I have read the opinion expressed by Mallam Lamido Sanusi over the ongoing oil subsidy imbroglio. To read Sanusi’s views click HERE. I am one of those who once said Sanusi is not arrogant but brutally straightforward. In that wise, I have decided to be brutally straight-forward in my opinion and reaction as well.

My position on Lamido Sanusi’s views are as follows
I concur with Sanusi’s analysis of the problem. However, due to our very different backgrounds, I strongly disagree with the following as itemized.

(1) First is the reckless generalization and uninformed conclusion (was this deliberate?) that the real masses do not use petrol. There is no empirical or statistical basis for this conclusion and neither is it supported by common sense. His very words “Removing it has costs in terms of Nigerians paying more for PMS – which by the way is not the fuel for generators… It is fuel used by the middle class and car owners to drive around town”. Take note of how Sanusi played down the functional role of a vehicle and reduce same to mere ‘glittering toys’ used by the rich (this was what he implied) “to drive around town”. To start with, critical observation suggests that most small generators affordable to the genuinely poor in Nigeria in fact rely on petrol and that most buses (popular 12 or 18 seater vehicles for public transport) in Nigeria the type that take the poor from Oshodi to Agidingbi, from Kuje to Kawo, from Akure to Abuja, from Asaba to Onitsha, from Rumu Okoro to Rumuola etc solely use petrol and are popular sights at fuel stations buying PMS! It should be noted that we are yet to factor in the numbers of the ordinary folks that depend upon Keke NAPEP (tricycles) or the popular ‘Okada’ (motorcycles) for basic transportation on a daily basis in a country where authorities responsible for putting in place efficient mass transportation systems have failed abysmally. This is even as what constitute the middle class from the point of view of Sanusi is debatable. The aspiring Kano businessman who borrowed ‘transport money’ from his friend to explore opportunities in Yenagoa, the unemployed but active job seeker who has to travel from Iwo in Oyo State to Abuja or the young man who has just saved enough to buy a small generator for his new barbing saloon in Mubi or the young woman who has just collected her thrift after a five year rigorous saving ordeal and has now bought a second-hand or fifth-hand car (Sanusi’s worse experience may be a grade A tokunbo or he may never have even experienced a tokunbo before) to move her goods around in Anambra just so she could help her husband to feed their family are people you may erroneously refer to as the middle class even as they represent the typical majority of ordinary Nigerians who would be negatively impacted by Sanusi’s logic because their daily living revolves around PMS.

This position has been aptly captured by Dr. Oluwadare Bada that the major error of commission is the so called ‘Technocrats’, who are completely detached from reality and who work on hypothetical models and then seek to force their experiment on the ‘guinea pig’ populace they do not know. They do not know of “I better pass my neighbour” petrol generators which sell for about ten thousand naira only and which the grassroots of Nigeria rely upon for their electricity in the face of failure of PHCN. They do not know that PMS is used to power small businesses like pure water sales, grinding mills, ‘bukateria’, soft drinks joints and beer parlours, dressmaking, welding works etc in our cities and villages and that electricity load shedding is predominant in poor and rural communities in favour of rich and elitist areas where their likes reside.

(2) His wilful over-simplification and deliberate appeal to probability, when he referred to “smart cars” is unnerving. His very words are “Those speaking now on the internet and facebook and twitter and newspapers are not workers but middle class elite who use PMS in their smart cars so let’s stop all the ideological pretence. This is not about elite and masses but an intra-elite discourse”. Yes, granted that the possibility exists for some of those actively opposing fuel subsidy removal on facebook to be those that can be classified as elites, it does not imply that all are or that majority of those speaking out using modern social networking tools are elites. Unfortunately, it is a naked reality that very few of the majority of what constitutes cars in Nigeria qualify for the toga of ‘smart cars’ in the first place. The majority are the rickety but functional vehicles on our intra-city and intercity roads that perform the basic function of moving our people around. Majority of those on the internet depend on one of these for their transportation. The student, the job seeker, the newly employed etc are the type of Nigerians that form the majority on listserv. I meet them every day. Because there are a few well-to-do Nigerians who are making their voice heard over the internet should not confuse any policy maker to commit such a blunder that is based upon only illusions of validity that everybody on the internet in Nigeria must be elite. It is a basic rule of science, whenever the data constituting primary inputs into any analysis is wrong, the output cannot be reliable.

(3) His conclusion that removal of subsidy is the ONLY solution to checking the corrupt practices that have come to define subsidy’s administration in Nigeria is simplistic. It is like taking the path with the least resistance – and an admission that the government is afraid of a few powerful men but is ready to impoverish 150million vulnerable Nigerians. It is my view that this approach would merely serve as a pat on the back for those who carried out the unprecedented heist described by Sanusi in his submission. In fact, removal of oil subsidy after an acknowledgement of the level of economic crime committed against the Nigerian people without first confronting the existing system and ensuring that those who collaborated to take advantage of it are trapped and caught which would then empower the Nigerian state to retrieve a reasonable amount of what has been stolen would further negatively impact on the trajectory of the corruption narrative and transform it to something akin to ‘corruption is good as far as the culprits are able to cover their tracks and remain uncaught’.

Unlike Sanusi, due to my background as a scientist, I see the challenges posed by the faulty and loopholes’ laden processes currently in place, as far as the downstream oil sector is concerned, as surmountable odds. For instance, I see a parallel between the scenario painted by Sanusi and what I met on ground in 2006 at the Ondo State Board of Internal Revenue (BIR). Then my mandate from the governor was to eliminate all avenues of financial leakages and ensure all funds meant for the state comes directly into the purse of the state and for them to remain eternally traceable and for critical questions of how much, who paid, to whom, for what purpose etc to be answerable correctly at every instance of time.

The first thing my team did after understudying the scenario was to develop a new IGR Fund Processing and Administration Policy that appreciably altered the existing process to suit the type that would make leakages impossible. This is because we discovered that there was absolutely nothing in the original process that did not expose the line administrators to naked temptations of abuse or that prevented them from helping themselves to the State’s till. My team discovered that bank officials, some men of the board of internal revenue and other collaborators worked jointly and individually to sabotage the existing system because it would in-truth require only angels to remain saintly untainted in an atmosphere that offered indestructible cloak of protection to pilferers of public funds. A chunk of the missing money was in fact never known to have ever existed! And like the scenario painted by Sanusi, these officials could always ‘perfect’ the documents to make everything appear legit, authentic and untraceable. You can only trace money you knew existed! Our new policy formed the backbone of the Automated Revenue Generation, Collection Administration and Accounting System that we eventually deployed.

Realising that a system cannot change without first changing processes, our new policy stipulated that basically no single organ or person would have absolute control over the system, this included reportage and record warehousing and that every activity would be a transaction for the purpose of maintaining an audit trail and log of activities. Without going into the nitty gritty of what we did and the checks put in place; history recorded the fact that the result of our effort was an unprecedented 86% increase in the state’s IGR within the first year of my team’s intervention. Of course I had the governor who wanted results and the then Head of the BIR Mr. John Adebiyi, who worked tirelessly with my team to thank for the success recorded.

Like the Yorubas would say “ori bibe ko ni oogun ori fifo”. This means that you cannot recommend beheading a man as a prescription for his headache. Yes we know that beheading a man would end the headache, but the cost to the man is the ultimate price. This is why it is my view that further impoverishing Nigerians with the domino impact of the oil subsidy removal at a time when the nation is grappling with the menace of religious and politically motivated mass killings is an exercise that suggest that those in charge of national policy decisions are too far detached from the reality on our streets and have sanity that leans towards cruelty. Their choice of time to introduce their volatile and controversial economic policy, which coincided with a time hundreds are being slaughtered in a part of the country while other parts are threatening reprisal attacks indicates that they lack any scintilla of patriotism in them. The real opportunity cost of a reform in that sector at this time should be the denial of further opportunities for those who abused or took advantage of the system via a change in processes empowered by appropriate relevant modern technology.

Also, against the reality that the average Nigerian lives on less than 1 to 2 US dollars per day while the minimum wage (yet to be paid by most states) is just N18,000 (112 US dollars per month) and the ultimate realisation that there is no steady electricity supply in any part of Nigeria thus making everybody dependent upon petrol and diesel should make any patriotic policy maker to explore other options that would ease the pain of members of the public and offer then hope that their government cares. It is only a naive policy maker or the egregiously selfish type, whose fundamental desire is to impress the World Bank and IMF so as to secure future job relationships with such bodies, that would recommend that Nigerians who live on less than $1 per day pay for fuel at the price obtainable in the US, UK and Canada – their preferred international references for prices though never for good governance – when the reality of the quality of life and standard of living in those places are world apart from Nigerians’. This is a well-known international politics that the well-connected have played for ages. The recent ‘buses for mass transit gesture’ by Mr. President is not even an adequate token for the pre-subsidy removal days, talk-less of it being considered an acceptable post-removal intervention gesture or palliative by government.
I shuddered to observe that Sanusi laboured frantically to deploy his in-depth knowledge of and handy Nigerian financial statistics using them as canon folder to sell a very different conclusion to the public. Is he being smart or he sincerely does not know there are other options? There is no correlation between the statistics cited by Sanusi and the conclusion that the ONLY solution is subsidy removal. At best, Sanusi’s throwing the N1.2trillion in our face did not address the core premise of the subject matter. He is misrepresenting the position of those opposed to subsidy removal. He has continued to equate support for subsidy to a support of a continuation of an annual payment of the phony N1.2trillion. Sanusi is revelling in wilful fallacy of Ignoratio elenchi. The position of Nigerians is that if Sanusi and his other star attractions in government are serious, within one week, the government can end the payment of this N1.2trillion fake subsidy and pay only genuine subsidy. There are volunteers who are ready to let them know how to eliminate the checkpoints of fraud that have pervasively defined the existing system. We also insist that actual subsidy based on the reality of our actual consumption (which he has admitted) CANNOT be more than a third of that amount. This is the position of Nigerians.

As I have argued on many occasions, the greatest obstacle to reform in Nigeria is the government. The Nigerian government appears to derive pleasure from manning mission critical national challenges with the least qualified Nigerians. As it is today, it is a fact known on the streets that professional bodies such as the Nigerian Society of Engineers, Nigerian Petroleum Engineering Division of the NSE and even the Council for the Regulation of Engineering Practice in Nigeria are not in any way involved in any reform being carried out in the country other than paying courtesy visits to Mr. President. These are institutions who ordinarily would add value to the nation if the president liaises with them for the purpose of getting professional advice before taking decisions on areas that ordinarily constitute critical success factors in nation building. As an engineer, listening to Ngozi Okonjo-Iweala talk about billions of dollars and making subsidy removal a condition precedent to being able to build our roads often makes it difficult for me to shake the feeling that I am listening to an infrastructure-illiterate. This is often my feeling as well when I listen to our ‘experts’ drop the value of billions of dollars even before project BEME or even basic BOQ are defined and produced. The example of Lagos-Ibadan expressway project’s value without evaluation is fresh in our memory. This is the same feeling I get when other ‘experts’ speak about their strategies for reining in the difficulties the nation is facing in attaining sustainable electricity – especially against the backdrop of the fact that their actions are often at variance with what has worked elsewhere.

For example, is it not a huge irony that people of the calibre of Sanusi would keep quiet when the Petroleum Product Pricing and Regulatory Authority (PPPRA) claimed in a single press release on the first of January 2012 that “By this announcement, the downstream sub-sector of the petroleum industry is hereby deregulated for PMS” while in that same press release the same PPPRA claims it would continue to set prices of products? PPPRA’s language does not also indicate that it would end government’s controlling power in the industry to determine who is favoured with licenses for PMS import which the PPPRA stylishly referred to in that same press release as “Service providers”, a euphemism for ‘Subsidy Beneficiaries’ or better still ‘the thieves’ identified and chronicled by Sanusi in his exposé! Is it not elementary that deregulation is the opposite of regulating prices? Is it not also elementary that once government controls who gets licenses, that is the birth of a cabal and whether PPPRA regulates price or not, the cabal can always set their price thus defeating the goal of deregulation? If government is sincere, deregulation must be followed by a proscription of PPPRA and a formal empowerment of the Department of Petroleum Resources (DPR) to conduct Quality Compliance Test on all petroleum product imports at the port of entry. That way, the downstream would be opened to all as an equal opportunity investment environment. Every Nigerian individual and businesses that so desires, would be able to use their money to import products and have such products inspected at the port. I mention this only because of the obvious reluctance or inability of government to promote the real solution – local refining of our petroleum for our local needs. Even under this scenario, subsidy will die naturally.

It is also worthy of note that Lamido Sanusi appears to agree with virtually everything revealed by Femi Fani-Kayode in his recent revelation about the N300billion oil subsidy payment under President Olusegun Obasanjo and the N1.3trillion claim of the Goodluck Jonathan’s government except the claim of deduction at source by the NNPC which had no material impact on the comparison or the subject matter of unrestrained and wanton abuse. This position reinforces the belief that the bane of the oil subsidy issue under the present leadership appears to be its readiness to totally acquiesce to ‘petrol corruption’, a policy of ‘do absolutely nothing’ and the end result is the current dire situation for which innocent Nigerian are to be punished while the culprits roam freely and re-strategize in-order to continue to take advantage of the system using newer methods.

Is it not also laughable that when Sanusi and Iweala are telling Nigerians that their new policy will punish the ‘subsidy beneficiaries’ by redirecting subsidy money away from them, the same beneficiaries have been happily taking pages of newspaper to express their solidarity with and support for the government! This is because the cabal or subsidy beneficiaries or subsidy thieves know that the difference of N76 (i.e., N65 and N141 new price post removal) will be paid by somebody – that somebody is the ordinary Nigerian, the poor masses. Hence, government’s removal of subsidy has only transferred the subsidy payment (the balance of N76) from government to poor Nigerians.

Also, Nigerians cannot trust any of the major proponents of subsidy removal. As rightly noted by Joseph Obe, Okonjo-Iweala in 2005 at the core of her Paris club deal’s assurance to Nigerians was the promise that ‘funds earmarked for debt servicing would be utilized for the provision of social services that would directly impact on the well-being of Nigerians’ (please refer to http://english.peopledaily.com.cn/200510/22/eng20051022_215999.html ). History is the best teacher. That promise failed. All the critical social and physical infrastructural never materialised for the well-being of Nigerians (please refer to http://www.punchng.com/business/subsidy-removal-nigerians-wont-suffer-in-vain-okonjo-iweala/).

Recommendation

  1. Let Sanusi and the president of this nation allow Nigerians to come up with cast iron solutions that will end the wanton corruption in the downstream sector. Such solutions exist. I assure them that we will unveil to them how to apply technology for a reliable and pervasive tracking of each drop of oil from the high sea to the ports and to the pump stations. They should consider this an open challenge.
  2. Let the federal government co-opt established multinationals who have excellent track record in the energy industry to set up local refineries in Nigeria. Some of the billions of dollars being wasted on frivolities should be injected into this joint venture as counterpart funds while allowing the multinationals to operate and manage the new refineries using international best practices. Production cost will be pushed down because required labour would be sourced locally plus the natural advantage of proximity to raw materials. One does not need a soothsayer to know that subsidy will die a natural death in this scenario. Imagine 12 functional refineries servicing a population of 150million and the West Africa sub-region, imagine the potential for economic revival, job creation and technology transfer. The success of these multinationals will spur into action and rub-off on genuine Nigerian investors who are ready to set up local refineries the same way that MTN and Econet’s success back then aided the success of Glo.

Conclusion
It is instructive for the Executive at this crucial time to take particular note of the wordings of the Sunday (8th January 2012) Resolution by the House of Representatives on Oil Subsidy at its emergency session. The significance of the wordings of the resolution should not be lost on Nigerians. It is a strong indictment of the Executive portraying the latter’s action over subsidy removal as reckless, grossly immature and gravely insensitive.

 

LAMIDO SANUSI’s POSITION

If you will patiently read this mail to the end you will understand my position. I won’t be able to repeat everything I have said over the past few years on fuel subsidy, but in summary; Fraud like theft thrives not only because of the existence of greed and benefit but of opportunity. Place yourself in the shoes of the average nigerian “businessman” or “entrepreneur”-polite euphemisms for rent seeking parasites.

You establish an elcee for importing 20,000MT of PMS and the PPPRA says this is at a landed cost of N145 for example per litre. So u know that for every litre in that vessel you will get at least N85 as subsidy. Now you have a number of “possiblities”:

1. You can off load 5,000 MT and bribe customs and other officials to sign papers confirming u offloaded 20k MT. Then do the same across the chain with a paper trail showing you delivered 20k MT to a tank farm, and maybe even that u transported it to Maiduguri entitling you to a share of the price equalization fund. Maybe for N20-N30 per litre u bribe all those who sign the papers. The 15k MT you take to Benin or Ghana or Cameroun and sell at market price thus makin an additional “profit” of N55/ltr on 15,000MT!

2 you can just forge documents and have them stamped without bringing in anything and collect the subsidy-PPPRA pays based on DOCUMENTS.

3 you can bring in the fuel, load on tankers, sell some at N65N some at 80 some at 100 some across the land borders.

You can do all this and no one can catch it or prove it because somebody was paid to sign off on docs. And with a high enough margin there is too much temptation to be resisted and firepower for bribing officials.

When I spoke to the house of reps I told them why I was suspecting fraud. It starts from PPPRA “allocations” based on “capacity”. You will find a company like Mobil with capacity for say 60,000 MT and a relatively unknown name with a capacity of say 90k MT. Red alert number 1.

Although PPPRA is supposed to give license only to marketers with a national distribution network you see names of companies where you have never seen a filling station in their name.

I was a chief risk officer in UBA and in FBN for many years approving loans so I know the name of every big player in every industry that nigerian banks lend to as these are among the biggest banks in the country. I see names on the least I don’t recognise either from portfolios. I looked at or industry
studies over the years. Red alert number 2.

I studied the papers presented to PPPRA in a short period in 2010 (I won’t tell you how I got them!). And I was surprised that on some days over 10 vessels are said to have discharged cargo in lagos on the same day-clearly the same officers stamping and “verifying” that the vessels were SEEN. Is it really realistic that on the same day 13-15 vessels can discharge in Lagos? Red alert number 3.

Why was I interested in fuel marketing. Because the two sectors that led to the near collapse of the banking industry were capital markets and oil marketing. I am not giving any confidential info out as AMCON MD has already disclosed publicly that two companies alone-zenon and AP-owned by the same businessman owed the nigerian banking industry N220b. And we all saw the amount of subsidy paid to those companies published by BusinessDay.

So money had been taken, subsidy had been collected but loans were not repaid, and we couldn’t see the money either as product in tank farms or in fuel stations or credit sales. So I became obsessed with trying to
understand how that industry operated and the more I saw the more I hated it and I started the war against subsidies.

It is actually better to do a direct cash payout or add a line item to salaries called petroleum support or transport allowance capped at say N300b p/a than to keep paying it. It goes to pay middle men, rent-seekers and corrupt officers and there is no amount of preaching that will stop this fraud so long as the policy is so badly defined.

Everytime oil price goes up and everytime the naira is devalued and everytime the quantity of imports increases the “subsidy” and thus the “rent” increases and there is more gravy to go round. So every year we
“import” more and more and deplete our reserves, and the government borrows more and more to pay for subsidy and the beneficiaries are a smal group of marketers, govt officials and neighbouring countries which get fuel without losing forex! And while a person who applies intelligence can see what is happening you can’t prove it in a court of law. If the man says he sighted the vessel and it was 20kMT you have to accept it. It was a year ago!

So for two years I have been convinced that this thing is a scam and that it cannot be stopped because the entire controls have been compromised. NNPC sells domestic crude, Pays whatever subsidy PPPRA says and then gives the balance after JVC to the federation account. And while fani kayode is right to speak up, the truth is that it was obasanjo who first subverted the process by allowing NNPC to make the deductions before paying into federation account. Because once money goes into that account it is to be shared among 3 tiers of government so strictly speaking the deductions have always been unconstitutional as the FG was paying subsidy on behalf of itself and state and LGs without their approval.

So yes, I am willing to take all the criticism and labels and be unpopular but this has to stop and govt can find other ways of alleviating pain. Iran removed subsidies and started cash transfers directly to the poor. It is up
to fiscal authorities to figure out safety nets but from where I sit and what I know this decision is not only correct but necessary and overdue. I also confirm that I have revealed nothing here I haven’t spoken about before in public and it is just that Nigerians never listen!

I am not complaining about insults I am used to that. I just believe that an insult is not an argument and when people resort to personal abuse they have run out of logic.

But to then go beyond me and extend it to my dead grandfather and his “descendants” ie my late father his siblings etc I think goes beyond the pale. As a Nigerian-and as an economist- I can take a position on economic matters and this position is one I have had for years even before coming in
to the central bank.

I have also explained the position on several occasions and criticised government for not doing this before. In 2010 at a public hearing in the House of Reps on the 25% saga I alerted the nation of what I considered a
potential big scam around subsidies and urged for its removal. No one paid attention. The economics is very clear to me. That it is unpopular is also understandable.

The British public is unhappy with Tory budget cuts. The Greeks went on riot over austerity. Italian parliamentarians came to blows before Berlusconi was thrown out of office. The US congress is yet to approve Obamas tax increases.

Economic decisions-by definition-ALWAYS must involve a cost or an opportunity cost since for them to qualify as economic they must involve a choice in resource allocation among competing uses. An enlightened debate is one that weighs the pros and cons of removing subsidy and continuing with it.

Removing it has costs in terms of nigerians paying more for PMS-which by the way is not the fuel for genrators, power plants, production facilities, heavy duty goods transportation trucks and even luxury buses.

It is fuel used by the middle class and car owners to drove around town and from city to city not to employ workers and produce goods and services. Diesel which is critical to manufacturing and employment creation is not subsidized as the subsidy was removed years ago by obasanjo. Nigerians said nothing then because it was blue collar workers that got retrenched by factories.

Those speaking now on the internet and facebook and twitter and newspapers are not workers but middle class elite who use PMS in their smart cars so let’s stop all the ideological pretence. This is not about elite and masses but an intra-elite discourse.

Lamido

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