Tuesday, April 05, 2016

Nigeria's Persistent Fuel Crisis: Who wanna be a Magician?

The guy is not a magician. He was being honest. He met 4 trillion of debt, mostly owed to cronies that supplied nothing and unverifiable but still legal debt cos NNPC staff were getting settled. The place is literally full of demons. From security guard to GGM, settlement is the culture of NNPC. The alternative was to ignore this and throw caution to the winds..but in the tight knit petroleum industry, it wouldn't matter. NNPC could not default on its "obligations" no matter how poorly contracted. In certain parts of NNPC, it requires 42 different officers/managers to approve an invoice. Just imagine that. Each an opportunity to "collect". 

In the Mean time, the entire asset of the organization was comatose. 30 of 33 depots/pump stations have not received product for years some since the time of Abacha and there was no plan to use them. Only about 720km of 5120km PPMC pipelines was even serviceable. 

(Side note: Even if refineries can work by miracle wand, they supply just half of Nigeria's needs meaning 900,000bbl is required to be supplied to them instead of their designed 450k bbl/day. It will mean that all federation crude will purely go to domestic consumption at under par prices.  This is a technical problem which a senate hearing cannot solve but have real consequences for the revenues of our 37 parasitic federating units. 😅)

Warri-Escravos pipeline that supplied crude to Warri and onward to Kaduna refinery have not been used in 5 years while PPPFM a crony company close to Diezani ripped Nigeria off on shipping contracts to deliver crude to Warri when it was not even producing.  So they deliver, evacuate and charged us for nothing for 3.5 years! PDP continued to import and abandon pipeline because the alternative was more expensive and they can make quick bucks. Imagine using ships to transport crude instead of pipeline. Using coastal jetties and trucking instead of depots connected with pipelines to the hinterlands. Addiction to Importing instead of refining when oil price were at its highest and we could afford to fix our refineries. Instead PDP racked up subsidy bills and allowed cronies to deliver phantom PMS for which they got paid for doing nothing. Others got dubious crude swap contracts that saw expensive crude being exchanged for a basket of products of dubious formula .

In short, All the operational choices were more expensive and equally unreliable. If an importing entity don't secure a ship for an international import cargo of petrol in minutes on a typical day, it takes another 2-3 weeks to get another one of similar spec as the market moves 2-3 weeks in advance and "subjects" get lifted as quickly as they appear (midstream terms - pardon me) . So one mistake or indecision and the entire country is screwed..even one by a starting junior officer acting for a boss on vacation. A simple decision on vessel programming suddenly determines if the entire country is thrown into panic buying and economy goes comatose because they (PDP) took the easy money route to plan our energy economy.  This is the country Obasanjo and PDP gave us..It started under him and he created the monster - to sponsor elections and win by all means. Lets be honest. 

Now the kicker..

And those guys have the money which translates into power to sabotage noble efforts to even fix this mess whose scope and magnitude you can't even begin to imagine. 

In reality, this long problem have an not so easy fix (thanks to union). Break up NNPC, spin off the business units and assets to private sector investors, et al. But even that requires time. Cleaning up the books and assets!

Another not so easy fix for the queues was to throw open the sea borders and allow anyone bring in fuel and sell at any price they wish. Similar to Kenya where they don't produce a drop of crude yet have no single line for petrol. Let's even make it temporary and remove duties to lower end user price . Make it the only product you can import for 18 months without duties until the refineries start working? But that was not an easy pill for Aso Rock Villa. The mentality of Petrol being the rights of Nigerians even if they have to die in scarcity and want persists. 

Now are you the magician? Solve this problem!

Saturday, March 19, 2016

A country of Minors

I said before, and I repeat that Nigeria is a country that major in Minors; but I'm beginning to think we are also minors. Minors throw tantrum, they blame others, they can't make decisions and follow throw. Minors are children, they're not matured. They feel helpless. Here are four reasons why I think we are exhibiting Advance Minors Syndrome (AMS). Think of it:

1. Ogbeni is to blame for not being able to pay salaries for borrowing when the FG insist on selling its dollar to Dangote for 197 naira indeed of 340, reducing Osun's take from 3.3bn to 1.7bn? Ok , Osun had 1.695 bn worth of debt, but at least 1.6bn will remain if we are not playing Ostrich with the Forex to pay salaries and fuel his helicopter 😂

Some of you are crying about the subsidy for the rich kids Vis CBN employment. The biggest subsidy is the undersold naira given to the richest among us. Yet some say we've been blowing grammar. Ok now. Complex as the issue may be, Nigerians sweat the small stuff while the big elephant is ignored.

2. Ocholi's driver is to blame for overspeeding, but who is to blame for the massive craters that destroyed the tires on Kaduna-Abuja road? The FRSC guy gave a presentation and then put fixing the bad road as the last item when Fashola was seating in the room. 9 months after swearing in, we are deceiving ourselves!

3. Vandals are to blame for power outage and system collapse , when we are yet to point to exactly which installation was vandalized? Truth was we celebrate misinformation.  We told them when celebration ensued  late last year that the combination of weather and rains is making their day. Now that the heat is up, and our under invested transmission system is collapsing in response, they're blaming unnamed vandals. Who is deceiving who?

What happened to just being truthful and actioning a plan to decentralize the transmission system in 9-18 months while we build 100 MW (all sources welcomed) in every state? This is what we promised, lets do it!

4. Lastly, we've blamed the petrol scarcity that started before the strikes on the unions? Only in Nigeria! Now that we are 10 days after the strikes and the queues are refusing to disappear how about we admit we made a grave error in not moving fast enough to reform the sector? How about we look at the very premise of price control (when petrol prices are at historic lows) and explore if this is smart policy or dumb policy?

Oh no! Too hard! A nation of minors.

Sunday, February 14, 2016

False Devaluation Debate of Emefiele and Buhari's Budget Excuses

The problem with Emefiele is that he is majoring in minors. The real problem of Nigeria is not devaluation vs ostrich policy. Devaluation has already taken place- the act of sending medical bills to parallel market is an act of devaluation. The selling of official rate to Hajj and pilgrimage folks is an act of economic subsidy of unproductive activities. Hence the debate is a false one. The real solution is revaluation.

The mechanism of forex demand and supply of Nigeria today is faulty. Emefiele however lacks the intellectual depth or the boldness to address this salient fact. There is no real forex "market" in Nigeria, where 90% of supply is dominated by one player - the Central Bank. This should not be so. The solution to Nigeria's problem as such is simple - and this will actually lead to a single rate market, and that rate will neither be 200 nor 345. It will be somewhere in between and enable banks and industry to focus on what matters instead of the nonsense going on now- growing production instead of worrying about exchange rate .

This solution is in constitution. All consolidated revenue should be distributed to all constituent bodies in the manner in which they were received. If they were received in dollar, yen, pounds et al- they should be distributed in that manner. This frees the CBN from the headache of being the sole market maker. Dollar and other currencies will be in the hands of 37-800 players who can trade it for naira or not with banks whom they will bank with who won't in turn distinguish these deposits or inflow different from normal exporters as it were and will be able to then stimulate a true forex market free from Emefiele fiat and market distorting nonsense. This is the structural solution that a compromised nonetheless intellectually Lilliputian CBN governor can never provide. You can't give what you don't have. Emefiele reflects the president that chose him.

PS: As I said earlier the independence of central banks was enshrined in central banking doctrine in the 1900s based on the reality that given the tough monetary decisions necessary to maintain a balanced economy, politicians should not drive both fiscal and monetary policy. In fact, it is in their interest to be insulated from it. Emefiele however has exposed the President by his inability to be independent because he is criminally exposed. The tail is now wagging the dog!

The only group benefitting from the current Emefiele Regime of fire brigade and jujitsu management of our monetary policy are the banks. Already denied the easy money of fixing government money via TSA with implicit carried interest of 8-25%, Emefiele have provided his buddies almost a 80% carried interest in Forex. I have friends that work in the industry and they confirm this. The forex policy have negated the potential effect of TSA which would have forced banks to lend to the real sector to stay in business. Now it is only their treasury department that are working- churning dollars supposedly allocated to manufacturers to round tripping - with no positive impact on the economy but their wallets. Nigerians need pitch forks and knives to deal with Emefiele and his band of bandit bankers!

The President and His Budget

The President should please start over, by assuming the first step in reorganizing the government was cutting down ministries Vis his newly appointed ministers to 24. Now ask the ministers to set the agenda, look through their ministries for who can implement it among current staff, examine existing agencies and parastatals and examine their viability and sustainability - recommend the ones to stay, go or merge, and then prepare a budget to fit the mission and the staffing.  Where staff are redundant by the exercise, launch a national retraining and redeployment program with part of the savings to not only engage them but boost the economy Vis investments, cooperatives and entrepreneurship. On the national level introduce serious ICT policy and shared services  mentality in ICT, Facilities and Building use by MDAs and vehicle use to cut cost.  Also constitute the NATIONAL PROCUREMENT COUNCIL and enforce uniform & sensible pricing and standards. A deep look at our foreign missions and if we need that many must also be undertaken . Time to tighten our belt!


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