Understanding the Struggle

[Okwy Okeke]

Many at the beginning of the year were up in arms when the FG attempted deregulating the distribution and sale of pms, though many if not most economists that were not seized by the frenzy of the day argued that the average man on the street would benefit in the long run.

At the risk of sounding like a bull-horn for the FG, I wrote in this space that deregulation was the way to go, unfortunately, we ended up with a leg in the world of deregulation, and the other outside of it.

Given our import dependence, the common man may have seen material savings (Naira has traded for N160/$ for several weeks now, ~7% appreciation from its November 2012 value), and more importantly, the reduction of rent-seeking activities by government cronies.

Opposition is the check a democracy needs to be on its toes, then, we need informed and sophisticated opposition (keyword: informed).

Okwy

 

------------------------------------------
We face forward,...we face neither East or West: we face forward.......Kwame Nkrumah

[Moses Ebe Ochonu]

And how did you, Okwy Okeke, miss the fact that the anti-subsidy critics who argued that subsidy did not in fact exist (at least not nearly to the extent of the numbers being bandied around by the FG) have been vindicated by the report of the fuel subsidy probe? Have we, the uninformed critics, not been proven right that what exists is a system of fraudulent payments, false import declarations, and round-tripping bazaars that benefits only a few favored oil industry players and their government and political allies? I am shocked and appalled by the escapism of your post, and by its inexplicable removal from the facts of the $7 billion dollar subsidy scam. Even Sanusi Lamido Sanusi is now doing the backslide, asserting that the revelations discredit the case for so-called subsidy removal. Is "subsidy removal" not simply the legalization of a corrupt regime of fuel importation?

--
You received this message because you are subscribed to the "USA-Africa Dialogue Series" moderated by Toyin Falola, University of Texas at Austin.
For current archives, visit http://groups.google.com/group/USAAfricaDialogue
For previous archives, visit http://www.utexas.edu/conferences/africa/ads/index.html
To post to this group, send an email to USAAfric...@googlegroups.com
To unsubscribe from this group, send an email to USAAfricaDialogue-
unsub...@googlegroups.com

--
There is enough in the world for everyone's need but not for everyone's greed.


---Mohandas Gandhi

[shina7...@yahoo.com]

What is the point Okwy Okeke REALLY trying to pass across? I think I miss his argument.

Adeshina Afolayan

Sent from my BlackBerry wireless device from MTN

---

From: Moses Ebe Ochonu <meoc...@gmail.com>

Sender: usaafric...@googlegroups.com

Date: Thu, 24 May 2012 12:08:52 -0500

To: <usaafric...@googlegroups.com>

ReplyTo: usaafric...@googlegroups.com

Subject: Re: USA Africa Dialogue Series - Understanding the Struggle

[Okwy Okeke]

Apparently the attachment never got through, please see below 

http://businessdayonline.com/NG/index.php/news/76-hot-topic/38296-fuel-imports-down-by-27-million-litres-on-subsidy-removal

Fuel imports down by 27 million litres on subsidy removal

THURSDAY, 24 MAY 2012 00:00 PATRICK ATUANYA & PYEMO AFEGO

Petrol pumps

Nigeria’s daily fuel imports are down 45 percent this year, or by 27 million litres a day, on the back of the partial removal of petroleum subsidies by the Federal Government.

The amount of fuel imported into the country is running at a rate of 32 million litres a day, down from 59 million litres a day, before the 49.2 percent hike in fuel prices, from N67/ litre to N97/litre, and this is having a positive effect on the value of the naira, as well as the foreign exchange (FX) reserves.

“Over the period of many weeks, the naira exchange rate has firmed on the back of a sharp fall in imports of petroleum products,” said FBN capital analysts, in a research note released yesterday.

“A reduction in the subsidy does not reduce the total cost of the import but does reallocate the split between the consumer and the provider of the subsidy. A reduction in the volume of imports, by contrast has a positive impact on FX demand and on the public finances.”, the note said.

The naira has been relatively stable at the N157 to the dollar level for most of the year, and has advanced 3.2 percent this year, versus the dollar. Nigeria’s FX reserves rose to $37.3 billion, a 21-month high, last week, after ending 2011 flat on the year. The reserves are up 13.3 percent year-to-date.

FBN capital says the cut in the subsidy on premium motor spirit (PMS) in January has led to a number of changes in the market and in market practice. The Petroleum Products Pricing Regulatory Agency (PPPRA) has introduced changes in the import regime, such as the appointment of certified cargo inspectors and the launch of a new inspection system, which has helped to cut the number of companies benefitting from the subsidy scheme to 42 from 128 last year. The changes have brought about “striking progress” according to sources at the Presidency, helping to curb fraudulent imports.

In a debate in the National Assembly in February, it emerged that imports had been running last year at 59 million litres while consumption was estimated at 35 million litres. A detailed report by the House of Representatives ad-hoc committee on fuel subsidy recently alleged fraud totaling the equivalent of N1.07 trillion (about $ 6.8billion). Payments totaling N2.6 trillion ($16 billion) in fuel subsidies were made in 2011 through a fraudulent process, the committee said.

“Nigeria consumes about 35million litres of petrol a day. If we assume that all of the petrol consumed in Nigeria is imported and by implication subsidised, then the government should be spending about N1.1 trillion ($7 billion) on petrol subsidies per annum, instead, the government is estimated to have spent more than double that, up to $16billion, on petrol subsidies in 2011.” Yvonne Mhango, Renaissance Capital Sub-Saharan Africa, economist, wrote in a recent research note.

The Central Bank of Nigeria’s (CBN) Monetary Policy Committee, (MPC) met this week, and referred to the “reduction in arbitrage opportunities” in the industry, as a result of the partial removal of the fuel subsidy. CBN Governor, Sanusi Lamido Sanusi, in a statement made after the MPC meeting hinted at the need for structural reforms to take place in the Nigerian economy, including perhaps a total phase out of the subsidy.

“Our view on fuel subsidy has always been very clear: that we cannot spend 4 percent of our Gross Domestic Product (GDP) on petroleum subsidies. There are of course other issues. These incude issues around the transparency of the entire process, which have come into light, and which are being investigated,” he said.

President Goodluck Jonathan this week submitted a report on the $6.8 billion fuel subsidy fraud to the Economic and Financial Crimes Commission (EFCC) for investigation and possible prosecution of oil company officials behind the scam.

The real solution though, would be to move to full price deregulation, according to FBN capital, “This would yield substantial fiscal savings, attract investment in refining, remove the need of the PPPRA and several other public bodies, and in time, improve supplies across the country.”

 

------------------------------------------
We face forward,...we face neither East or West: we face forward.......Kwame Nkrumah

---

From: "shina7...@yahoo.com" <shina7...@yahoo.com>
To: usaafric...@googlegroups.com
Sent: Thursday, 24 May 2012, 20:08

[Okwy Okeke]

Your shock is very understandable given your inability to grasp the difference between deregulation and subsidy removal, and it is unnecessary to misrepresent Sanusi's view on this, his statement at the most recent MPC that held this week is in the public domain

Okwy

[Moses Ochonu]

No, Okwy, I think you are the one who seems to have forgotten that the advocates of "subsidy removal" packaged it as part of the so-called deregulation of the downstream sector of the petroleum industry, in fact as a stand-in for deregulation. By the way, since you seem so hung up on a textbookish understanding of deregulation and are unable to unpack and deconstruct its rhetorical claims, how can you have deregulation when you have a government price-setting body called PPRA presiding over how to price and allocate petroleum products? The layers of deception and the ignorant and sheepish adoption of ill-digested neoliberal jargons have unravelled tragically with dire consequences for Nigerians. Wake up from your neoliberal dogmatic stupor!

Sent from my iPad

[Olayinka Agbetuyi]

I think it is unhelpful to see the release of the statistics in the news report as license to view one side on the debate as uninformed and the other as vindicated.  The report if anything is eloquent in what it does not reveal as well as what it does.  if partial removal of subsidy led to 45% reduction in importation how is this shortfall being met?  Have the Nigerian refineries bridged the gap by increased production in the interim?   Yes, it may have saved the FG forex and shored up the value of the Naira but at whose expense? 
 
As I stated in my initial contribution to the debate the success of the whole enterprise would depend on how govt  ensures that majority of the people not only benefit from savings made as a result of the move, but that whatever programmes put in place to enhance purchasing power at new prices do not lead to inflationary trends such as seen in past palliatives as Udoji Award etc which only end up defeating the rationale behind minimizing the negative effects of such policies on the people they are meant to protect in the long run.  Again it is undisputable that the whole affair was handled in a dictatorial stealth initally and much of what govt has been doing is due the manner in which the people decided to hold the govt accountable through mass action.

Olayinka Agbetuyi





 

---

Subject: Re: USA Africa Dialogue Series - Understanding the Struggle

From: meoc...@gmail.com
Date: Fri, 25 May 2012 17:37:10 -0500
To: usaafric...@googlegroups.com

[Ayo Obe]

Possibly at the expense of the crooks who were pretending to import petrol but whose only objective was to collect 'subsidy', some of whom have been exposed by the House ad hoc committee's report on the same.  We shall have to see whether the protection that the Attorney-General's reluctance to be proactive about prosecuting such fraudsters will embolden them to try 'subsidy' again, or whether they have found a new way of hoovering up the national cake into their insatiably greedy mouths.

Ayo

I invite you to follow me on Twitter @naijama

[Okwy Okeke]

There is no denying the dictatorial stealth you speak about which is an unfortunate trait in our life, and there's no denying the bungling of many good intentions of government by this regime and those before it, which bring me to the reason for posting this message; deregulation, otherwise the withdrawal of government as an player in this and other regulated sectors beyond that of a regulator better assures the efficiency you wish.

On the other matter of spreading the wealth, it is an anomaly to put a program in place to "alleviate" the "impact" of pms market price given that it is not any more central to the lives of citizens, even the poorer half of the population than diesel, which has been deregulated for a while, or drinking water that was deregulated over the last 20 years with little fanfare, or are you aware of anyone that drinks government supplied water in Nigeria as you knew it in the 80s and before?

The reason I support deregulation includes the elimination of the corruption and racketeering that springs from subsidy programs the world over, which took an unprecedented impish twist in the case of Nigeria pms distribution and sale. There is no justification for imported pms selling for the same price at Makurdi as it does Lagos given the cost of transportation (deregulation includes the removal of equalization payment by government) just as a kilo of yam sells for different prices in both markets.

The subsidy program gave birth to corruption that included perfection of subsidy attracting documents with no drop of gas supplied. The removal of that subsidy is what led to a "fall" in the quantity imported chiefly because of increased policing given the new found attention, then we know these gains could so easily be lost when attention wanes, and to prevent a relapse into that massive fraud that cost all of us so much, the incentive for the fraud should be removed, which can only be achieved by deregulation, not increased policing, which has a price by the way.

Finally, there are not many better ways to assure fairer spread of the commonwealth than the appreciation of the purchasing power of the Naira (Nigerians) which the strengthening of its value against the USD means, given the  import dependency of the economy, and more so if it is achieved without market intervention (selling more from government reserve) that all economists agree is short-termed gain and unsustainable

Okwy

 

------------------------------------------
We face forward,...we face neither East or West: we face forward.......Kwame Nkrumah

---

From: Olayinka Agbetuyi <yagb...@hotmail.com>
To: usaafric...@googlegroups.com
Sent: Sunday, 27 May 2012, 2:48
Subject: RE: USA Africa Dialogue Series - Understanding the Struggle

[Moses Ochonu]

These are precisely the points that the initiator of this discussion, who was celebrating the success of subsidy removal as an importation curbing, Naira-revaluation tool fails to see. The new importation figures suggest that the previous figures were bogus, cooked up by subsidy-craving thieves in government and in the private sector. It indicates that the January uprising forced these subsidy thieves to reluctantly start verifying the claimed volume of fuel importation. This is the most likely explanation since Nigeria's fuel consumption did not suddenly dip by about 45 percent and since we've not been told that domestic refining has increased by that much. I am surprised that an advocate of subsidy removal would giddily advance these new importation figures without realizing that they in fact undercut the case for subsidy removal by proving that the so-called subsidy, as some of us argued and as the House Committee has concluded, was nothing but a scheme of highly inflated and outright false fuel importation claims, claims that were then paid to politically connected thieves. In fact the statistical analyses of Bolaji Aluko on this list prove conclusively that  Nigeria was never actually importing or consuming the amount of fuel that the fuel importers and the complicit government agencies claimed it was. So the new figures should be taken as a small step towards transparency in the fuel importation regime, and the credit for that goes to the mass action that Nigerians embarked upon in January, not to the so-called partial subsidy removal, which in fact was predicated on the bogus importation figures that are now discredited, and which has actually legitimized some of the bogus importation expenses of the fuel importers. Instead of celebrating a false reduction in fuel importation, we should be asking why we're importing refined fuel in the first place.

Sent from my iPad