Thursday, January 12, 2012

Occupy Nigeria: Fuel Subsidy Crisis & Way Out

We understand Labor and Government are finally talking after much prevarication by our stubborn President. A starting point of compromise and negotiation should look like this:

1. Immediate reversion to the ex-fuel price of 65 naira up until the end of current budget year of March 31, 2012.

2. Empowerment of a joint task force of the EFCC, ICPC, CBN and Nigeria Police under a Sitting Judge to investigate the cabal that have milked fuel subsidy in the last 10 years, recommending fines and jail terms where appropriate. Tax fraud, racketeering and forgery should all be on the table for use to nail the offenders. 

3. Implementation of the following in the new budget:

a. Drastic reduction in the allowances and payments to political in both arms of government with a view to reducing net overhead expenditure to 45% of budget size. This includes removal of security votes, removal of constituency projects, reduction in number of advisors/assistants, reduction in the size of the presidential fleet, and reduction in the size of pools of vehicles maintained by the FG.

b. Law to mandate the RMAFC to tie basic salaries of political officers to the minimum wage (as a multiple) and remove ALL allowances. All benefits to political officers are to be provided as line items in budget, and must be justified by MDAs and agencies. Nigeria's president (as the highest paid) should not earn more than the equivalent of $200,000 per annum and should feed his family from it. Period. 

c. Immediate dissolution of the PPRA, and transfer of powers to meet domestic fuel demand shortfall due to NNPC's moribund refineries to a new agency governed by a board of 2 Representatives of the Executive, 2 Representative of Labor, 2 Representative of Civil Society and 1 Representative of Fuel Marketers. All organizations present their nominee.

d. KPMG or Price Water House is invited to recruit true professionals into this quasi agency. Also, Agency accounts is to be audited by KPMG every three months. 

e. New Agency to put out invitation to tender on supply contracts for open bidding by local companies only- investors in "under construction" private refineries being given preferential treatment, 3 months ahead of anticipated demand shortfall. Where good prices are not secured by bids, agency is empowered to negotiate for direct consignment from international refineries. 

4. Upon implementation of the above in six months, labor shall engage with government with a view of securing some contribution from Nigerians towards reducing the cost of subsidizing importation, in return for elevated level of investments in new local refineries with 3 years. 

5. Pass the Petroleum Industry Bill immediately, split up NNPC into manageable parts-separating the refineries into various companies while commercializing them.

Tuesday, January 10, 2012

Occupy Nigeria: Debunking the Subsidy Propaganda

In recent times, we have seen an upsurge in falsehoods and false arguments propagated by the propaganda machine of the federal government. These disinformations are particularly effective now that the strike is on and we are all glued to our TVs.  Of course, as the day wears by the goal is to make our resolve wane by these false arguments. To prevent the planned disillusionment, we must counter the false arguments. Here is a list, and we shall add to it as we go, of falsehoods “your government” is propagating:

1. Deregulation is good in telecoms, Banking etc. It will be good in Petroleum Too – By NESG Chairman, Fred Nweke (Former Information Minister) & Others

Response: Well, not exactly. Deregulating the marketing of petroleum (which is usually money losing) and not the upstream production (where the easy money is) is analogous to government owning MTN and Globacom, but privatizing sale of recharge cards! Our right to subsidized petroleum is a derivative of government’s insistence on managing that asset directly in trust for the people: who demand it cheaply. Moreover, in developed countries (like the US) where the price at the pump is deregulated, if you find oil in your backyard you also own it. In these countries as well, important resources like food are subsidized. What has the Nigerian government done for you lately?

2. Subsidy breeds corruption and the cabal benefits – By Governor Sanusi
Response: This argument is basically saying the government cannot deal with corruption or is not willing to confront their buddies that are the “cabal”. Was Femi Otedola (the Diesel Prince) not the biggest sponsor of the President’s ambition in 2011? What happened to prosecution, forensic accounting, investigations, trial of these cabal for anti-market tactics, fraud, forgery, tax evasion and perhaps treason? Guess the President does not take his Chief Security Officer role very seriously!

3. Oil is lower in surrounding markets and if lower in Nigeria it will lead to leakage – Minister Okonjo-Iweala
Response: This argument is preposterous. If this were true, then refined oil prices will be the same around the world except for islands! Think about it, every nation have a border and oil prices vary widely across them because those borders are monitored for smuggling. If the government cannot do its job, with simple technology, why should the people pay? Moreover with 75% spent on overhead, we still cannot find people to guard that border to avoid seepage? Moreover, these surrounding countries don’t produce oil. Cameroon that produces mere 85,000 barrels per day, subsidizes petroleum with up to $100 million per year. 

4. Only the Middle & Upper Class benefit– Governor Sanusi & Minister Okonjo-Iweala
Response: This argument is bogus. The price of energy affects everything in every economy and more so in Nigeria. In the US, for every 15 naira rise in energy price at the pump, the GDP is reduced by 0.5%. In Nigeria it will be worse since we are not just poorer (by many thousands) but also depend on it not just for transport but power and cooking because our government is inept! The price of everything, on everybody is going up.

5. We are borrowing money to pay subsidy – President Jonathan & Mrs. Okonjo-Iweala
Response: This is a big fat lie. The NNPC pays money for the current subsidies from sale of crude oil directly to PPRA before the balance is deposited in the Federation Account. Albeit illegal, this is what the Senate found out. How then can it be said to be borrowed? If Nigeria is borrowing, it is only because our political class of less than 10,000 people arrogates 30% percent of the budget for itself, allocates 45% for its work force (of about 350,000) and asks the rest of us (149.5 million) to make do with 25% of the budget which never gets to us!

6. The money saved by subsidy will be spent on job creation and infrastructure – President & Ministers
Response: Again, the previous point they make is the answer to this. Where will this be saved if the money is borrowed? See, we received the 2012 budget and they did not indicate any subhead as SURE Projects or whatever that is called. Fact is the SURE Initiative was an afterthought. Evidence is slowly emerging that document was put together hurriedly by his spin doctors, in the last few weeks to the end of the year before GEJ sprung us a surprise of the year. By the way, how can a government with 4.3 trillion and no evidence of good spending convince 1.3 trillion will make a difference? Or a government that cannot even organize a medal ceremony be trusted with huge infrastructure projects? The best way to restore the economy is to increase the buying powers of the people not reduce it by 1.3 trillion naira that will go into foreign accounts! Tax cuts not increases!

7. 25% cut in salaries of political officers is sharing the pain- President Goodluck Jonathan
Response: For one, let us be clear here: basic salaries amounts to nothing to political officers. They make more from security votes and allowances than anything else. They get enough freebies from us including free fuel and house helps; they basically dash away their salaries. Also, the President has no such powers to reduce salaries of political officers. They are set by the Revenue Mobilization and Fiscal Commission (RMAFC) which sends it to the National Assembly for approval. The President also did not reflect this reduction in his budget. Nice! 

8. The protests are sponsored and being used to discredit the government – Reuben Abati & the Statehouse Press Folks
Response: No, it is the policy that is sponsored: by World Bank and IMF types. The protesters need no sponsors like the President and his cabinet does; we have our minds. Being an opposition politician does not disqualify anyone from voicing their opinion against arrant policies especially popularly unpopular ones (emphasis mine). What is the point of being in opposition anyway?

To the leaders of the movement, the Save Nigeria Group or the Nigeria Labor Congress or the Occupy Nigeria movement, it is important to keep the momentum and think strategically. The enemy is foxy; they have at their disposal the resources of the state and it is important we undermine that advantage especially going forward. Education of your followers with the above rebuttal points is important but that is just part of it. Motivation will soon run in few days as the economy of the common grinds to a halt. Food will run low; energy will run dry. It is important we start thinking now of how to sustain this movement and to make the government feel the pain quickly.

The government of Nigeria fortunately lives and dies by one resource. This makes them an easy target. Ask the MEND boys who got the attention of the Federal Government by doing the same targeting albeit in a more innocuous ways. We should be planning on how to shut in as much oil production as possible. Make it impossible for the IOCs to service their wells, onshore or offshore. Ban the lifting and transport of materials to support oil production. Block the operations of the big energy players and see the federal government go literally broke in one week! The earlier we do this, the quicker the outstanding issues will be resolved. The Nigeria Labor Congress and Civil Society must flex its muscle, and remind this government where the true power resides: with the people! 


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