“A bondage of corruption” – Iyinoluwa Aboyeji explains why the subsidy STILL needs to go

Government is a disease masquerading as its own cure.

-Robert LeFevre

Over the last few weeks since the new year began, I and many others have been engaged in a vibrant national debate on whether or not the government should continue to subsidize premium motor spirit (also known as ‘fuel’ or ‘petrol’).  Clearly, the disastrous human impact of the removal of fuel subsidy and the attendant increase in the cost of living is deserving of sympathy. However, I fear the current debate might be missing a badly needed historical context.

Contrary to what some Nigerians may believe, while we have been an oil producing country since the 1950’s, we were not born with a subsidy spoon in our mouth. In fact, until our government bit the forbidden fruit of oil rents that set us on our current path to destruction, there is no doubt in my mind that we would still have had a naturally deregulated upstream and downstream market undistorted by almost government’s almost total control of the economy. Unfortunately, in 1971, thanks to the serpent advice of the organization of petro-dictators (known formally as OPEC), a state controlled Nigerian National Oil Corporation which took a direct stake in international oil corporations was established. By the end of the decade, oil export earnings had risen fifty fold from N219 million in 1971 to N10.6 billion in 1980. On the surface it looked like success –an African nation had finally managed to wrest control of its natural resources from its seemingly invincible colonial interests. However, unknown to us, remarkably true to the tale of man’s original sin; eyes opened, the ground (agriculture) was cursed and our death spiral begun.

It only took five years for the consequences of our original sin to begin manifesting. In what might sound like a jarring case of déjà vu for Nigerians today, NNOC had not produced audited accounts from 1975 onward. When the report was eventually forced out of hiding by the 1980 oil sales tribunal, it was discovered that from 1975 to 1978, about 182.95 million barrels of crude oil worth over $2 billion was unaccounted for. Of course, this episode would repeat itself as recently as 2004, with the case of another elusive 65 million barrels of crude worth $2.5 billion, and again in 2011). If there is anything we know for sure about the custodians of the nation’s black gold, it is that they clearly can’t count.

The NNOC was restructured in 1977 and we got the NNPC headed by General Buhari. Even he couldn’t stem the corrosive tide. Apart from the fact that fundamentally speaking, this was essentially just a change in name only, some of the new provisions enshrined in the establishing Decree No. 33 simply tightened the noose; the ceiling on contracts the rebranded NNOC could award rose fifty fold, it was granted unlimited borrowing powers and the Petroleum Inspectorate was established as part of the NNPC to issue licenses for any and all activities related to the petroleum sector. The government, despite its mounting record of mismanagement, also took an increased stake in several oil companies as part of these “reforms”. To put it quite simply, the new NNPC was the racketeer’s paradise. If the NNOC was the Garden of Eden after the fall, NNPC was and remains our Sodom and Gomorrah.

Not much changed with a hand over to democratic rule in 1979. In fact, we tightened the noose some more. Instead of killing the beast and returning control to the market, the government gave it hydra heads in the name of reform. In 1981, after the government’s looting machinery, NNPC, grew to nine subsidiaries in the name of “diversification”. Included in this number were the nation’s four refineries which were on the path to “commercialization” as it was called. By 1988, in another restructuring, emblematic of the government in general, the NNPC grew to eleven subsidiary companies under Rilwan Lukman and IBB. The corruption grew with it, eventually implicating even David Tam West, (author and originator of the fabled “petrol tax”) who was jailed on charges of embezzlement in 1990.  Time and again, NNPC officials enthroned by government interests kept sabotaging the nations’ interests. Every weapon was employed in this looting effort; bunkering, sabotaging refineries, missing barrels of oil, joint venture cash calls, pipeline vandalism, voodoo accounting, you name it. To add to the trouble, the subsidiaries were consistently producing losses which were borne by the NNPC. These losses would eventually translate to our domestic and external debt as oil price fluctuations in 1980’s often resulted in reduced government revenues while government expenditure particularly with respect to recurrent spending kept growing.

Now, it turns out the actual decision that brought us here today was actually made in 1997 by Minister of Finance, Anthony Ani, (son of Michael Ani, FEDECO Chairman in 1979 and brother to Senator Ani representing Cross River State – proof that government in Nigeria is almost always a family affair) who also judging by some recent interviews subscribes to Tam Wests’ “petrol tax” theory. He opined justifiably, that it was 20% cheaper to import oil than to refine it locally since most of the refineries were operating below capacity and crude oil theft was rampant. As usual, officials in the NNPC found a way to beat the new system by conniving with importing countries to inflate costs. Obasanjo’s civilian administration innocently further exacerbated the issue by removing the NNPC’s monopoly, so that independent marketers could compete against each other in the importation of refined products. Thanks to the NNPC, that too failed. Oil money from the NNPC easily bought over the independent oil marketers. In 2009, we were already spending more than our total capital allowance on the imports of fuel subsidy. By 2011, it had already replaced “contracts” as the government’s official political reward program, doubling itself in costs to government over a single year. As expected, overtime, the NNPC had converted the subsidy program from its noble purpose to a money doubling investment for looters, with several lucrative “exits” for the lucky, from “air importation” to selling at market price “over the b(ord)ar”.

At the end of the day, one realizes that the story of the NNPC in Nigeria’s Nigeria is aptly summarized thus: the NNPC has become a weapon of enchantment for every government in power, corrupting reform effort after reform effort, and perpetually enslaving our people. It cannot be cured, it can only be destroyed.

The pro-subsidy movement has presented an argument simplistically summarized in its slogan “cut government waste, not fuel subsidy”. Well, I believe we should cut both. To cut government waste while excusing the waste in the government’s hottest looting zone seems to me, a moronic oxymoron.

Three fears inform my opposition to a return to, as the Labour leaders’ have aptly termed it, “the status quo”.

The first is that with a return to N65, we will simply be extending the NNPC’s lease of life. For over forty years, this one company has held us in the bondage of corruption but somehow we believe we can domesticate a wild python. Pardon my pessimism, but I believe it is impossible. Probe after probe, NNPC has proved itself the cat with nine lives. Reform has been tried before and failed severally.  In fact, reminiscent of its origins from 1970-75, NNPC has not reported its earnings in line with EITI since 2008. Indeed, the only way to free Nigeria from the clutches of a vulture ridden NNPC is to relinquish its demonic control over our lives by putting it down. By ridding ourselves of this subsidy of bondage, we are one step closer to the freedom we deserve from this national blood sucker.

My second fear is that a return to N65 is foolhardy given we are at the end of our fiscal rope and all we really have is just debt. Last year, in spite of high oil prices, we depleted our reserves and doubled our debt. This year, the proposed budget will have an $8 billion dollar deficit. Already, the country’s debt burden is close to 20% of its Gross Domestic Product at $39 billion. No doubt, we are far from Grecian debt levels, but given we were only just pardoned from our Paris Club debt a few years ago, that we are fast rebuilding this mountain of debt seems rather shocking. More alarming is the fact that the bulk of this debt is domestic debt, which may be owned mainly by the petro-marketers we purchase subsidised fuel from. Given especially high interest rates, in a few decades, the next generation may be back on its knees begging for debt forgiveness a la 2005. So we don’t have any money to waste, not for fuel subsidies, not for the touted SURE program, not even for the capital expenditure we desperately need. In fact, ironically enough, the SURE program is about the same cost as this year’s debt servicing. Talk about tough choices.

My third fear is that a return to N65 seems to me another familiar, cheap settling point. Understandably, many people in civil society, I deeply respect feel that the demand for a return to the “status quo” maybe the right platform for a broader campaign against corruption and waste in government, but I remain unconvinced. While everyone hopes for greater, the history of civil activism in Nigeria is appropriately decked with cheap position based compromises anchored on fuel price fixing and its famous twin, minimum wage lifting. Putting these surface level issues on the table makes labour unions, and the general populace –especially the middle class (70% of who enjoy government employment) –easier to placate. We’ve been here several times in our history before. In 1975, when Gowon’s drums of tenure elongation grew too loud for our ears, we protested and we were immediately placated with piles of cash in the name of salary increases –even against Udoji’s recommendations – all at the expense of the national debt. In 1992, we were back at the same major crossroads with the ‘Maradona’ himself. After “SAP”ing all the energy out of us with the largest fuel price hike in Nigerian history replete with massive layoffs and government budget cuts, he soon became profligate at about the time he was contemplating tenure elongation. Many were soon shut up by his massive employment drives through the proliferation of completely useless government agencies (National Sugar Development Commission?), a rise in the allowances of government employees, and even the rare reduction in the pump price (amidst a raging gulf war) –again, at the expense of the national debt. Now here we are again, a sweet toothed (un)SURE plan, a recent minimum wage increase and 370,000 “jobs” created in one afternoon broadcast by our General President. Do you imagine that should it prove necessary, a return to N65 might be too big a thing for him to do? –provided of course, that it is funded by our nation’s exasperated credit card. Time and again, we have sold our nation short on the altar of such illegitimate, impermanent bungs and not much has changed as a result. Perhaps, this time, we need a different approach. While the poor and powerless will continue to suffer and sacrifice as indeed they always have, the resultant price increase might just be the fair reminder the middle class need of their responsibility to stop the country’s economic mismanagement by taking their civic duties more seriously.

At the end of the day, while it might not seem so plainly clad in cries of solidarity, shifting our focus from the restoration of our bondage to ensuring the full deregulation of the oil industry and accountability in government is a matter of equity and justice. We need to ask ourselves, show we continue subsidising the numerous failures of the hydra headed NNPC whose foulness has repeatedly strangled any fresh air of open and accountable governance in our country? Is this poisoned bung of fuel subsidy really a just distribution of the nation’s resources given it trickles down, to each, according to his conspicuous consumption and at even greater cost to our children? Will Nigeria’s well-educated upper middle class continue to live up to its civic responsibility to keep government accountable and the masses knowledgeable without the N140 tax on its conscience?

As with Sauron’s ring in the fabled Tolkien classic, reforming the NNPC to make it work with our subsidized yoke might seem like an attractive option, but let’s not forget its rich history of enchantment. Perhaps it is better for us to keep it marching steadily towards the fires of Mount doom.

 

 

 

 

 

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Comments (6)

  1. ^All change is not growth, as all movement is not forward.

  2. Be the change, not the article.

  3. But I worry this is all academic

  4. Excellent. Well Researched. You get it.

cool good eh love2 cute confused notgood numb disgusting fail