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17 Feb 2012 By Jibo Nura jibonura@yahoo.com
Introduction:
The
euphoria on oil subsidy removal on January 1, 2012 by
President Ebele Jonathan and his
economic henchmen such as Sanusi Lamido Sanusi, Ngozi
Okonjo-Iweala and co. explains the
hypothesis and theoretical nature
of an expensive decision, which was taken out of sheer
economic anxiety
that if Nigerians continue to enjoy oil price relief,
the nation's economy will
no doubt perish,
because its foreign reserves had been depleted.
Be
that as it may, but one thing remains clear. Nigerians
are tired and increasingly becoming impatient on
President Jonathan's oil subsidy removal vagueness,
verbosity and waffle. We are
very seriously fed up with Sanusism and
Okonjoism gospel singing on improving our nation's
economy based on gobbledygook and apocalyptic
certiorari. In a country of imperfect
economic competition where microscopic few noisy
individuals like Labaran Maku (President
Jonathan's Minister of Information), can come out
boldly and tell us that there is no harm in the
fire
brigade decision of removal of oil subsidy, then it
means an individual economic unit or
group of individuals in Nigeria can decide to pursue
their own self interest based on unilateral
actions and attitudes that are heavily lopsided with
aggrandizement and sheer arrogance, which are at a
complete variance with the overall wellbeing of
Nigerian society as a whole.
Indeed, the economic assumption(s) behind the
President's anxious decision on this oil subsidy
of a
thing finds a place in the lack of knowledge and
understanding of Human Relations
Approach (HRA) to leadership management and practice.
It exposes an inertia in fuel capital
management, which is realistically and logically not
in tandem with mechanistic theories and
modus operandi of the classical and scientific
management school.
The
thrust of our analysis today will therefore be centred
on the behavioural viewpoint which
states that people deserve to be looked at as central
concern of any organized activity, which must be
guided by democratic and participative management. We
shall achieve this based on
three (3) subsidization philosophies and economic
frameworks as mathematically deduced by
Tamuno David West (2011), Izielen
Agbon Izielen (2012) and Elton Mayo (1927). As we
explain these
philosophies of subsidization and national
humanization approach that were since advocated by
scholars and authorities such as Mary Parker Follet,
Douglas McGregor, Abraham
Maslow,
Frederick Herzberg, Charles Handy and Dale Carnegie,
there is the need to take into
cognizance the
monumental national economic deficiencies that were
superficially and terribly
postulated by Mr.
and Mrs. Know-all (Sanusi Lamido Sanusi and
Okonjo-Iweala). We shall eventually look at the
superficiality and setbacks in Sunusism
economic model that have
neglected the
role of people in an informal economy who should be
viewed as central focus to
productivity,
welfare and negotiation. But before we go further
there is also the need to state
categorically
that one-sided calculation on national economy
according to Adam Smith (1776)
and Henri Fayol
(1925), is directly proportional to inefficiency, and
do not guarantee good job
performance and
satisfaction, instead success depends on people and
their fair treatment as a community.
Oil subsidy removal myth and reality:
A
common cause of internal conflict in a nation is the
absence of definite responsibilities where
leaders do not clearly understand their roles and
limitations. To avoid this conflict, leaders must
be
ready to at any point in time design and boldly
outline their duties and responsibilities to the
citizenry. For Jonathan, Sanusi Lamido and
Okonjo-Iweala to take a stringent measures and
decision on the entire nation on oil subsidy removal
with total disregard to decorum by playing with our
psyche and economic knowledge, is indeed worrisome.
They deliberately shied away
from
explaining to us the way the nation's foreign reserve
is being depleted within 8 months by
Jonathan and his political puppets. An investigative
report in the Daily Trust stable of Thursday,
January 5, 2012 revealed that the Federal Government
under Goodluck Jonathan has
unpatriotically and irresponsibly depleted the
stabilization account where he (Jonathan) single-handedly
withdrew in different installments N114 billion from
September 2010 to May 2011. Sadly, most of these funds
were mischievously used for car finances scheme,
so-called police
peace keeping mission in Haiti (the most corrupt
country in the world now assisted by another
corrupt government), and in financing the terrible
INEC elections activities that was presided by
Prof
Jega to mention but a few. These monies were 100%
withdrawn and spent by Jonathan
government, but the question is: what impact and/or
improvement have we seen in the nation's
economy let alone Nigerian politics?
When
Sanusi Lamido Sanusi was busy playing to the gallery
on his so-called exposition of the
Nigerian Senators and Rep Members, what advice has he
given Mr. President on the way to
tackle the spending spree in the National Assembly?
The cardinal question here is: why can't
Sanusi, Okonjo-Iweala and the talkative Labaran Maku
come out and explain in plain language
how
the nation's external reserve was callously depleted
instead of dilly-dallying and disco-dancing
over oil subsidy just to cause confusion by putting
discomfort in the minds of ordinary
Nigerians?
The
irony is: when Sanusi boldly took that step of
unraveling the financial spending in the
National Assembly, immediately they retaliated in
defense, he was completely silenced, because
he
wanted to save his job. That was why he could not take
that same bold step again to candidly
advice President Jonathan to revisit and cut-down the
salaries of those Senators and Rep.
Members. What balderdash!
The
same Sanusi deliberately refused to tell us the whys,
hows and whats of spending the
following monies from our external reserve by Jonathan
administration.
. Loan to fund INEC-N87.70 billion
·
Funding of National Council on Finance and Economic
Development (NACOFED)
activities-N255.75 million
·
Release to Federation Account Allocation
Committee(FAAC) Secretariat for the year
2004-N31 million
·
NACOFED conference of 2004-N25.70 million
·
Loan to FGN 2006 Car Scheme-N4.58 billion
·
Loan to IG-N308 million
·
Loan to FGN Car Scheme in paramilitary agencies-N10.76
billion
·
Loan to FGN pioneer Car Scheme-N2.8 billion
·
Advance to FGN to meet shortfall in revenue-N985
million
(Source: Daily Trust Stable, January, 5, 2012)
In
the 2012 budget the following monies are included
therein and will be 100% spent by the end
of
this year. We therefore wish to ask Mr. President why
the following monies cannot be used to
save
the nation's economy from collapsing if at all he and
his economic cronies are ready to
salvage Nigerians.
·
N280 million-for the purchase of two bullet proof
vehicles-claiming that the current one
is
too old. As Majek Adega (a writer) challenged
elsewhere i.e. why the President and his
V.P
can't continue to drive the existing ones until the
economy gets better?
·
N125 million-for the purchase of 5 Mercedes Benz Salon
Cars.
·
N100 million-for the purchase of 10 assorted SUVs at
N10 million each.
·
N76 million-renovation of 3 of Aso Rock's Gates.
·
N152 million-extension and renovation of GEJ' family
wing of the presidential villa.
·
N385 million-reclamation of land at the state house
medical centre.
·
N230
million-extension and renovation of the V.P's guest
house. This same project
according to Adega gulped N400 million in the 2011
budget.
·
N37
million-for the renovation of the presidential chalet
at Nnamdi Azikwe International
Airport. In 2011, N48 million was spent on the same
project.
·
N1 billion-for food allowance for the President and
his V.P in 2012.
·
N45 million-purchase of kitchen equipment.
·
N45 million-president's Jonathan's 2012 Newspaper
budget.
(Source: Majek Adega, "Why the Removal of Fuel Subsidy
cannot be justified",
Facebook, Page 1).
Summing up the above figures, we think our CBN
Governor can easily calculate for us
how
we can make-up the nation's treasury without much ado
about oil subsidy removal.
But
one fact remains: he is not seeing along our line of
thinking. He instead, prefers to
score cheap economic point by focusing on subsidy;
trying very hard to prove that he is a
Banker of international repute. He is always eager and
enthusiastic to be aired on radio so
that
he convinces us on how "Nigeria lost $16 billion on
subsidy last year". He has been
parambulating that the total amount of money in the
foreign reserves was $200,000 short
of
the spent sum.
May
be, one should at this point remind Jonathan and
Sanusi and their chief financial
Architect, Okonjo-Iweala by throwing them a
double-decker question i.e. where were
they
when the PDP government as we heard from El-rufa'i
spent $200 billion from 1999-
2007 on elections and campaigns? Where were the
Sanusis, Iwealas and Labarans when
all
these colossal amount of petro-dollars were
hypocritically spent by the PDP
government-the so-called ruling party in Nigeria?
Now
let us quickly flash back to our earlier assertions so
that we buttress our analysis
with
Tamuno David West and Izielen Agbon Izielen practical
calculations on how much
a
litre of petrol is supposed to be sold to every
Nigerian in every filling station across the
country.
Tamuno David West's mathematical petrol production and
functional approach:
a.
1
barrel of Crude Oil =42 Gallons or 159 litres in some
cases 168 litres due to variance in
barrel size and capacity. The 42 Gallons of petroleum
products consists of 4 Gallons of
LPG,
9.5 Gallons of Gasoline, 10 Gallons of Diesel, 4
Gallons of Jet Fuel/ Kerosene, 2.5
Gallons of Fuel oil and 5 Gallons of Bottoms.
b.
Nigerian Refineries (4 installed capacity at Kaduna,
Warri and Portharcourt) =445,000
barrels per day.
c.
Actual refineries capacity due to ageing equipment and
obsolescence=30-38.2%
efficiency =133,500-170,000 barrels per day out of
which we get throughput refined
products of about 13.26 million litres of petrol, 6.8
million litres of diesel and 2.72
million litres of Kerosene/ Jet Fuel, which are all
not enough to cater for the total national
demand. This obliged us to send our remaining crude
oil of about 275,000 barrels per day
to
be refined abroad and imported back into the country
for sale. But even at the level of
deterioration of Nigeria's refineries we get at least
133, 500 barrels= 21.20 million litres.
d.
Local required consumption (F.O.S) = 12 million litres.
This means with the moribund
status quo of our national refineries, we can actually
cater for our local consumption
since we just need 12 million litres out of which we
have 9.20 million litres in excess.
Now
let us look at the David West's deduction formula on
structure of refining the crude
oil
i.e. Qua Iboe Crude Oil production cost.
e.
Findings/development=$3.50 per barrel
Refining cost= $12.60 per barrel
Pipeline/ transportation= $1.50 per barrel
Distribution/ bridging fund margins=$15.69, which
comprises of retailers, transporters, dealers,
bridging funds and other administrative charges.
f.
True cost of 1 litre of petroleum anywhere in Nigeria
=
$3.50+$1.50+$12.60+$1.50+$15.69=$34.79 per barrel
1
litre cost = $34.79÷159 litres = $0.219.
Naira equivalent of $0.219= 0.219x N160= N35.04k
Add
V.A.T of N5.00= N35.04+N5.00= N40.04k
This
N40.04k as calculated by Professor David West, former
Nigeria's petroleum Minister, is
actually what every Nigerian who cares to fuel or oil
his vehicle is supposed to pay at every
filling station in Nigeria. So where is the subsidy
that Jonathan, Sanusi Lamido, Okonjo-Iweala
and
co. are terribly disturbing us about? Who then is
unrealistic? Who then is ignorant and
nonacademic with national economic statistics?
Indeed, the issue is: even the 275,000 barrels per day
that we send daily abroad, we give it out to
commodity traders, which are also divided as follows:
a.
90,000 barrels per day goes to Duke Oil.
b.
60,000 barrels per day goes to Trafigura (Puma
Energy)- a company that conspired against the Ivorien
citizens health status by dumping a hazardous
petroleum substance
on
Ivorian soil. This Trafigura was caught in barbarous
throwing away of toxic
petroleum waste on Cote d'Ivoire's soil, which
stripped their nutritious land bare,
killed scores of people and sickened thousands of
Ivorien citizens. The dumping of
the
deleterious petroleum residue, according to Kperogi
was done on July 2, 2006. An
Amsterdam court that found the company guilty had to
fine it 1 million Euros. But regrettably, the Nigerian
government feels there is nothing wrong in engaging
this fraudulent Trafigura to refine its crude oil in a
crookest manner. Please see Farooq
Kperogi's analysis on Trafigura in his Weekly Trust
Column of Saturday, November 5, 2011 i.e. "Notes from
Atlanta".
c.
Another 60,000 barrels per day goes to Societe
Ivorienne de Refinage (SIR) in
Abidjan, Ivory Coast.
d.
65,000
barrels per day goes to (unknown sources) in a swap
deal.
Now
let us refer to the 2nd theoretical
framework as deduced by the mathematical Izielen Agbon
Izielen on swapped petroleum products before we
finally draw an inference after comparing it
with Tamuno David West's petrol production approach.
Izielen Agbon Izielen mathematical method:
If the landing cost of a litre of
petrol is N 123.32 and the distribution margin is
N15.49 according
to the Jonathan's government, it means: 1 litre
=N123.32+N15.49=
N138.81, which is
equivalent to $3.54 per Gallon=$ 148.54 per barrel.
a.
Technically, 1 barrel of Nigerian Crude Oil= 6.6%
volume yield of AGO 20.70% Gasoline 9.50% Kerosene/
Jet Fuel 30.60% Diesel 32.60% Fuel Oil/ Bottoms The
above percentages according Izielen are what we will
get when our crude is fully refined.
b.
AGO=$174.48 per barrel Gasoline (PMS or Petrol)
=$69.55 per barrel
c.
$142.32-$102.65=$39.67 per barrel of swapped crude
oil, which is a net of N39.91 per barrel obtained
thus: $39.67±159 litres=.$0.249x N160 Naira
equivalent=N39.91. We add V.A.T of N5.00
=N39.91+N5.00= N44.91 of petrol per litre. Again
according to the Izielen's method, this is also a fair
price of petrol in any filling station in Nigeria.
Now
comparing Izielen's N44.91 per litre with Tamuno David
West's N40.04 as obtained elsewhere in this analysis,
we add the 2 figures together and take the average
i.e.N44.91+N40.04=N84.95±2= N42.48≈N42 per litre.
Therefore, the final cost of 1 litre of petrol, which
is supposed to be sold to everybody in Nigeria
that wants to buy fuel is N42 not the former
government price of N65 per litre and definitely not
at
the extra-large and hypothetical figure of N141 per
litre. The real cost of petrol is statistically
obtained from this comparative analysis of the results
of two authoritative mathematical
connotations, which gives out our oil price per litre
in Nigeria as N42. Who then is unrealistic?
This
shows how some people with very little knowledge in
economics can brag themselves as
scholars and hence can ignore the views of professors
and authorities that are more
knowledgeable than them in the area of Nigeria's
political-economy.
Therefore, the Jonathan-Sanusi-Okonjo-Iweala's version
of oil subsidy removal far "surpassed"
our
normal understanding, because theirs, is a complete
mismatch of our own simplistic
definition. That is why one may wish to ask Sanusi his
own definition and meaning of subsidy,
particularly when he bailed out those five Banks where
he single-handedly injected over N10
billion to rescue them out of their operational
doldrums. He could have chosen not to do just that so
that the Banks could die down naturally, but he used
tax payers' money and relieved them up. Is it not a
subsidy that he gave to the Banks to free them from
their comatose situation?
Realistically, even the Bank's bailout plan that he
did, was actually faulty. As Irvine Sprague, a
former director of the FDIC writes in his book "
Bailout", "In a bailout, the bank does not close,
and
everyone-insured or not –is fully protected, except
management which is fired and
stockholders who retain only great diluted value in
their holdings. Such privileged treatment as
accorded by the FDIC only benefits an elect few in the
economy". This means bailouts are only
for the rich. Sanusi should know that if, for example,
JP Morgan Chase or Citibank gets in
trouble in the
US., the tax payers in the State pay for all losses.
This means the $250,000 limit does not apply. In a
nutshell, what the CBN did is just a carbon copy of
the FDIC in a simple term, which is a smoke
screen protecting the biggest banks. This also means
if a bank gets
caught, the government bails it out with tax payers
money the way Sanusi Lamido did with the
likes of Oceanic
and Intercontinental Banks. What an economic "guru"?
The
CBN governor should therefore go beyond economic
polemics and rhetoric in what appears
to
be his attempt at pleasing IMF and World
Bank-institutions that he was vehemently opposed
to
not long ago. It is indeed mind boggling to see the
likes of Sanusi and Okonjo-Iweala who few
years ago were heavily opposed to certain IMF and
World Bank policies are now disco-dancing
to
their tunes and lyrics. Sanusi in particular was once
attacking these Bretons Institutions,
because of their economic policy inequalities in the
developing nations. Hear him:
"The struggle against global capital as represented by
the unholy trinity of the IMF, the World
Bank and Multilateral ‘trade' organizations as well as
that against the entrenched domestic
class of contractors, commission
agents and corrupt public officers were vicious and
thus required
extreme measures. Draconian policies are a necessary
component of this struggle for
transformation
and this has been the case with all such epochs in
history".
That
was Mallam Sanusi Lamido Sanusi of yesteryears when he
was depending "Buharism" in his own version of
economic theory and political-economy on July 22, 2002
in Lagos. But
shamelessly enough, this same man has today eaten up
his own vomit by schematically trying to
implement the World Bank's agenda. That is why he
seriously craves for the support of
Nigerians to succumb to removal of oil subsidy even
when he seems not to understand its real meaning and
significance from its originators.
In
view of the above therefore, we urge on President
Goodluck Ebele Azikwe Jonathan, Sanusi Lamido Sanusi
and Okonjo-Iweala to kindly refer to Joseph Stiglitz,
the 2001 Nobel Prize for
Economics Laureate and one of the world's best
known-economists and former Chief
Economist at the World Bank, and get well informed
about national and international finances,
which he (Stiglitz) honestly argued and explained to,
especially President Clinton's government
as
the Chairman of the Council of Economic advisers. He
opined that subsidy removal,
"globalization and its discontents", cannot simply
work for the developing nations such as
Nigeria. We also urge them to in the spirit of
profound camaraderie and sportsmanship revisit
this
oil subsidy unilateral decision before it consumes all
of us.
For
Okonjo-Iweala, the Nigeria's finance Minister, there
is lots of lessons that she ought to have
learnt from her very senior colleague (Professor
Stiglitz) when she was at the World Bank, but
she
could not do just that. What a waste? She could have
learnt from him that subsidy in its realform
and structure, is always given and provided by any
apex government to cushion the
economic
hardship of its citizenry. Definitively, she could
have known from Joseph Stiglitz's
school of
thought the multinational institutions' policies and
what they want to achieve as a faith
accompli in
developing countries such as Nigeria. A decade after
the Uruguay Round, more than
two-thirds of
farm income in Norway and Switzerland came from
subsidies, more than half in
Japan, and
one-third in the EU. For some crops, like sugar and
rice (not even oil), the subsidies
amounted to as
much as 80 percent of farm income. The aggregate
agricultural subsidies of the
United States,
EU and Japan, for example (including hidden subsidies
such as on water), if they
do not actually
exceed the total income of sub-Saharan Africa, amount
to at least 75 percent of
the region's
income, making it almost impossible for African
farmers to compete in world
markets. The
average European cow, gets a subsidy of $2 a day (the
World Bank measure of poverty), 80 percent of the
people living in Nigeria today live on less than that.
This means it is better to be a cow in Europe than to
be a poor person in a developing country like Nigeria.
The
Burkinabe Farmer, for example, lives in his country
with an average annual income of just
over
$250. He ekes a living on small plots of semi-arid
land; there is no irrigation, and he is too
poor
to afford fertilizer, a tractor, or high-quality
seeds, unlike his colleagues in California that
can
farm a huge tract of hundreds of acres, using all the
technology of modern farming: tractors,
high
grade seeds, fertilizers, herbicides, insecticides
etc. The most striking difference here is
subsidy on irrigation water (not even oil) by the U.S
government, which allows the California
cotton Farmer to farm very well, because the water he
uses to irrigate land is in effect highly
subsidized. He pays for less for it
than he would in a competitive market. But even with
the water
subsidy, even with all of his other advantages, the
California Farmer simply couldn't compete in a fair
global marketplace were it not for further direct
government subsidies that
provide half or
more of his income. Without these subsidies, it would
not pay for the United
States to
produce cotton; with them, the United States is, as we
have seen, the world's largest
cotton exporter.
And this brings us to the end of this discourse on oil
subsidy removal using
Elton Mayo's
Hawthorne studies framework that the incentive plan on
subsidy given to people if
removed in
effect; it affects their general output,
socio-economic wellbeing and standards,
because it is the
key determinants of individual's welfare and behavior.
Conclusion:
The
Federal Government of Nigeria should therefore as a
matter of national interest urgently
reverse the decision on oil subsidy removal. The money
it claims to be losing on oil subsidy each
year, can be obtained by cutting the salaries of all
the political appointees and office holders by
50
percent not by 25 percent as meagerly asserted by
President Jonathan in his address to the
nation yesterday night. These political appointees,
starting from local government councilors, to
chairmen, state and federal rep. members, senators,
ambassadors, ministers, governors, vice
president and president, should be
reduced their salaries by half if at all we are
serious about
nation building. The unnecessary committee sitting
allowances given to House Committees
should all be remitted back to government coffers for
Project Nigeria. Once this is done, we can
invite the Sanusis and Okonjo-Iwealas to reevaluate
and calculate the national income index and
see
if the N 1 trillion that they said we are losing on
subsidy cannot emerge out of those political
appointees spending jamboree. There is no conflict
whatsoever between this and action
committed to meaningful goals. The two are
inseparable. We should intellectually, but
ideologically challenge President Jonathan
administration, his cohorts and economic think-tanks
such as Okonjo-Iweala, Sanusi Lamido and Diezani by
collectively letting them know that there
are
teaming fellow Nigerians who are out there that only
manage to eat once a day. We must
remind them anytime that because of their stern and
inhuman actions on oil subsidy, there are
lots of children who will drop out of school, because
their parents can no longer afford to send
them to study anymore. Indeed, we
must tell them that the decision they took,
maliciously means
afflicting more hardship and suffering to ordinary
Nigerians. We have no choice than to
tell them that we
can no longer confide in them that they will do
something tangible with the oil
subsidy money
trillions that they said will save for the development
of Nigeria. We feel nothing
will be done
with the money other than to be shared again by
government top echelons in their
business as
usual. As we put our hands on deck to salvage Nigeria,
we shall pursue our own cause with personal
temerity, grandeur and passion. What is wrong, useless
and should be
avoided is what honourable Dr. Yusufu Bala Usman once
referred to as hot-air jargon what is
popularly called
in Hausa as Dogon Turanci.
References: Adam, S. (1790). "An enquiry into the nature and
causes of the wealth of nations", London
Jibo Nura
(Quantity Surveyor), is lifetime Member, West African
Research Association
(WARA), African
Studies Centre, Boston University, United States. He
can be reached at:
jibonura@yahoo.com. |
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