We understand the Governor’s Forum and the National Economic Council have approved the removal of the fuel subsidy. We will see what the National Assembly (NASS) will do in the coming weeks.
We understand the logic that over a Trillion Naira will be released for future infrastructure or capital projects. We also understand the fuel subsidy removal may decrease the demand for foreign currency thus the exchange rates of the Naira may be strengthen, that also investors may flock to the refining sector, etc. That palliative measures will be put in place for pregnant women, children and other support initiatives will be developed… Also we saw the list of the who-is-who cabals benefiting from the Trillion fuel subsidy racket.
However, we think the removal of the fuel subsidy at this time is a very bad idea. To start with the policy initiative is driven by the Bretton-Wood institutions – the World Bank / IMF – https://siteresources.worldbank.org/EXTESC/Resources/Subsidy_background_paper.pdf If you take a close look as the paper even the World Bank has acknowledged lots of issues with the fuel subsidy removal. Also current World Bank VP Oby Ezekwesili couple of month ago has expressed her reservations on the subsidy removal – https://www.vanguardngr.com/2011/10/fuel-subsidy-removal-world-bank-chief-cautions-jonathan/.
We strongly believe removal of the subsidy will unleash hyperinflation – since the price of fuel even according to the Ministry of Finance may be more than double! Thus the price of basic necessities such as food and transportation are most likely to double. As you know earning and wages are most likely to remain stagnant and without highly developed mass transportation systems prices will go up. It would have been wise to bring the Trillion Naira syndicate in-line rather than transfer the burden to the Nigerian people.
Also it would have been prudent if new refineries are built (through Public-Private-Partnership) or the capacities of the current refineries were increased before the removal of the subsidy. From the recent KPMG report – you know that the NNPC and allied sister agencies are highly corrupt – is very sad that even though billions of Naira were expended over the years in the highly fraudulent Turn-around-maintenance none of the refineries are operating in 100% capacity.
The logic of cheap Nigeria refined / subsidized fuel re-exported to bordering countries is very weak. One what are the Nigerian Custom Service for? Are you aware that the second poorest country in the World, Niger ( https://www.hottnez.com/the-10-poorest-countries-of-the-world/ ) just build a refinery across the border, with intent to export refined products to Nigeria? Also Niger has uninterrupted power supply which mostly is supplied by Kainji from Nigeria!
You know what happens to the current statutory allocations! You may also know that by throwing the state Governors more money – they will just steal more. So now you know the ulterior motive behind their support of the subsidy removal. It is sad that some crooks among former governors, after stealing billions are now protected by perpetual injunctions to enjoy the loot!
Nigerian government would have been smart – if they tie lifting of oil or allocations of oil blocks to investment in building power-plant, fertilizer factories or petroleum refineries. Also, removal of the subsidy pegged to improvement in Nigeria’s refining capacity. You may want to take a close look at what other OPEC members such as Venezuela and Indonesia are doing! Also another option may be graduated subsidy removal again tied to improvement in refining capacity (eg 25% in 2013, 50% in 2014, 75% in 2015 and 100% in 2016).
It seems like the die is cast for a major confrontation – since there is no provisions in the budget the President has submitted to the NASS. – President Jonathan did not request for the subsidy fuel as mandated by Sections 80 and 81 of the 1999 Constitution – that it is the National Assembly that gives authorization to the President and the executive for all expenditures from the consolidated Revenue Fund that funds the subsidy.
With nation-wide strike on 01/03/2012 – https://premiumtimesng.com/index.php/news/3187-fuel_subsidy_removal_mass_action_begins_jan_3rd.html
Mal. Sanusi – we understand your friendship with Dr. Okonjo-Iweala. Also we understand you may be going along with the powers-be today to keep your job or to be re-appointed after this CBN term. However, remember where you came from and after this job or others you will still go back home and the judgement of the people with your policies and initiatives will be your ultimate legacy! You have made a monumental mistake by supporting removal of the fuel subsidy. Only time will tell and for the sake of the Nigerian people we hope we are proven wrong and that you are right!
Regards,
Dr. Baba Adam, a Nigerian- American who is a university administrator and former US-PRONACO leader wrote this memo before the formal removal of the fuel subsidy on January 1, 2012
