SPARING ON FUEL SUBSIDY REMOVAL ON OKONKWO NETWORKS
Okenwa Nwosu, M.D.
“Nigeria is peculiar and you need to solve the problems by getting to the root and carrying out surgery to remove this ailment. Corruption becomes easier to handle when you can eliminate it at source through processes and practices put in place. Removing fuel subsidy deals with one of our biggest source of corruption and frees up money for developmental projects. How well that money is used is a subject for another discussion but suffice it to say the man in the street is not in any way enjoying the benefits of this subsidy due to product unavailability, inflated prices, loss of productive man-hours in the pursuit of this scarce commodity and safety issues that often accompanies the storage of the products in various homes to safeguard it for another day.
It is amusing that even with the continuous fall of crude oil, the Government is still paying subsidy and yet the product remains scarce and where available, it sells higher than the advertised pump rate of #87/liter. Nigeria succeeded in the Telecommunications industry because it deregulated and allowed the forces of demand and supply to establish price in the first instance. Overtime, due to healthy competition, as there was no monopoly, increased efficiencies in processes, the suppliers were able to gradually lower their prices to retain their market share and stay in business.
This is what will happen when we de-regulate the downstream sector of the energy sector. Nigeria will attract DFI from investors willing to get a piece of the action, the traditional refineries will sit up and know that it is not business as usual. These products will become increasingly available at a possible initial high price and overtime prices will crash and yet without affecting availability of products and its attendant downsides. More jobs will be created in the downstream sectors due to entrants of more players, numerous smaller businesses will grow as their will be service providers for different kinds of stuffs in support of this sector. Nigeria will no longer be sweating to catch the thieves associated with corruptly enriching themselves by the reason of this fuel subsidy and quantum of good monies will be available for other developmental projects. Nigerians can then ask questions and demand answers in terms of how this money is being used. We saw signs of these with the SURE-P programme of the previous administration.
Let’s make the hard choices today to free us all for a better tomorrow. The downside of not removing this subsidy, is that 10-15 yrs from now, we will still be talking about massive corruption in this sector. The reason is that the whole process of unravelling it and dealing with it is so complicated. It involves a chain of corrupt but powerful people that include: those who are given the licenses to operate, those that issue these licenses, the government agencies required to regulate their practices as well as some powerful members of the executive, legislative and judiciary due to the big money involved. Indeed, it is a vicious cycle and we can only deal with it decisively by kissing fuel subsidy good-bye.” – Godwin
“The subsidies are worthless. Nigerian political and oil and gas leaders are not sincere. If they are, they would employ capable supply chain individuals who can look into why most countries of the world that import petroleum do so at much reduced price than Nigeria. Since they are incapable of fixing the existing refineries and producing petroleum. You do not need to subsidize a business man to sell products to you. If I were in charge of their supply chain, the subsidies will disappear. I will bring in capable hands in supply chain and get off my ass and obtain the actual cost of purchasing transporting, storing and distributing petroleum products in Nigeria. I will determine the profit margin that is reasonable for any business entity can make to stay in business and then set up my purchase price. I will open up the bids to all suppliers instead of to a limited number of Marketers. I bet you that if this is done, competition alone will lead to drastic reduction of the subsidies and if applied properly, it will go away.
Also, to prevent the marketers from robbing the people at the pump, I will push the government to peg the price of petrol at the pump at a rate that can lead to 15 to 30% margin for the marketers. If you are a marketer and an importer, it becomes your responsibility to run your business as you see fit. If anyone cannot live with this type of margin, then he need not be in the business. If you want 200% margin, then you need to go somewhere else. Iran and other OPEC countries import petrol into their countries at a much cheaper rate than Nigeria and they all buy from the same source. Another thing that need to be done is to open Port-Harcourt or Onne port as another shipping zone to decongest Lagos Port. Mandate that at least 45% of all Oil and Gas related imports go through Port-Harcourt while 55% goes through Lagos. This will lead to reduction of the number of days pregnant tankers seat idle with products before unloading as well as the cost of transportation for marketers at the Eastern flank of the country.
Also, NNPC can set up its purchasing organization and start buying directly from the producers if the country that has huge unemployment problem cannot get its act together and fix its refineries which could become a huge source of employment for her people. This discussion is really a waste of time because it does not make sense for any government to be subsidizing businessmen and women to be making well over 200% margin on products they supply through its agency. I am against subsidy if it exist.” - Dr. Joseph Ogundu
Folks,
While processing the many posts which come regularly to IDU USA forum from my homie, who also owns and moderates Okonkwo Networks at Googlegroups, I stumbled onto the excerpted sections reposted above. And those nuggets made me to read through most of the other comments in same thread discussing the pros and cons of removal of oil subsidy by the Buhari administration. I must commend the levelheadedness manifested by the discussants in marshalling their points without the usual distractions of name calling and grandstanding which usually characterize many Nigeriacentric forums with which I have been familiar over the years. Maybe it is due to the profundity of the matter under discourse. I would, nonetheless, prefer that such focus should also be extended to other equally important issues which pop up every now and then in our midst for deliberative discourse.
The thread was kicked off by a widely circulated post by SKC Ogbonnia titled “Removing Nigeria’s Fuel Subsidy Is A Lame Excuse” which argues in favor of retention of the subsisting fuel importation subsidy, at least, in the interim by the new Buhari administration. Of course, the eloquence of the many voices opposed to Ogbonnia’s well-articulated viewpoints is awfully hard to overlook. So, from my perspective, the exchanges are quite entertaining as well as informative. What I surmise from ongoing exchanges is that President Buhari finds himself caught between the rock and a very hard place as far as the subsidy removal/retention matter is concerned. Here is why.
Buhari’s presidency has wagered its reputation on winning the fight against corruption. Since the promise to fight corruption played a significant role in garnering the majority votes which swept candidate Buhari and the former opposition party, APC, into power during the last general elections, the incumbent president appears to have put all its metaphorical eggs in the one basket of fighting and winning the war against corruption for a good reason. The argument in the referenced exchanges for immediate removal of fuel importation subsidy is that, doing otherwise, would negate the apparent intensified “war” to defeat corruption by the Buhari administration. Those who support retention of the subsidy fear the destabilizing effect, including threat to public social order, which might occur when the central government removes this handout. Some indeed fear that it might be too much a risk for the Buhari’s incoming administration to take. Furthermore, things shall get really very complicated in a hurry if the Buhari administration yanks the subsidy as is being counseled and at same time, fails to score any immediate visible and tangible victories against corruption.
Riding the Nigerian tiger is attractive to many who are on the spectator side of the political amphitheater. Buhari is no longer on the spectator side; he is now the man on the tiger’s back.
There is always this cautionary advice to whoever rides the tiger and I believe that the presidency has no shortage of wise counsel, if he needs any, on issues of this complexity and urgency.
Okenwa.
From: idu...@googlegroups.com [mailto:idu...@googlegroups.com] On Behalf Of Ikenna Okonkwo
Sent: Wednesday, August 26, 2015 6:31 AM
To: Ejimofor, Chukwuemenem C <chukwuemene...@exxonmobil.com>
Cc: Chinyel...@shell.com; skcogb...@aol.com; naija...@googlegroups.com; mjog...@msn.com; okonkwo...@googlegroups.com; esut-...@googlegroups.com; idu...@googlegroups.com; Ikenna Okonkwo <bioko...@gmail.com>
Subject: [IDU USA] WHEN IS MR PRESIDENT REMOVING SUBSIDY IF HE IS ANGRY OVER IT??????????????????
WHEN IS MR PRESIDENT REMOVING SUBSIDY IF HE IS ANGRY OVER IT??????????????????
Buhari angry over subsidy
‘Payment manipulators wicked’
From Juliana Taiwo-Obalonye, Abuja
An angry President Muhammadu Buhari has called manipulators of fuel subsidies payment leading to its escalation into billions of naira as wicked.
This is even as he has warned that severe sanctions will be visited on any individual or organisation that violates the directive on payment of all national revenue into the Federation Account.
The President has also blamed past administrations for the current situation in which Nigeria is forced to spend billions of Naira annually on alleged subsidies for petroleum products.
The Senior Special Assistant to the President on Media and Publicity, Garba Shehu, quoted the President as saying at a meeting with the Chairman and members of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), that the escalation of petroleum subsidy payments in recent years was due to the deliberate neglect of the nation’s refineries, oil pipelines and other related infrastructure to allow for the importation of petroleum products and corruption to thrive.
Buhari again used the occasion to express his huge disappointment with the way Nigeria’s oil industry has been run since he left office as Petroleum Minister and Military Head of State, stating that he was convinced that if the development of the country’s domestic refining capacity and petroleum products distribution network had kept pace with national demand, there would not have been any need for the huge subsidies currently being paid to importers.
“They allowed the infrastructure to collapse so that their cronies can steal by bringing in refined products from overseas,” President Buhari said.
The President urged the chairman and members of the RMAFC, who availed him of their view on the vexed issue of petroleum subsidy payments, to go “back to the drawing board” and come up with more humane proposals to rescue ordinary Nigerians from the “wicked manipulation” of the country’s oil industry by corrupt operators.
The President said that the Nigerian National Petroleum Corporation, the Nigerian Ports Authority and other MDAs which previously relied on the laws establishing them to retain all or part of revenues collected by them, did so illegally and must now comply with the Nigerian Constitution by paying all revenues to the Federation Account.
President Buhari, who also chided the RMAFC for approving excessive remunerations for some political office holders, urged the commission to seek a proper interpretation of its powers and address the public outcry against the unreasonably high payments.
On Mon, Aug 24, 2015 at 9:37 AM, Ejimofor, Chukwuemenem C <chukwuemene...@exxonmobil.com> wrote:
Nobody invests in a regulated market – private refineries will remain a mirage, the circle of doom continues.
Esteemed Regard
CHRIS EJIMOFOR
P For a greener planet, please don't print this email unless necessary
From: esut-...@googlegroups.com [mailto:esut-...@googlegroups.com] On Behalf Of Chinyel...@shell.com
Sent: Monday, August 24, 2015 8:58 AM
To: skcogb...@aol.com; naija...@googlegroups.com
Cc: mjog...@msn.com; okonkwo...@googlegroups.com; esut-...@googlegroups.com; idu...@googlegroups.com; bioko...@gmail.com
Subject: [esut-alumni] RE: Removing Nigeria ’s Fuel Subsidy Is A Lame Excuse
Hello SKC,
Thanks for trying to provide more clarity on your arguments as to why Nigeria should retain fuel subsidy. Like you noted, in other countries with less challenges, this might just work even though, it will be unsustainable in the long run ( check out oil producing countries in more developed countries and you can see what they do).
Nigeria is peculiar and you need to solve the problems by getting to the root and carrying out surgery to remove this ailment. Corruption becomes easier to handle when you can eliminate it at source through processes and practices put in place. Removing fuel subsidy deals with one of our biggest source of corruption and frees up money for developmental projects. How well that money is used is a subject for another discussion but suffice it to say the man in the street is not in any way enjoying the benefits of this subsidy due to product unavailability, inflated prices, loss of productive man-hours in the pursuit of this scarce commodity and safety issues that often accompanies the storage of the products in various homes to safeguard it for another day.
It is amusing that even with the continuous fall of crude oil, the Government is still paying subsidy and yet the product remains scarce and where available, it sells higher than the advertised pump rate of #87/liter. Nigeria succeeded in the Telecommunications industry because it deregulated and allowed the forces of demand and supply to establish price in the first instance. Overtime, due to healthy competition, as there was no monopoly, increased efficiencies in processes, the suppliers were able to gradually lower their prices to retain their market share and stay in business.
This is what will happen when we de-regulate the downstream sector of the energy sector. Nigeria will attract DFI from investors willing to get a piece of the action, the traditional refineries will sit up and know that it is not business as usual. These products will become increasingly available at a possible initial high price and overtime prices will crash and yet without affecting availability of products and its attendant downsides. More jobs will be created in the downstream sectors due to entrants of more players, numerous smaller businesses will grow as their will be service providers for different kinds of stuffs in support of this sector. Nigeria will no longer be sweating to catch the thieves associated with corruptly enriching themselves by the reason of this fuel subsidy and quantum of good monies will be available for other developmental projects. Nigerians can then ask questions and demand answers in terms of how this money is being used. We saw signs of these with the SURE-P programme of the previous administration.
Let’s make the hard choices today to free us all for a better tomorrow. The downside of not removing this subsidy, is that 10-15 yrs from now, we will still be talking about massive corruption in this sector. The reason is that the whole process of unravelling it and dealing with it is so complicated. It involves a chain of corrupt but powerful people that include: those who are given the licenses to operate, those that issue these licenses, the government agencies required to regulate their practices as well as some powerful members of the executive, legislative and judiciary due to the big money involved. Indeed, it is a vicious cycle and we can only deal with it decisively by kissing fuel subsidy good-bye.
Best regards,
Godwin.
From: skcogb...@aol.com [mailto:skcogb...@aol.com]
Sent: vrijdag 21 augustus 2015 16:23
To: naija...@googlegroups.com; Aronu, Godwin C NAM-UIO/D/PT
Cc: mjog...@msn.com; okonkwo...@googlegroups.com; esut-...@googlegroups.com; idu...@googlegroups.com; bioko...@gmail.com
Subject: Re: Removing Nigeria ’s Fuel Subsidy Is A Lame Excuse
Good argument, Ikenna/Godwin!
I wrote in the original piece as follows:
"Similar to most other oil-producing countries, the fuel subsidy policy was designed to alleviate the plight of the masses who have been waiting in vain to experience the welcome breeze of Nigeria ’s overflowing oil wealth. Moreover, any review of the original fuel subsidy policy roundly shows that the scheme is vitally essential for Nigeria ’s national development....Unfortunately, the policy has failed to meet the desired goals. But there is hardly any such thing as a perfect or an ironclad policy. The fuel subsidy policy can always be restructured to reflect current conditions, including crude oil as well as pump prices. Besides, which of the various policies in any sector of the Nigerian economy has actually worked as intended? If Nigeria is to utilize the savings from fuel subsidy to intervene in other sectors, as some have suggested, how plausible is it that such funds will not fall prey to the same corruption, especially considering that budgets for projects in every sector are commonly looted by politicians and their cronies?...Granted that corruption has been a big obstacle, but how long must Nigeria continue to scrap good policies because of the fear of corruption?"
All that the government needs to is to confront the corruption within the subsidy regime, period. That way, instead of N87 per litre for PMS, the price could go down as low as we deem fit--in line with prevailing conditions. Where prudently implemented, the subsidy scheme is a win-win. Our economy will be jump-started. Cost of doing business in Nigeria (including communication) will be down. More people will be motivated to invest in the country. There will be employment. And besides the simplistic cost at the pumps, the masses will finally feel that sweet breeze of our wealth that the policy was designed for in the first place.
Again, as note in the original piece, "One important fact that has consistently escaped the minds of many pundits is that Nigeria ’s problem has never been the lack of progressive policies capable of elevating the country to an enviable pedestal. And it is definitely not the lack of individuals ready and willing to implement the policies. The main problem has been the perpetual failure to produce a national leader with the inner will to influence the implementation of the policies to the admiration of the intended beneficiaries. This lack of efficient implementation usually creates loopholes for corrupt practices and consequently failed programs."
THEN Ikenna wrote:
"JUST AS IN telecommunication, WE ALL STARTED making calls at N50 per minute in 2001 and 14 years after, we are now making calls at N9 per minute and in some packages even N6 per minute"
See, I hear that elitist argument all the time. So, you are expecting Nigerians to wait for another 13 years before they can purchase fuel at a reasonable price? Now, how competitive is the N6 per minute after all? If you give a student in Nigeria N10,000, how much do you think he or she will spend in communications alone as against other needs, such as food, books, etc? What am I saying here? The communication industry has not been as good as an example as many think. A topic for another day.
Let's keep it simple.
SKC Ogbonnia
-----Original Message-----
From: Ikenna Okonkwo <bioko...@gmail.com>
To: Aronu, Godwin C NAM-UIO/D/PT <Chinyel...@shell.com>
Cc: Acer Acer <mjog...@msn.com>; Okonkwonetworks <okonkwo...@googlegroups.com>; naijaevent <naija...@googlegroups.com>; esut-alumni <esut-...@googlegroups.com>; idu-usa <idu...@googlegroups.com>; Ikenna Okonkwo <bioko...@gmail.com>
Sent: Fri, Aug 21, 2015 5:14 am
Subject: Re: [esut-alumni] Re: Chief Dr SKC Ogbonnia - Are you in support of removal of FUEL SUBSIDY or retention of FUEL SUBSIDY???????????????Chief Godwin,
I got your point and I agree with it 100%, if we can buy at 100, 120, 150 and even 500 why are we still talking about SUBSIDY, WE SHOULD EXPRESSLY REMOVE IT AND KEEP SELLING AT AGREED MARKET PRICE WHILE WE GET THE REFINERIES WORKING and afterwards, THE RIGHT PRICE WILL EMERGE which will even be LOWER, so it could be high and PAINFUL at the initial stage but at long run we will all smile. JUST AS IN telecommunication, WE ALL STARTED making calls at N50 per minute in 2001 and 14 years after, we are now making calls at N9 per minute and in some packages even N6 per minute.
I HOPE THAT GOVERNMENT PEOPLE AND DECISION MAKERS ARE FOLLOWING US IN THIS DISCUSSION.
Thanks and kind regards,
Ikenna.
On Fri, Aug 21, 2015 at 10:51 AM, <Chinyel...@shell.com> wrote:
Ikenna,
The problem with the steps that you are prescribing as enablers to the removal of fuel subsidy is incidentally what is holding the nation down. The refineries are not working presently because on entrenched interests and possible sabotage by those people benefitting from the present subsidy arrangement.
Removal of this subsidy removes the incentives for keeping the refineries down and hence unlock the true potentials of this sector.
The current subsidy rates puts PMS at #87/per liter but which filling station is selling at this price?. The product is not only scarce but when seen, it is procured at rates in excess of #100/litre and in some cases up to #500.00, yet there is no chaos and people are buying at these inflated prices while Government is still paying subsidy to the importers. So who is loosing?.
Let’s know that this is about market fundamentals and if we do not price in favor of prevailing market fundamentals then we will be putting hiccups to the continuous survival of our nation.
Our people normally says “Oji onye nani ji onwe ya”. So let’s get going.
Best regards,
Godwin.
From: esut-...@googlegroups.com [mailto:esut-...@googlegroups.com] On Behalf Of Ikenna Okonkwo
Sent: vrijdag 21 augustus 2015 11:03
To: Aronu, Godwin C NAM-UIO/D/PT
Cc: Acer Acer; Okonkwonetworks; naija...@googlegroups.com; esut-...@googlegroups.com; idu...@googlegroups.com; Ikenna Okonkwo
Subject: Re: [esut-alumni] Re: Chief Dr SKC Ogbonnia - Are you in support of removal of FUEL SUBSIDY or retention of FUEL SUBSIDY???????????????
Godwin,
I asked this question to NIGERIAN TEXAS BASED ENERGY GURU - Dr SKC Ogbonnia and he said in his RESPONSE BELOW that he does not support the REMOVAL OF SUBSIDY THAT WORLD OVER, that essential commodities are subsidized and I TEND TO AGREE with him, but what is lacking in Nigeria is TRANSPARENCY, IF GOVERNMENT IS TRUTHFUL, we should know the LANDING COST and how MUCH subsidy is in PLACE, that information has not been KNOWN and both PARTIES - both Government and the IMPORTERS are a HUGE suspects here.
BUT WHAT IS MORE CRITICAL HERE is regardless of what you want to do - REMOVE SUBSIDY OR RETAIN SUBSIDY, FIRST THING IS NEEDED TO BE DONE FIRST OTHERWISE YOU WILL PLUNGE THE COUNTRY INTO REAL CHAOS and what is that first thing first is TO REPAIR THE REFINERY AND INCREASE LOCAL REFINING and now know the balance for IMPORT.
IF WE DO NOT REPAIR THE REFINERIES FIRST, nothing will work and repairing the refineries is not coming up earlier than in a YEARS TIME, so you still need the SUBSIDY REGIME. That is the message.
BUHARI KNOWS WHAT HE IS DOING BY SAYING - DO NOT WITHDRAW THE SUBSIDY FOR NOW, IT WILL BE REMOVED BUT LET'S MEET THE CONDITION PRECEDENT FIRST.
skcogb...@aol.com
Aug 19 (2 days ago)
to naijaevent, okonkwonetworks, me, esut-alumni, idu-usa
My brother, Ikenna!
SKC Ogbonnia is against removal of the subsidy. And I made it clear from beginning to the end, including the following passages:
"...there has been a growing opposition to the subsidy, particularly from influential voices, such as the eminent political economist, Pat Utomi; former governor of Central Bank, and Emir of Kano, Muhammadu Sanusi II; and some newspaper editorials; to name a few. But Buhari should not budge. Removing the subsidy because of the fear of corruption is a lame excuse for failure." (SKC Ogbonnia)
And this:
"Instead of removing the subsidy, now is the time to confront the corruption within the subsidy regime head-on. And President Buhari should be decisive. He ought to be emboldened by the positions of progressive forces, as expressed by the president of the Nigeria Labour Congress (NLC), Ayuba Wabba; the Publicity Secretary of Conference of Nigerian Political Parties (CNPP), Osita Okechukwu; human rights activist and lawyer, Femi Falana (SAN); and many others who share the view that closing the corrupt loopholes within the fuel subsidy program offers a better compromise." (SKC Ogbonnia)
Blessings+
SKC
On Fri, Aug 21, 2015 at 9:38 AM, <Chinyel...@shell.com> wrote:
Ikenna,
This statement is coming from the current MD at the helm of affairs in NNPC when he visited Lagos.
“Nigeria's fuel subsidy unsustainable”: state oil head.
The sooner we come to terms with this reality and react the better for us all as Nigerians. It can be said that this constitute the biggest drain in the resources of Nigeria, leads to massive corruption of a cartel engaged in the importation of refined products in the country as well as hampering the capacity to maintain functional refineries in the country in a profitable manner.
The country also loses so much in importing refined products and hence facilitating capital flight and invariable outsourcing scarce jobs in these areas to foreigners.
The common man who is supposed to benefit from this subsidy is not getting any good deal, as the product is scarce and come at inflated prices. So much time is also wasted trying to procure these precious fluids that lead to huge loss in the collective productivity of the working class.
A stitch in time saves nine. Let’s have the boldness to do the needful for our country and change the current trajectory of stagnant or worsening case of the economy into a one that can come back.
Best regards,
Godwin.
From: esut-...@googlegroups.com [mailto:esut-...@googlegroups.com] On Behalf Of Ikenna Okonkwo
Sent: donderdag 20 augustus 2015 15:00
To: Acer Acer
Cc: okonkwo...@googlegroups.com; naija...@googlegroups.com; esut-...@googlegroups.com; idu...@googlegroups.com; Ikenna Okonkwo
Subject: [esut-alumni] Re: Chief Dr SKC Ogbonnia - Are you in support of removal of FUEL SUBSIDY or retention of FUEL SUBSIDY???????????????
THE TRUTH HAVE NOT BEEN TOLD. Why did they move petrol from N97 to N87 per liter when we expected them to be increasing from N97 to N107 for example. The said that it was because of SHARP DROP IN CRUDE OIL PRICE, but was that supposed to be the maximum reduction, shouldn't it go down further if this was the genuine reason.
On Wed, Aug 19, 2015 at 4:57 PM, Acer Acer <mjog...@msn.com> wrote:
Ikenna,
The subsidies are worthless. Nigerian political and oil and gas leaders are not sincere. If they are, they would employ capable supply chain individuals who can look into why most countries of the world that import petroleum do so at much reduced price than Nigeria. Since they are incapable of fixing the existing refineries and producing petroleum. You do not need to subsidize a business man to sell products to you. If I were in charge of their supply chain, the subsidies will disappear. I will bring in capable hands in supply chain and get off my ass and obtain the actual cost of purchasing transporting, storing and distributing petroleum products in Nigeria. I will determine the profit margin that is reasonable for any business entity can make to stay in business and then set up my purchase price. I will open up the bids to all suppliers instead of to a limited number of Marketers. I bet you that if this is done, competition alone will lead to drastic reduction of the subsidies and if applied properly, it will go away. Also, to prevent the marketers from robbing the people at the pump, I will push the government to peg the price of petrol at the pump at a rate that can lead to 15 to 30% margin for the marketers. If you are a marketer and an importer, it becomes your responsibility to run your business as you see fit. If any one can not live with this type of margin, then he need not be in the business. If you want 200% margin, then you need to go somewhere else. Iran and other OPEC countries import petrol into their countries at a much cheaper rate than Nigeria and they all buy from the same source. Another thing that need to be done is to open Port-Harcourt or Onne port as another shipping zone to decongest Lagos Port. Mandate that at least 45% of all Oil and Gas related imports go through Port-Harcourt while 55% goes through Lagos. This will lead to reduction of the number of days pregnant tankers seat idle with products before unloading as well as the cost of transportation for marketers at the Eastern flank of the country. Also, NNPC can set up its purchasing organization and start buying directly from the producers if the country that has huge unemployment problem can not get its act together and fix its refineries which could become a huge source of employment for her people. This discussion is really a waste of time because it does not make sense for any government to be subsidizing businessmen and women to be making well over 200% margin on products they supply through its agency. I am against subsidy if it exist. Hopefully the current NNPC leaders can do a better job managing the business than what the past leaders of the entity did. It is shameful that the simple rules of supply chain management that could save the county hundreds of millions of dollars in shady deals are not being followed.
Dr. Joseph Ogundu
Date: Wed, 19 Aug 2015 15:55:01 +0100
Subject: Chief Dr SKC Ogbonnia - Are you in support of removal of FUEL SUBSIDY or retention of FUEL SUBSIDY???????????????
From: bioko...@gmail.com
To: okonkwo...@googlegroups.com
CC: bioko...@gmail.com; naija...@googlegroups.com; esuG TO HANDLE AND for one to remove the SUBSIDY, THERE ARE CONDITIONS PRECEDENT TO IT, and until those conditions such as FIXING OF LOCAL REFINERIES ARE MET, if you remove it, IT MAY BE CATASTROPHIC CONSIDERING THAT GREATER PART OF THE PEOPLE ARE IN LESS THAN ONE DOLLAR A DAY. WE NEED TO BE THREADING VERY SOFTLY ON THIS ISSUE.
Removing Nigeria ’s Fuel Subsidy Is A Lame Excuse
19 Aug, 2015
By SKC Ogbonnia
Plagued by endemic corruption, Nigeria ’s fuel subsidy scheme has ignited intense debate in recent times. The past Jonathan regime attempted to end the subsidy but was rebuffed by the masses. Once Muhammadu Buhari was elected president, many pundits, including former British Prime Minister, Tony Blair; Bukola Saraki, now Senate President; and the Presidential Transition Committee urged him to terminate the subsidy entirely. Although President Buhari has rejected such calls, the tone of his press statement of July 13, 2015 lacked the decisiveness needed to quell the debate.
Since then there has been a growing opposition to the subsidy, particularly from influential voices, such as the eminent political economist, Pat Utomi; former governor of Central Bank, and Emir of Kano, Muhammadu Sanusi II; and some newspaper editorials; to name a few. But Buhari should not budge. Removing the subsidy because of the fear of corruption is a lame excuse for failure.
First of all, the fuel subsidy is not a bad policy after all. Different forms of subsidy are obtainable world over in both developed and developing economies. Subsidy is nothing but financial aid granted by the government to assist a sector or sectors of the economy so that the price of certain commodities or services can remain competitive or affordable to the citizens. Similar to most other oil-producing countries, the fuel subsidy policy was designed to alleviate the plight of the masses who have been waiting in vain to experience the welcome breeze of Nigeria ’s overflowing oil wealth. Moreover, any review of the original fuel subsidy policy roundly shows that the scheme is vitally essential for Nigeria ’s national development.
Unfortunately, the policy has failed to meet the desired goals. But there is hardly any such thing as a perfect or an ironclad policy. The fuel subsidy policy can always be restructured to reflect current conditions, including crude oil as well as pump prices. Besides, which of the various policies in any sector of the Nigerian economy has actually worked as intended? If Nigeria is to utilize the savings from fuel subsidy to intervene in other sectors, as some have suggested, how plausible is it that such funds will not fall prey to the same corruption, especially considering that budgets for projects in every sector are commonly looted by politicians and their cronies?
One important fact that has consistently escaped the minds of many pundits is that Nigeria ’s problem has never been the lack of progressive policies capable of elevating the country to an enviable pedestal. And it is definitely not the lack of individuals ready and willing to implement the policies. The main problem has been the perpetual failure to produce a national leader with the inner will to influence the implementation of the policies to the admiration of the intended beneficiaries. This lack of efficient implementation usually creates loopholes for corrupt practices and consequently failed programs. But there is change. There is change. President Buhari is gradually looking like that leader day-by-day. True.
Effective leadership is all about positive influence—being able to persuade people to do what they are required to do—towards greater good. Within two months of Buhari being in office, there is a dramatic improvement in electric power supply; the refineries are finally back on stream; the moribund anti-corruption agency is back to life and, of course, the looters of our common wealth are now running helter-skelter. In short, for the first time in a long time, there seems to be consequences for bad behviour in my country.
So, why is the ‘Buhari effect’ not being felt in the subsidy regime—so that the masses that yearned for the change can finally benefit from this policy? Granted that corruption has been a big obstacle, but how long must Nigeria continue to scrap good policies because of the fear of corruption?
Instead of removing the subsidy, now is the time to confront the corruption within the subsidy regime head-on. And President Buhari should be decisive. He ought to be emboldened by the positions of progressive forces, as expressed by the president of the Nigeria Labour Congress (NLC), Ayuba Wabba; the Publicity Secretary of Conference of Nigerian Political Parties (CNPP), Osita Okechukwu; human rights activist and lawyer, Femi Falana (SAN); and many others who share the view that closing the corrupt loopholes within the fuel subsidy program offers a better compromise.
A starting point is to truly enforce the extant laws on the fuel subsidy scheme. With the current personnel changes sweeping through Nigerian National Petroleum Corporation (NNPC), the Department of Petroleum Resources (DPR) should walk the talk by setting earnest examples with petrol stations, tank farms, and major marketers who flout the price laws. This view may be at odds with the evangelicals of free market economy. Yet, there is no nation, including capitalistic societies, where a state-subsidized commodity is left at the mercy of the opportunistic realm of market-determined prices without a measure of restriction on the ownership or exchange of the commodity itself.
The second is to permanently disengage the political henchmen who have posed as middlemen in the fuel importation exercise and promote the new initiative where NNPC is the sole importer of fuel, at least for the time being. NNPC as sole importer also minimizes the chances of refinery agents colluding with fuel importers to keep the local refineries comatose.
The third step is for NNPC to fully transition to a more transparent and cost-efficient crude-for-refined product swap program.
The fourth recommendation is to move towards refined-product independence by investing in more state-owned refineries without further delay. A quick approach is to deploy easy-to-install modular refineries, similar to a 2012 initiative by the Trade Ministry. Such refineries should be strategically spread across the six political zones, using a location template that mirrors the existing national crude pipeline-depots network. The end purpose here is that state refineries do work, have worked before in Nigeria , are working again now, and ought to continue to work moving forward. Thus far, the new NNPC Group Managing Director, Ibe Kachikwu, is making good moves, repositioning the refinery management. But there is the need to further sanitize the entire operation and maintenance culture by engaging competent and experienced refining team, pruning stale workers immanent with past patterns and practices, and retraining others committed to efficient service delivery.
The last recommendation is expected to attract a broad range of critics, especially from the proponents of privatization. But Nigeria has to be extremely careful with borrowed theories. Just as leadership is contingent upon the environment, deregulation and privatization have never been a one-size-fits-all.
While it remains a viable approach in the Nigeria ’s oil industry, deregulation without due considerations to the conditions on the ground is a specious ingredient for a sour outcome. The country cannot immerse its economy completely into a concept that intrinsically advocates corporate profits at the crude expense of public interest in this stage of national development, especially where an average citizen lives on less than one dollar per day.
Even in the United States of American, often seen as model capitalism, not all sectors are fully deregulated. For instance, due to the importance of electricity in human welfare and obvious complexities with open market economy, deregulation of the power sector in the US did not begin until less than 25 years ago. Moreover, despite what some analysts may view as its merits, a majority of American states are yet to see sufficient benefits to exercise full deregulation of electricity.
So much is at stake and there is little room for error. Yet, given Buhari’s huge reservoir of goodwill, the temptation to toy with the removal of the subsidy remains real. But Mr. President should not lose sight of history. His predecessor, Goodluck Jonathan, has not recovered since betting his enormous luck against the masses by tinkering with the same fuel subsidy program in the spring of 2012. The current change movement cannot be compromised on the altar of a radical gamble.
*Ogbonnia, a leadership scholar, is the chairman of First Texas Energy Corporation.
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