consumption Rate of PMS. This is because merely ‘ending the subsidy regime’ would only achieve one single thing definitively; this is that the cost of paying for the full price of the product would only have been transferred from the government purse to the private pockets of individual citizens at the point of sale. This is neither punishment nor disincentive for the cabal. As long as they can recover costs fully from the pump price, it does not affect them negatively at all. It is important to make this point in order to deflate and explode new myths being woven that those who refused to name the cabal and punish them before January, those whose solution in January was to simply transfer the cost of feathering the nest of the cabal from public purse to private purse, were in some way those who were fighting the cabal and were thus the enemies, not friends and protectors of the cabal!

·         Next it is important to purse at this point to once again reiterate just where the root cause of this crisis lies; and how this regime has done precious little since the January Uprising to address these, in part because as a regime, its members reaching to the highest levels, are perhaps deeply involved in the grand looting that is going on.

What were these root causes and what are their implications? As long as we continue to import refined products; and as long as the Naira is floated against other currencies, the landing cost of imported PMS will continue vary, and more likely rise over time. The implication of this is that pump price will almost certainly always have the tendency to keep rising. The further implication of this is that with a subsidy regime in place, no matter what you do, there will always arise a subsidy, and this subsidy component will almost certainly have a tendency to rise and increase over time. This in part at the root of why the government is unable to accurately project the yearly subsidy cost in its budgets.  For instance at a January landing cost of N141 per liter, the implied subsidy as at that time with a pump price of N97 per liter would have been N44 per liter. However this landing cost has varied significantly since then, hence the inability to accurately predict the subsidy cost, and therefore the tendency towards eroding the potentially saved cost for SURE – P.
The alternative that is being proposed which is to end the subsidy regime will not solve this problem, it will only lead to an unsustainable persistent hiking of pump price which in the context of pervasive poverty [69% of the population: over 112 million citizens according to government’s own figures] is merely a recipe for persistent and permanent social conflicts!

This is further complicated by the centrality of petroleum products to powering the economy as the dominant source of energy; particularly in a context where electricity power generation from the national grid is grossly inadequate and unreliable; and where businesses – small, medium and large scale; as well as households have to provide their own electricity through generating sets, the bulk of which are run on PMS. Recent studies and reports on the cost of doing business in Nigeria from the World Bank group to MAN [Manufacturers Association of Nigeria], and NACCIMA [National Chamber of Industry, Mines and Agriculture], all demonstrate that the single most significant contributor to the unbearably and therefore uncompetitively high cost of doing business in Nigeria, is the cost of generating one’s own electricity.

It is in this sense that the differentiation for the purpose of justifying the thrust towards ending the subsidy policy provided by the serving CBN governor is to be faulted. Sanusi, the CBN governor had differentiated between subsidy on production [which according to him is good for the economy] and subsidy on consumption which is bad for the economy], and under which he categorises the subsidy on petroleum products. Given that over 80% of the electricity required for businesses and households is self generated through the use of generators, the overwhelming majority of which [particularly for small and medium scale enterprises] are run on PMS; premium motor spirit has become a decisive factor of production, and therefore a subsidy on it is not a subsidy on consumption, it is on the contrary in the Nigerian situation, a subsidy on production.

·         However the additional root cause of the crisis and perhaps a major root cause of the gargantuan corruption in the sector is the guestimate nature of determining the actual Daily Consumption Rate [DCR] for PMS, as well as the actual Daily Production Rate [DPR] for PMS from the domestic refineries. Accurately determining these two rates [and this is possible with available technology, and requires no rocket science], will enable a precise determination actual quantity of PMS to be imported daily. The various probes have now revealed that all through 2011 the country was importing and paid for 59 million liters of PMS per day; however because of the January Uprising, since February the average daily import quantity for PMS has been 40.9 million liters per day; and according to PPPRA, this figure even dropped to 35 million liters per day in September. It is in the inability to accurately determine, plan and work with these rates that provides the opportunity for the collaborative mind boggling looting of the treasury now being perpetrated and perpetuated by the marketers and government and industry officials! It should also not be forgotten that these aforementioned stakeholders are the constituent members of the infamous Cabal; and it is this composition of the cabal, that makes this regime a government of the cabal, by the cabal, for the cabal: a kleptocratic lootocracy and or cabalocracy! Why is it so impossible to determine these rates? Is this because government personnel reaching to its highest levels are beneficiaries of the consequent pillage of the treasury?

·         Just in case I am going to be deliberately misinterpreted by some, let me restate very clearly here that the fundamental cause, spawning these other secondary causes stems from the fact that the nation does not have, and forces are working strenuously to prevent it acquiring adequate domestic refining capacity! Nigeria is the only exception among OPEC members, where by the relationship between domestic refining capacities versus import requirement for refined products weighs heavily in favour of the later.

The country needs to acquire adequate [somewhere between 80% to 100%] domestic refining capacity for petroleum products, and perhaps even become an exporter of these products, becoming for instance a net supplier for the ECOWAS region. This is not only feasible; it is a feat that can be achieved within 24 to 36 months, by a serious patriotic and nationalistic government and ruling class! This can be achieved through a strategic framework that puts the nation first, and combines public and private sector investment in the refining subsector of the petroleum industry. Money saved through plugging the loopholes in the determination of DCR and DPR and from the excess crude account, as well as from private investors can conveniently finance implementation of such a process, that will ensure availability accessibility and affordability of the products, while ending the waste and rot in the system. However, perhaps, it is for this same reason, that this government is not taking this a s a serious option.

The offer to negotiate a framework through which this can be achieved was on the table during the January Uprising! It was one of the major demands of the Labour Civil Society Coalition [NLC, TUC, JAF &UAD]; a well as of the much broader January/Occupy Nigeria Coalition! What is more it was presented as a cornerstone of the demands of the citizens during the negotiations, with an offer to have a 90 day negotiating period to determine the strategic framework of such a policy thrust, and put in place a mutually agreed mechanism for realising the objectives of the new policy. We were convinced then and now, that this could have been achieved within 2 to 3 years, and that this could have been done without any increases in fuel prices over the course of those 3 years, if the avenues for waste, leakage and corruption were not only plugged, but culprits identified and punished. The regime was however not interested in this solution then, and everything and every step it has since taken, is an indication that it continues not to be interested in taking this step. It’s only solution appears to be end subsidy, increase fuel prices, and let sleeping dogs lie!

As we approach another January, the first anniversary of the January Uprising, it became necessary, incumbent, event obligatory to once again refocus the discussion on the issues and on the reasons why this crisis has persisted and will continue to persist.

As you read this article, of the over 2.5 trillion naira suspected to have been looted in the subsidy scam in 2011, only 232 billion naira [less than 10%] has been verified by the regime; and of this only 29 billion [again just about 10% of verified theft] have been recovered!

Amazingly not one single successful prosecution has taken place; and while some featherweight marketers have been indicted, with some taken to court; no single official of government and its many implicated agencies, including political appointees with political responsibility, have been implicated nor even tried! Yet how could this scale of economic crime and the sabotage and undermining of the countries laws, constitution, etc have taken place without the knowledge and connivance, as well as protection of government officials and personnel? Everything points to an orchestrated attempt to sweep the whole thing under the proverbial carpet at the most minimum of cost to the regime, and to continue with business as usual, not minding the cost of these to both the economy and the well being and welfare of citizens!

This is why it is ludicrous to find regime members actually trying to claim credit as fighters of the cabal, while at the same time trying to cast those of us who took action in January and since then, as the ones being sponsored by the cabal! And this is the cabal, which until our uprising, the regime was unable to neither expose nor take any action against?

As the first anniversary of the January Uprising approaches, it is important for us to realise that although we wrested some gains from an unwilling regime; nevertheless the fundamental issues are still unaddressed, and our alertness is required, along with our preparedness to take further actions.

It took the January Uprising to force the issues out into the open; it will take another uprising to compel the issues to be addressed.

Welcome to the Uprising Next Time.

(Gaskia is the National Convener of the United Action For Democracy [UAD] one of the member coalitions of the Labour Civil Society Coalition).

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