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| President Buhari and British PM Cameron |
So knowing and understanding this why do I appear to be focused on corruption and the congenital and historically intrinsic incompetence and ineptitude and insensitivity of the Nigeria ruling class? The reason is simple. The substrate of corruption powered by impunity has contributing significantly to the nurturing of the incompetence, ineptitude and insensitivity of Nigeria’s ruling elites is what has brought us to this penkelemesi, that is this state of peculiar mess to borrow from the immortal expression of one of Nigeria’s first republic leaders, the late Adelabu of Ibadan.
But before I go on, a slight digression on the reference to Nigeria as being one of the most fantastically corrupt countries in the world by the serving British Prime Minister in his conversations with their Queen.
We do not need David Cameron to remind us of our status, nor do we need the hypocritical sleight of hand in using Nigeria to justify the importance of the meeting Her Majesty’s Government is hosting to point out to us the existential threat that corruption possess to our nation.
We know this ourselves, and long before the treacherous politicians of ‘Change Mantra’ took over our language, concern and cry, ordinary active citizens of Nigeria have constantly and consistently raised the issue of corruption and have persistently pointed out why it has become the single most significant obstacle on the path of our collective national and human development.
But thanks to the most Fantastically Safe Havens oversighting some of the most Fantastically Enabled Environment to receive, harbour, and utilise the proceeds of corruption provided by these same UK and her peers in Europe, the US and across the developed world; every real effort to contain and roll back corruption has been undermined and made unsustainable.
Besides we do know from our lay understanding of the modern criminal law with its roots in British legal history, that the recipient of stolen property and the proceeds of theft is in the eye of the law also a criminal.
So whereas we may be one of the most fantastically corrupt countries in the world, nevertheless, the UK is also one of the most fantastically fashioned receptacles for looted funds, and thus one of the most significant enablers of global corruption.
But now enough of the necessary digression, let us get back to corruption, incompetence, ineptitude, insensitivity and the constant pressure to hike pump price of petrol.
There can no longer be any doubt that it is the incompetence and crass ineptitude of Nigeria’s ruling class that led to the mismanagement of the petroleum sector in particular, and the economy and polity in general. It is this grave mismanagement that converted our public domestic refineries into moribund and monstrous monuments to waste; turning one of the biggest producers and exporters of crude oil into one of the largest importers of the refined products from that same crude.
Bearing in mind this context of mismanagement induced by corruption, let us quickly recap the factors that contribute significantly in determining the price of fuel that is the pump price of petrol in Nigeria.
The first, the most significant, and the underlying root cause is the fact that we have become dependent on massive importation to meet our domestic needs for refined petroleum products. To understand the significance and incomprehensible nature of this situation we need to place the Nigerian case in the context of OPEC.
Whereas on the average most OPEC member countries significantly meet their domestic needs for refined products through domestic refining, accounting on the average for 80% of their domestic needs for refined petrol and other products; Nigeria on the other hand, depends almost exclusively on importation to meet her domestic needs for refined products accounting on the average for about 90% of her needs. What is more? We are the only OPEC member country to be in this kind of situation where more than 50% of our domestic needs is met through importation.
It is this root cause that has now festered the other secondary but equally significant factors contributing to determining the pump price of petrol.
Because we are dependent on importation it means that the end point price will also be influenced and shaped by the cost of refining abroad, as well as the cost of transportation abroad and back to Nigeria, all of which are denominated in USD. The implication of this is that relative value of the Naira to the USD becomes very decisive. A s the value of the Naira depreciates against the USD, or as the value of the USD strengthens internationally, the higher the landing cost of the product in Nigeria, and therefore the higher ultimately the pump price of the product becomes.
In order to understand this scenario of endemic and more or less permanent crisis better, let us look at the other side of this coin, which is the utility value of this product called petrol in Nigeria.
What therefore is the utility value of this petrol in Nigeria? The most obvious is that it powers the transportation business and that given the dilapidated nature and or severe absence of necessary and requisite basic infrastructure, the costs of transportation of goods, services and people have become significant components of the overhead expenses for both households and businesses.
But because medium, big and large businesses and corporations as well as wealthy households benefit from economies of scale, it is for the small and micro businesses along with poor households that the cost of transportation then assumes a disproportionate and burdensome chunk of their expenses.
But the utility value of petrol in Nigeria is far bigger than this consumption value in transportation. And by the way a Planned, sustained Massive public and private sector investment in integrated mass transportation including freighting [land, air and water transport] and the infrastructure to support it, along with investment in other interlinked basic infrastructure such as in storage and preservation, would enable small and micro businesses as well as poor households to benefit from the cost reducing impact of economies of scale as well.
The other significant utility value of petrol is in its role as a significant factor of production in the Nigeria context of overwhelming energy deficit and near collapse of public power supply in terms of generation, distribution and transmission.
Because of the gross inadequacy of public power supply over the decades, autonomous power production by businesses and households has become a primary fact of life in the country. The implication of this is that more than 60% to 80% of the power or energy needs for businesses and households on the average are met through the use of Generators.
Virtually all the stakeholders in the Nigeria economy agree that one of the most significant contributor to the astronomical cost of doing business in Nigeria, and which makes our economy to be less competitive globally is the cost of energy. The component of the cost of doing business and overhead expenses in the Nigeria economy attributed to energy cost is again in the range of 60 to 80%.
What this implies is that any significant increase in the price of energy, both electricity tariff and petrol to fuel generators will also lead to significance increases in the cost of doing business, and thus impact even more negatively on productivity and profitability of businesses as well as on the relative competitiveness of the economy vis a vis other economies.
And just as it is with the cost of transportation, it is the poor households and the small and micro businesses that are going to be most negatively impacted by rising energy cost compounded by rising petrol cost.
So with an economy that is in dire crisis and contracting, plagued by unsustainably high levels of unemployment [with general unemployment rate and youth unemployment rate put at 24% and 45% respectively]; as well as high poverty rate [with a relative and absolute poverty rates put at 70% and 52% respectively]; And with the economy dominated by small, micro and medium scale businesses; it becomes clear why it is of utmost necessity to make both fuel and electricity available, accessible and affordable for the general population.
Without these two interconnected and interdependent products and factors of production being available, accessible and affordable, it is clear that small, micro and medium businesses, as well as poor households will be unable to sustain their households and businesses, and that their existence will be thrown into jeopardy.
It is the combination of all of these factors and the potentially catastrophic impact these have on the economy and household livelihoods in general, that engendered the need to make the two products cheaply available, thus leading to the establishment of the corruption driven and enhanced subsidy regime.
The subsidy regime exists therefore as a direct consequence of the corruption, incompetence and ineptitude of the Ruling Class. And they have had to periodically compound these with their gross insensitivity to the plight of ordinary citizens.
Without fixing the system, without putting in place a well-structured, articulated, and integrated plan, negotiated through wide ranging broad based and genuine process of consultation and multilogue with citizens and their organisations; it is going to be impossible to turn around both the petroleum and electricity sectors of the economy.
What must be fixed and reversed is our total dependence on imported refined products. Unless the government puts in place a plan to ensure adequate domestic refining capacity that can meet our domestic needs and supply the sub-region, the government will continue to be faced with the two unworkable options of either bridging the cost differential between actual importation determined cost of petrol, and socio-economically affordable cost of the product which leads to subsidy; or leave the pump price to be solely determined by the cost of importation, in which case the pump price will be exorbitantly high and will have a tendency to continue to rise.
In fact at this rate and on this trend, the pump price of fuel will hover above N200 per litre by the end of 2016. It is debatable whether the economy can survive or be revived on the basis of this, or whether this will trigger catastrophic consequences for the economy and polity, including a state of near permanent civil unrest. We need look no further for an example of what this might look like. Greece has become Europe’s poster boy for permanent civil unrest and permanent political and economic crisis.
Let us put everything now in their proper perspective and context: At the beginning of this year we were gifted a 45 to 60% increase in electricity tariff. And what has been the result? A catastrophic all inclusive crash of the power sector affecting power generation, distribution and transmission leading to a situation where that sector has experienced total system collapse on four occasions in less than two months [March 31st, April 9th, April 23rd and April 25th 2016].
This scenario makes specious and hollow, lacking in intellectual rigor, the argument of increased prices leading to improved services.
What needs to be fixed first is systemic and structural, including tackling corruption and punishing impunity, and not prices. There is no automatic correlation between increased price and improved service or product.
And as if this intrinsic insensitivity of our ruling class is enough, just about midway into the year and on the eve of the first anniversary of this ‘Change Regime’ and ‘Self-proclaimed Governing Party’, we are being treated to another 60% hike in the price of petrol.
Again it is important to point out here that increase in price will not translate into improved service delivery and the availability and accessibility of the product across the country. What is responsible for variation in the price of the product across the country is associated with the problems inherent in the logistics of distributing the product. If this problem of logistics of distribution is not fixed, official market determined pump prices will simply become the new base for determining the price of the product the further away you are from Lagos, Abuja and Perhaps Port Harcourt.
What is emerging after one year in office is that we have a government that is clearly overwhelmed by the situation, that lacks new initiatives, that continues to substitute symptoms of the problem for the problem; bedevilled with the absence of a clear, coherent, cohesive and shared vision; compounded by the inability to therefore develop a holistic and integrated plan implementation plan for their vision of change.
One year on, the shape of the change they are capable of delivering is emerging, and the picture is potentially catastrophic for our people, our economy and our polity.
What will be the impact of this astronomical 60% rise in the price of the two most significant factors of both household and national economy, electricity and fuel, on the avowed promised social investment program of the change regime? What will be the impact of this 60% fuel price and electricity tariff hike on the 1 million traders, market women and artisans that are being targeted to benefit from a one off grant of N60,000 to improve their businesses?
What will be the impact of these twin price hikes on the N18,000 monthyly minimum wage of workers?
What impact will these have on the jobless and unemployed, the impoverished? Make no mistakes, because these categories continue to depend on those who are in work or running businesses for their survival this will translate into compounded burden for them as they meet theirs as well as the needs of those dependent on them with respect to electricity and fuel costs etc.
What will be the impact on the cost of the proposed school feeding program aiming to cover 4.5 million pupils?
What will be the impact on the 500,000 young graduates to be employed and deployed to teach, or on the 350,000 artisans to be selected for training for improved skills? What will be the impact of these twin additional burdens on the salaries of these 500,000 newly employed young graduates; or for that matter on the businesses of the 350,000 artisans newly trained with new skills?
Let me use another example to illustrate the mutually exclusive and antagonistic nature of the contradictory strands of the inchoate composite economic policies of this government. Take the 60% hike in electricity tariffs: of the current total of N93bn debt owed to the DISCOs by consumers prior to the hike, N78bn of the amount is being owed by MDAs. What will be the impact of the 60% tariff hike on the overheads of these MDAs? And given that MDAs still buy fuel for their vehicles and to power their generators, what will be the impact on the overheads of the respective MDAs?
Again, I can come to only one conclusion, we have in place a government, regime and governing party at odds with itself, plagued by mutually exclusive and antagonistically contradictory visions and plans manifesting in the mutually defeating nature of contradictory natures of what passes for their economic policy.
There is a clear wide gulf of difference between the Change that we aspired for and desired; the change that they so treacherously promised; and the Change that they are now implementing.
The government is nearly one year in office meaning 25% of its tenure is already gone; yet we have only just managed to get a budget for 2016 five months into the year. For a four year tenure, a Nigeria government only has effective control over three annual budgets. The implication is that a third of the effective budget cycles is already set on flawed timeframe and faulty premises.
They do not have resources? What about the Trillions they claim to have recovered from the looted funds? What about the trillions they claim to have captured and safe guarded in the TSA? Who is keeping tabs on these? How can such secrecy and opaqueness pass for transparency and accountability? Who has returned what? How much has been recovered? What is the investment plan to utilise these funds?
The situation is dicey, the condition of existence of ordinary citizens has worsened and is being worsened by the policies, actions and inactions of the government; and something is bound to give and pretty soon.
A word they say should be enough for the wise. But can this have any meaning or impact on a government, a party, and a ruling class bereft of wisdom?
Time will Tell.
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