Nigeria: The pain of (oil) subsidy and the joy of its removal .

For a long time, I have thought that the subsidy was unnecessary and a financial black hole. More accurately I think most government subsidies, especially when the government is involved as a producer/supplier, is wasteful.

Such subsidies discourage true competition which would normally bring prices to their true market value. Without healthy competition, the industry could easily slip into costly mediocrity: under production, poor consumer experience, and exploitative pricing.

We have seen this play out in government owned corporations. Think of NITEL, NEPA (PHCN), Continue reading

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Data-driven discussion on Nigeria’s economy

The Naira is weakening against the Dollar. One significant way the government has responded to this is to peg the official exchange rate at no more than 200 NGN to 1 USD. The central bank seeks to reduce local supply for the dollar hoping that it would force lower demands for the currency and strengthen the Naira. In the background, the President Buhari administration is working ostensibly to recover looted or misappropriated public funds. The narrative is that the recovered monies would help in rebooting the economy. Beyond partisan thinking, are these measures working? Continue reading

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Boko Haram abductions: Beyond Chibok


On April 14, 2014, 276 school girls were abducted from their dormitories by Boko Haram in Chibok, Borno state. The latest from the government on this matter, at the time of this writing, is that it has ‘no reliable intelligence on the whereabouts of the girls’. It has also said it would soon name a panel to investigate the abduction.

This comes as a big let-down for the parents and families of the girls. It is also a shock to advocacy groups that have been at the forefront in demanding decisive government action in the rescue of these girls, especially the Bring Back Our Girls group, led by Aisha Yesufu, Oby Ezekwesili, and Hadiza Bala Usman.

While we wait on the government to name its panel to investigate the matter and to gather credible intelligence, it’s important that we see the big picture for what it is. Before setting out to write this piece I did a desk research to update myself on what is on ground. I asked questions like, ‘How much has the government done till date in combating the insurgents and what levels of success have we recorded? What is the present humanitarian cost of this crisis and just how well connected is the government to the plight of affected citizens?’

I found out and everyone should know that the Chibok girls are a small fraction of the total number of girls that have been abducted by the Boko Haram in recent times. It shocked me to find out according to some reports there are over 2000 people, majority of whom are girls and women, that have been abducted by the group between 2014 and now. According to Amnesty International (AI), between November 2014 and February 2015, about 500 women and 1000 girls were kidnapped by the Boko Haram. That happened just in the space of four months! And what do these insurgents do with these vulnerable people?

AI reports that many of them are forced into marriages, serially raped, used as sex workers, trained to fight, or sold off as slaves. These are Nigerian citizens who have full rights to government security and protection. All of these people also need to be brought back. It is time to let the government know that we are not only missing 219 Chibok girls (57 escaped on their own from the original 276), but 2000+ people.

How much has the government done? This deserves attention too. Here is a quote of a reported speech attributed to the president:
“”I assure you that I go to bed and wake up every day with the Chibok girls on my mind. The unfortunate incident happened before this government came into being. What have we done since we assumed office? We re-organized the military, removed all the service chiefs and ordered the succeeding service chiefs to deal decisively with the Boko Haram insurgency.
“In spite of the terrible economic condition we found ourselves in, we tried to get some resources to give to the military to reorganize and equip, retrain, deploy more troops and move more forcefully against Boko Haram. And you all know the progress we have made. When we came in Boko Haram was in Adamawa, Yobe and Borno. Boko Haram has now been reduced to areas around Lake Chad. Securing the Chibok girls is my responsibility.”

There is a long way to go. I look forward to hearing that there are greater results coming from our multi-task force at the borders in defeating Boko Haram and recovering all the children, women and men they have taken captive. None can be left behind. And until this is done Nigerians can not accept the claim that Boko Haram has been technically defeated. The president in his inaugural address plainly stated that the war on Boko Haram cannot be said to be won without bringing back the Chibok girls. This statement is commendable to the person who does not realize that over 2000 persons have actually been abducted. It is good however for the government to state the true picture of things and reframe its goals very clearly.

It should also start planning for the rehabilitation and reintegration of this people. This would be a sure signal that our government is heading somewhere and is keen on getting there. At this point, I just want to yell out loud, ‘Bring Back (all) our Girls! Bring back all our citizens!’


 

 

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State of the Republic

The current trend of the naira and shortfall in the government’s budget is not very surprising, given the fact that the oil market is the country’s major earner on the international front. It is said that at least 70% of government revenue depends on this sector. It is important that we understand what we are up against.

The collapse in global price of crude oil is a result of disruptive technology that makes it possible to have abundant oil at cheaper prices. For reasons best known to it, the OPEC has maintained it’s pre-crisis supply levels. Right now, the market is flooded with cheap and abundant fuel. Perhaps the thinking is that the shale revolution would shrink and choke out and crude oil prices would bounce back to an average of $100 per barrel. However, advanced countries have a lot of interest in seeing that fuel price stays low. Today, they finally have means to translate their interests into action. They are not only investing in cheaper and abundant fuel, they are also working hard at finding practical, cheaper and abundant supply of alternative energy.

The reason for this is around us. In recent times, we have witnessed unprecedented global economic growth and expansion. We have also experienced phenomenal economic shocks and recessions. Every state now considers, as high priority, ways to get back on the fast track of economic growth and development. The general strategy at play here is to find ways to cut back costs of production, increase supply of improved that are eco-friendly and offer them at profitable selling price. As such, even if the shale revolution would naturally choke out (that’s a big if), governments of advanced States would intervene to save the day.

The point here is that we can not wait for a time the price of crude oil would get back to $100 per barrel.

How are we holding up now? What would the coming months look like? Starting on January 4, 2016, IMF director Christine Lagarde commenced a four day visit to the country. She said, ‘we think that given the measures the government is taking, the country would not have a need for IMF loans.’ I do not think she was speaking accurate economic language. I think that she was talking to a significant proportion of the public who are suspicious of IMF loans and policy suggestions, and who are generally anti-IMF inclined. However, if we test her statement against the context on ground, we may see a different picture entirely.

The president recently presented the 2016 budget. It is a deficit as expected. Crude oil prices are not done with falling as we now have predictions it could sell as low as $20 per barrel soon. The naira has continued to dip against the dollar. Unemployment is rising. Inflation is inching up. Civil and public servants have been grumbling over delays in salaries. Government revenue is a shadow of what it used to be. There are loud economic and financial crimes investigations in hope of recouping misappropriated and stolen monies. Perhaps the biggest item in the midst of all this is that the federal government is taking off the fuel subsidy this year.

Two things are immediately clear. We are ‘scrounging’ for revenue. And second, we do need loans. That is the only way you can finance a budget deficit. Why did the IMF director say we might not be needing IMF loans? I would say she chose her words well. If we might not be needing loans, we might as well need them. A budget deficit in the face of falling revenues is a clear signal that we would need loans. Her comments also project the idea that the Nigerian economy still has space to bounce.

It is good for the government to come to terms with this early enough. Taking an early approach towards securing loans, while things still appear under control, has its advantages. We can negotiate from a position of strength and explore several debt financing options. The economy would yet be able to absorb the benign reforms that receiving loans may necessitate. Furthermore, the ease with which we receive such loans would boost investor confidence. If creditors feel safe to loan us money, then it is a sign that we are still a good place to invest in.

However, if we wait till things do appear bad before reaching out for loans, we would have less bargaining leverage and investors would become extra wary in doing business with us. One recent example of what happens when a state does not rise early enough to its economic realities is Greece. If Greece’ government had started pursuing smart reforms, debt restructuring, and attracting investment capital as early as 2008, it would not have had the trouble times it suffered in the last three years.

We must not take loans to merely keep the government afloat, i.e, having just enough to run its concurrent expenditures. We need to develop smart investment plans and policies for short and long periods of time. Many have seen the oil economy winding up and they immediately clamor for a reawakening of the agriculture sector. Investing in agriculture is good. But have we analyzed the maximum yield in profits we could have per million naira invested? I do not imagine that earnings from agriculture could bear the financial burden of this country for half a year. We must be careful to invest in right proportions, lest we launch another era of white elephant projects.

Let us look at our non-oil exports and our trading partners. Are there potential advantages that we are not exploring yet? Could we tweak our foreign trade laws, quotas, charges and taxes in such a way that it shores up the volume of our trade and earnings? How about our trading partners — are there profitable needs they have that we can attend to? What partnership agreements can we initiate with and through them to expand our market reach? How can we make it easier for legitimate foreign direct investment to flow into the country, and how can we channel that inflow to improve our citizens’ standards of living?

I hope the government has a team of thinkers in place who are dedicated to thinking, researching, collaborating and recommending smart policies, which the government would be eager and committed to implementing. Hopefully, with the right sort of thinking, collaboration, recommendations and executions, we would have a merrier story to tell in 2017.

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Nigeria: Smart plans, not reactionary, should drive removal of fuel subsidy.

News reports have it that the government has finally cut off fuel subsidy. Normally, that should excite me. Something doesn’t feel right, at least for now. Hopefully a detailed government rationale behind this would come out soon enough.

Global crude oil price has dropped by over 60% from 2014, and it’s still dropping. By some predictions, it may drop further to $20.

So naturally, refined fuel (especially PMS) should become cheaper and in surplus, since the price of the raw material has significantly fallen. Under such circumstance, paying subsidy would be unnecessary.

But this is neither happening today neither is this the reason government has cited for scrapping subsidy as far as news reports go. PMS is scarce, and where it is found, it sells at shocking high prices. And that’s why I am alarmed. According to news reports, the government says that we can not afford subsidy now due to a depleted treasury, hence it’s being taken off.

I ask, “What is the plan if some freak economic event makes the price of crude oil (the raw material) jump back up to $100? Do we reintroduce subsidy then? Freak events that could trigger such wild jumps include a break down of supply in major oil producing States like Russia, Iraq, Iran and Saudi Arabia. Take note, the OPEC hasn’t cut oil supplies yet. It is only a matter of time before they do so in a bid to get more favorable prices for crude. Also, there is no complete certainty that shale oil production is sustainably competitive at the moment. There is a possibility, however small, that the system could suffer minor to major break downs which lead to increase in price of crude oil.

In the case of a jump in price of crude oil, we will have bigger profit margins from our crude exports, expanded foreign trade and earnings, and therefore more money in the treasury. But then, the final price of the refined product would also make a jump. If our plan is to reintroduce subsidy at that time because we would be able to afford it, I don’t think it is good enough. It means we are merely reacting to market forces and trying to manipulate those forces by heavy government control. We will get some benefits immediately, perhaps lasting two years. That is if those market forces stay docile. History shows that market forces sooner or later rebel against direct government control.

I suggest that the government should develop an economic plan that removes subsidy with a grand aim to reinvest those funds, block leakages, encourage transparency and free market entry in that industry, and then drive up and protect local and foreign investment in the field.

This plan is reverse-austerity. It would be austere because removing subsidy may lead to greater scarcity and further hikes in fuel price. But this could be mitigated by proper monitoring and system auditing. This would curb hoarding. It would also expose and correct subtle and dubious inflation of cost prices. As it is, the government says that PMS should not sell as high as it goes for now. Clearly, hoarding, marketers’ speculation, and inflated cost pricing are the culprit here, not non payment of subsidy. If subsidy removal is carefully executed, fuel would be abundant and the price might stabilize at current prices or slightly lower. That’s the austere part and we are already enduring it.

Next is the reverse:

Government should keep spending as much as it would if it were paying subsidy to fuel marketers, but then, the money would be going in part, not to pay up salaries or clear debts, but to improving our capacity to refine and distribute locally. That unskilled,but reallocated spending would stimulate new investments in the sector, and other complementary sectors like transportation, storage and distribution facilities, etc.. I am glad therefore that the government in presenting the 2016 budget announced that it would spend it’s way out of lack. That requires deep thought and carefully executed strategies.

There is still plenty of room to see crude oil price revive. The situation is not bleak. And we have to approach it as such, planning and spending with the big picture in mind. We may have to take new loans. Taking out loans is never a problem to an excellent business man. Taking smart loans to boost our economy and to prevent collapse of social welfare would be a great thing to do if we have a great and well coordinated economic and financial team in government. I believe we do.

With such plans in place, we can be sure that we are not on a path to turning fuel subsidy on and off in panic response to market trends. We can be sure that we on a path to sustainable economic recovery, growth, development and diversification.

News reference;
http://www.premiumtimesng.com/business/195743-nigeria-scraps-fuel-subsidy-cuts-petrol-price-to-n85-per-litre.html

http://www.vanguardngr.com/2015/12/fg-removes-fuel-subsidy-says-petrol-to-sell-for-n85-per-litre/

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Critiquing the lines: Why Bill to prohibit “frivolous” petitions is anti good governance

Here is my critique (analysis) of “the bill for an Act to prohibit frivolous petitions and other matters concerned therewith”

Let’s refer to the Economic and Financial Crimes Commission’s Establishment Act.
“The EFCC Establishment Act mandates the EFCC to combat financial and economic crimes. The Commission is empowered to prevent, investigate, prosecute and penalise economic and financial crimes and is charged with the responsibility of enforcing the provisions of other laws and regulations relating to economic and financial crimes…” https://efccnigeria.org/efcc/index.php/about-efcc/the-establishment-act

Please take note of the details in that statement. Now let’s critic this bill on the floor of the Senate.

Point 1: “Not withstanding anything contained in any law, it shall be unlawful to submit ANY petition, [or] statement intended to report the conduct of ANY person for the purpose of an investigation, inquiry and or inquest without a dully sworn affidavit in the High Court of a State or the Federal High Court confirming the content to be true and correct and in accordance with the Oaths Act.

CRITIQUE:
The EFCC is empowered by its establishment act to prevent, investigate, prosecute and penalise economic and financial crimes. Obviously it can only act if someone makes a complaint or files a petition. Then the Commission may act. This proposed bill to prohibit frivolous petitions stretches that process. Now before you can petition the EFCC to act, and before the EFCC itself can investigate a matter, both the petitioner and the EFCC must get sworn court affidavits that what they are about to do is ‘is correct’…

Where then is the privacy for whistleblowers? It means one can not quietly submit a complaint against a powerful official. E.g Senate president, governors or ministers. You have to swear a court affidavit. Have you seen a court affidavit? One has to put his/her name on it. So whoever you petition against would know you.

The EFCC has only been effective till date because whistleblowers can maintain anonymity while making their complaints. Prior to this bill, we have seen numerous public officials try to stall or outrightly prevent investigations and prosecution by going from Court to Court seeking injunctions and causing judicial confusions. If this bill was passed into law, it would only become even more complicated, if not impossible, to investigate and prosecute cases brought against public officials.

We have not talked about bringing petitions or complaints against a noisy neighbor (a mild case) or a suspected drug dealer or rapist. The bill does not make exceptions. It says, ‘any person’.

POINT 2: “Any petition and or complains not accompanied by a sworn affidavit shall be incompetent and shall not be used by any government institution, Agency or bodies established by any law for the time being enforced in Nigeria.”

CRITIQUE:
Exactly the point. But have we considered the effects of a law as this on ongoing investigations and trial cases?

POINT 3: Anyone who unlawfully uses, publish or cause to be published any petition or complaints not accompanied by a dully sworn affidavit shall be deemed to have committed an offence and upon conviction shall be liable to an imprisonment for six months without the option of fine…

CRITIQUE:
This one hits at how we use news media. We know how slow paced the judicial system is, as and how it sometimes takes forever to get a complaint out into the open. So people, and institutions resort the Fourth Estate, the news media, to air their grievances and force those concerned into dialogue. This freedom has been the saving grace for student unions, academic and non academic staffs unions, and labour unions across the country. I’m alerted to the fact that this bill prohibits the publications ANY COMPLAINTS without sworn affidavits.

Not everyone will have time for this especially when matters are at a critical point. But there is a clause in this bill that says anyone who uses or acts on such complaints or petitions without affidavits would be fined or jailed.

Here is the catch. How about if you attempt to go around the law by not contacting government institutions like SERVICOM, EFCC, ICPC, etc, or going on news media? How about if you take to social media? The bill also cracks down on this medium.

Let it be known that this ‘bill for an Act to prohibit frivolous petitions and other matters concerned therewith’ is not primarily an attack on social media expression. The essence of this bill is to control what and how we can make petitions or complaints. The point is that, unless you go through the judiciary, you simply can’t make a protest or investigate a likely case of crime through ANY medium, be it government agencies, news media or social media.

So I have to ask, what is the logic behind this bill? Is it proven that the amount of petitions, complaints and investigations in this country hampers good governance? Do we presently have enough of those petitions and investigations without this law in in place? What will happen to how we address economic and financial crimes, workplace abuse, abuse of power, among other things? What is the extent of this bill? What are the exceptions?

I have argued elsewhere that corruption thrives in Nigeria because our laws are dirty and have incorporated many loopholes. We ought to be cleaning up our laws not rigging the system with more loopholes and effectively making a caricature of the judiciary and the public. This proposed bill is badly written and is anti good governance. It should not be passed into law.

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Proposed ‘act to prohibit frivolous petitions’ is anti good governance

“The Senate has said its proposed bill, which sets out to heavily punish those who “falsely” criticise government officials and institutions, is misunderstood.

The bill [is] titled: “Bill for an Act to Prohibit Frivolous Petitions and other Matters Connected therewith”, sponsored by Bala Ibn Na’allah, a member of the ruling All Progressives Congress from Kebbi State…”

– Premium Times
In literature, we try not to judge a book by its cover. But in legal matters, we can’t but judge by the cover. What is the meaning of ‘frivolous petitions’? And since when does this Senate have power to decide what a frivolous petition is?

If a petition is frivolous, the judge can determine that and throw it out. And that is NOT an offense. But until a case has been heard and the facts have been presented and vetted under the specs of the law, there is no telling that the case is frivolous! This bill isn’t a limited attack on our freedom of expression, though that appears to be the immediate target. This bill is an attack on our entire democratic process. That may not be the intent of the Senator proposing this bill, but then this is what it is. The Senate cannot decide what is ‘un-petition-able’ without clamping down on the powers of the judiciary and the sovereignty of the people. That is unacceptable.

And tell us, please, would the petitions against the Senate president in connection with his declaration of assets hearing qualify as frivolous under this bill? Would petitions against political and ministerial candidates qualify as frivolous under such a bill? Would public petitions demanding for government action on issues of Labour, delivery of services and government policies qualify as frivolous under such a bill? Would we have to go to courts or the police to get permission to make petitions? What if we want to make petitions against the police?

This bill is irrelevant and I am awestruck that it even came up at all. What is the agenda at play here? I believe we have more than enough laws on libel, slander and defamation of character already. I am alarmed that this bill is targeted at PETITIONS and not slander, libel or defamation of character, etc… We know that in law, a case may be won or lost based on such technical points as ‘petition vs. libel’.

This bill endangers our democracy, transparency and accountability in governance. I suppose this new administration would understand that, taking into consideration the fact that the party now in power has been in the opposition for upward of ten years, albeit in varying forms. We have heard astounding revelations of fraud, misappropriation of funds and massive leakages and in nearly every case, past governments denied it, called it frivolous and tried their best to stamp out both the revelation and the seer. But at the end of the day, when the facts come into public view all Nigerians see that those claims were not as frivolous as the government would have had us believe.

It is in the nature of governments all over the world, none excluded, to cover up messy details such as lost, stolen or mismanaged public funds. It is in their nature to cover up every messy detail about their operations. If all governments in the world have such laws in place against ‘frivolous petitions’, how do we guarantee accountability, legal redress and justice? How do we ensure that whistleblowers are safe? How do we audit our condition as a country and prevent colossal disasters? There is a greater good in restraining governmental powers to guarantee democratic process and ensure transparency, responsiveness and accountability on the part of government. For this reason, democracies are careful not to pass such bills against ‘frivolous petitions’. Such contraptions are found only in authoritarian societies.

Nigeria has come through a tough path to attain the democratic process we have today. If we let this bill pass, it will certainly derail whatever progress we have made till date. It is counter productive and it should be struck out. I maintain that we have enough laws on ground to address issues of slander, libel and defamation of character. Petitions, whether frivolous or not, are matters for public hearing and under the purview of the judiciary. The freedom to make wide ranging petitions must be preserved as a means for people to dialogue and not resort to violent protests or worse.

I appeal to the Senate therefore, in view of preserving our democracy, ensuring transparency, dialogue and accountability in governance, to kindly throw out this bill. I believe that this is the position of the majority of Nigerians. In a democracy, the will of the people should prevail. Nigeria is a democracy. That much is embedded in our Constitution.

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