Some Nigerians want fuel subsidy. It will come at a cost

So a few people think government should subsidize the price of petrol. I do not agree but let's assume this is the right thing to do. Shall we play with some figures? Good.

The current price is N145 per litre. Let's assume the government decides that people should pay N110 per litre. That means govt is subsidizing our fuel consumption at N35 per litre.

Now, the general consensus is that Nigerians consume 40 million litres of fuel every day. Let's assume this figure is too high and the actual figure is something like 35 million litres every day.

Let's also assume there are 365 days in a year.

What this means, my people, is that Nigeria will be subsidizing fuel consumption with N447 billion per year. This is assuming that crude oil price or exchange rate doesn't go up. If any of this goes up, the amount of subsidy also goes up.

Where will this money come from?

In the 2016 budget, Nigeria budgeted N268 billion for over 206 roads, N99 billion for power supply infrastructure and N66 billion for housing. That's a total of N433 billion. Are we then saying instead of spending money on roads, power and housing, we should spend money on fuel subsidy (and it may not be enough still).

Last year, the Nigerian federal government spent N19 billion on road in total. This year the government wants to spend N268 billion on roads. This amount is not even enough but at least it's something. That's partly why they did not budget for subsidy in 2016 - they want to spend money on real infrastructure. But it seems Nigerians prefer subsidized fuel instead of good roads and better power supply.

The time has come for us as a people to determine what we really want. We cannot continue to eat our cake and have it.

"Do not be deceived. God cannot be mocked. Whatever you sow, that is what you will reap" - Galatians 6:7

Selah

Making sense of the new petrol price regime in Nigeria

The first thing to know and accept is that the former price of premium motor spirit, or petrol (PMS) at N86.50 makes absolutely no sense within the prevailing crude oil price and exchange rates. The second thing is that what we have now is not deregulation but "price modulation". The third thing is that the government did not really remove subsidy per se – the 2016 budget does not even contain provision for subsidy.

Fine? So we can move on now.

A bit of history

In 2012, when the President Goodluck Jonathan government removed subsidy on PMS and announced a complete deregulation regime, Nigerians protested. I did too. While most of our reasons for rejecting the deregulation were valid (demand for prosecution of subsidy thieves, reduction of massive wastes in government, fight against widespread corruption etc), in retrospect Nigerians were wrong and the government was right – we should have accepted deregulation. However, the money saved by the government against subsidy payment would most likely have been stolen by the government anyway as we now know how corrupt that government was. Nevertheless, deregulation would likely have solved a lot of existing problems in the industry including new investments in refineries and distribution infrastructure. But it is never late to correct a misstep, is it?

Why deregulation?

Under deregulation, the government has almost zero input on the pricing and distribution of petroleum products. Anybody can produce or import petroleum products at whatever costs and sell at whatever prices. Government protects consumers by encouraging competition in the industry which ensures prices cannot be determined by one individual (think of MTN, Airtel, Etisalat and Glo and how competition has forced prices down). Here in the US, that’s what happens. For example, around my house there are three fuel stations within about 400 metres of one another. In fact two of them are right opposite each other. At no time do these fuel stations sell at the same price. The funny thing is that the one I prefer buying fuel at (called Royal Farm) is the one that usually has the most expensive price. I prefer there because their pump appears to dispense fuel faster. They also have a free tyre pumping machine and I get to buy stuff at their super market. Now the church where I worship is about 8 minutes away and there is another Royal Farms station there. The price at this station is always different from the price at the Royal Farms near me. Also, when I first arrived here fuel price was about $2.20 per gallon (1 gallon = 3.785 litres). As crude oil price crashed, fuel price also reduced. In early February when crude oil price was around $32 per barrel, I bought fuel at $1.54 per gallon. Now crude oil price has gone up to around $45 per barrel and fuel price has followed suit - at the weekend I paid $2.15 per gallon. This is how deregulation works.

Now back to Nigeria

So have we deregulated now?

No (and that is why the government announced a price peg – under deregulation the government cannot fix any price). What we have now is price modulation. Why did the government not just deregulate completely and focus its energy on something different? No one knows for sure, but I have two working theories. One, Nigerians hate the word “deregulation”. Labour unions will likely embark on strike and it might even lead to civil unrest. Two, and this is very important, you cannot trust the average Nigerian businessman. As stated earlier, what deregulation typically does is to ensure competition which eventually forces down prices. But Nigerian producers are a different, special breed. Who is to say these people will not collude to maintain high prices? A very good example is cement. Ordinarily, Dangote Cement has achieved high efficiency in production and this should translate into much lower prices than their competitors (which will force these competitors to improve efficiency and therefore lower their own prices too). But what do we have? They sell their cements at basically the same prices. The result is that Dangote Cement’s gross profit margin and net profit margin are the highest of any cement producer anywhere in the world!

Price modulation what?

Price modulation in this sense is official changes in price of PMS due to changes in the variables. For example, if crude oil price increases (or decreases) significantly, there is also an increase (or decrease) in the price of PMS. This is also the case where there is a significant change in other components of fuel price e.g transport cost, storage cost etc. As you can see, this is what should happen in a normal business – you increase your price whenever your cost increases. The fundamental difference here is that it is the government doing this increase or decrease, not the private sector (of course you would expect that the private sector will be involved in some ways). The gist also is that the government is using a more realistic exchange rate to determine the landing cost of fuel since we import our fuel (i.e closer to N320 per dollar instead of the previously used N199/$ which the oil marketers don’t even get). This point is very important as the current scarcity is largely due to lack of forex at the official exchange rate which is what the former price of N86.5 was based on. Another thing the government announced is that there is no longer import restrictions – anyone can import fuel and sell at any price (before now, you needed a licence and an import quota from the NNPC). However, the Nigerian government says it will be doing this price modulation every quarter unless something extraordinary happens to these indices before the end of the quarter. This is where there might be problem. Three months is too long to react to changes in input costs. We also need to look at how India and Kenya, two countries that also use price modulation on petroleum products, do their own.

Where do we go from here?

What price modulation does is to ensure these oil marketers do not take advantage of Nigerians and charge prices there are way beyond their cost. Also, there is still a bit of competition here since oil marketers are allowed to sell their products at any price so long it is not above the peg of N145. So if I am own a fuel station A and the fuel station B beside me is selling at N145, I can decide to sell at say N143 and ensure more cars come to my station to buy fuel, even though it means there might be queue. Of course this other station B will be forced to react and lower his own price too, so far it is not below their own cost. That is how competition works – everyone tries to take the other seller’s customers using price.

All said, I would still have preferred a full deregulation, even with the risk of excess profits that Nigerian producers are wont to charge. You have to have some measure of faith that the market system will eventually self-correct. However, it appears the Nigerian government could not take this risk with these marketers at this delicate time.

Nigerians are probably paying the price for years of successive governments not maintaining our refineries and/or building new ones to cater for our burgeoning population. It is therefore imperative that the government takes immediate steps to privatize our refineries (one of the reasons the late President Yaradua was a faiure) and give approvals for new ones to be built. The Dangote refinery scheduled to be completed in 2018 cannot come any quicker. New ones are needed. There is no reason why Nigeria should not be exporting refined petroleum products.

Until then, we have to live with this. It is painful but unavoidable, unless we want to embark on a journey to Venezuela. God forbid.

El-Rufai and the Easter holiday controversy

While reactions continue to trail the decision of the Kaduna state government to regulate religious preaching in the state, the governor Mallam Nasir El-Rufai is now involved in another religion controversy. Why? They say he's trying to deny Christians in public schools the privilege of having a long Easter break like they always get. Now they are convinced he has a vendetta against Christians in the state.

As usual, let us ignore the noise and look at the facts of the matter. What is the true story? Let's go.

Students in Nigeria's public schools usually spend 12 weeks in school for the second term of the school year, usually between January and March ending of every year. Now this year, schools were supposed to resume on January 4. However, some states (and some federal schools) did not resume on that date due to logistics (as an example, read this and this). Kaduna public schools resumed on January 18, partly due to the state government introducing free feeding and school uniforms for all students of the state public schools. The government wanted to make sure the program was rolled out in all public schools at the same time.

Normally, the Easter celebrations usually fall during the second term holiday. So while there are national holidays for Good Friday and Easter Monday for everyone, public school students are usually at home during this period for the school break anyway. However, because Kaduna schools only resumed on January 18, and the school has to spend 12 weeks for the school term, the government says the second term will finish in April as the school calendar will not be altered (see the Governor's facebook post here). Therefore, Easter celebrations will not coincide with school holidays. Of course, the students will still get the Good Friday and Easter Monday holidays but they will have to resume school immediately after to continue their education in line with the school calendar. To every rational person, this is totally sensible and appropriate.

But these days, many Christians have lost their rationality on the altar of religion. Some say the state should cut the second term to just 10 weeks and add the remaining two weeks to the third term. Some don't even care - they just want the second term to end before Easter. They say failure to do this means the State Governor hates Christians and wants to use this to punish them or send them away from the state. They say he has ulterior motives. Blah blah blah.

So people, I ask you, is this not madness? What are we turning Christianity into? Are we losing our minds now? Some people actually want to sacrifice their children's education just because they want them to enjoy a long Easter break.

The most annoying thing is that during school holidays, parents still try to organize holiday coaching classes for their children. Some don't even like seeing their children at home during the day, partly because of the stress and also the additional costs. Don't forget that Kaduna public schools students eat free meals in school o. What sort of people are we?

Which brings me to what I have been saying for some time now: we need to drastically reduce the role of religion in formal engagements. I don't need further evidence that religion in official state matters has done more harm than good to us as a people and as a nation. In any case, it is completely ridiculous that we have to suppress education because of religious prejudice. 

But this is Nigeria. When religion talks, common sense takes flight.

Kaduna religion law and the typical Nigerian reaction

So Kaduna state is planning a law that seeks to regulate how religious preaching (both Islamic and Christian) is done on the streets of Kaduna, both in terms of content and noise level. Kaduna is of course a state with a long history of religious clashes. The bill is still with the state House of Assembly for consideration.

As expected, religious bodies are not happy and are planning a showdown with the government.

Look, I know people are naturally not happy, especially since we have elevated religion over common sense. I am aware that some messages are being circulated among Men of God to instigate public retribution on the state government. But instead of threatening violence and death on the state Governor (as at least one Pastor has done, stupidly), there are move civil ways of doing it.

One, religious bodies should use their influence to lobby the Kaduna State house of assembly not to pass the law, or at least have sections they’re not happy with expunged from the bill. The Lawmakers are Muslims and Christians and I am sure will be willing to hear everyone's opinion. They can also be made to hold public hearings on this.

The second option, if the bill is eventually passed in a form the religious organizations are not happy with, is  to approach the court of law to contest the law.

These are some of the options available in a democracy, and the ways things are done in any sane society. Our religious leaders should not descend so low as to instigate violence against a government or pray for calamity on a Governor because of a law that actually has a lot of merits, if you try to see things beyond your ultra-religious prism. But Nigeria, like I always say, is not governed by the Bible or the Quran. Religion should not be used as an excuse to promote unlawful behavior.

Sanusi and his young bride

As usual, people miss the point about the Emir of Kano marrying an 18-year old chick.

 

Under Nigerian laws, an 18-year old is an adult and can definitely make his/her own choices, including getting married.

But that's where the validity ends. I don't support the Emir marrying such a young lady and I have two reasons:

 

1. For a region that is already bedeviled with the problem of girl-brides, seeing another young girl getting married early (even if 18) does nothing to assuage the problem. And this is reported to be the second 18-year old to be married by Emir Sanusi, also his fourth wife.

 

2. The lady just finished secondary school. The North is known for low level of education, both girls and boys. The very few ones that manage to finish primary school hardly go to secondary school. The stats are even more grim for the girls - less than two-thirds of those who enroll complete primary school and even fewer girls finish secondary school (See this). I also understand that less than 10% of those that finish secondary school go to university as most are married off early. There have been campaigns by NGOs to get more northern girls into University. It's been a rather difficult campaign but the groups have been forging ahead, even in the face of little cooperation from Northern leaders. Now the present Emir of Kano, who is arguably the most educated and widely traveled Emir in history, has married another young high school grad. Any decision to further her education now depends entirely on her husband. Even if the Emir allows her to go to the university from his house, it's beside the point - the fact is that it does not encourage other girls to attend University before they get married. This is rather unfortunate and is morally wrong of the Emir Sanusi, as in my view part of his role as Emir is to tackle the problems of the North which are both many and well-documented.

 

Some people have defended the Emir and his babe. Fine. We can't all agree and of course like I said the Emir has not committed any sin, whether to the Quran (I assume) or the Nigerian Constitution. But most of the problems of the North cannot be tackled by either the Quran or the Constitution anyway. It requires people who identify the problems and are committed to solving them. Those using examples of the US and issues of fornication are either being willfully ignorant or being clever by half. I know I will not be encouraging my daughter to get married at 18 and before she goes to the university, even though the final decision rests totally on her.

Akunyili, Buhari, the returned £12,000 - Why the Boss must show the way

This is the story on Late Dora Akunyili, Muhammadu Buhari, integrity and why it’s important to have a head that has a very public stance against corruption. It’s a popular story, but I have refrained from talking about it because there was no evidence. Until now.

 
Dora Akunyili was the Zonal Secretary of Petroleum Special Trust Fund (P.T.F.), co-ordinating all projects in the five South Eastern States of Nigeria (Abia, Anambra, Ebonyi, Enugu and Imo States) between 1997-2000 under Muhamamdu Buhari who was the Chairman of the PTF. The PTF was created by Sani Abacha to use the income from increase in fuel prices to carry out developmental projects across the country.

That is not the  story.

Sometime around 1998/9, Dora Akunyili was very sick.  She needed to go abroad for treatment for cancer treatment and applied to the PTF for funds, being her employer. The Chairman, Muhammadu Buhari, approved the sum of £17,100 made up of £5,100 for diagnostic tests and £12,000 for surgery and hospitalization. However, after the diagnostic test and therapy, the doctors determined she no longer needed the surgery.

In a rare show of integrity, Dora Akunyili returned the £12,000 meant for surgery to the PTF and wrote a letter to Buhari to thank him for giving approval. Buhari minuted on the letter thus:

“See above report from PTF Zonal Secretary Zone 1. You see there are still Nigerians will personal integrity. Please take action in line with PTF Financial Regulation”. I’ve attached the letter (courtesy of Tolu Ogunlesi, ace journalist).

I don’t know how true, but rumor has it that when Obasanjo wanted a Director General for NAFDAC and someone mentioned Dora Akunyili, Muhammadu heard about it and called Obasanjo to vouch for her, given the above story. Obasanjo is one of the rare believers in the integrity of Buhari (see what he wrote about Buhari in his new book, My Watch) and appointed Dora Akunyili to head NAFDAC.

What lesson is there for us?

There are no guarantees Dora Akunyili would have returned the money if she didn’t have a no-nonsense man like Buhari as Chairman, but my opinion is that she would have done the same. However it helps when everyone knows the boss is someone of high personal integrity and will not take any bullshit. When Dora Akunyili took over at NAFDAC, she worked with some people she met on ground and a few new hands she brought it. But they all worked together to clean up the mess at NAFDAC. We all know the story of NAFDAC under her. It took only one person, the head, for every other person to sit up and act properly.

How is this related to Nigeria? I am a firm believer in the school of thought that reckons that corruption is Nigeria’s biggest problem. Under this government, corruption has assumed an alarming rate and everything is free for all. We need a leader that not only has a track record of zero tolerance for corruption, but whom everyone fears and knows will do all within his power to punish corrupt people. There is probably worse corruption in China or US than Nigeria, yet there is development there. Why? Simple. Everyone knows he will get the maximum punishment if/when caught.

 I believe if this is done, everything else will fall into place. 

I'm voting Akinwunmi Ambode as Lagos Governor

I will be voting Akinwunmi Ambode as Governor of Lagos state.

Why?

He's got an excellent record in the Civil Service, rising from a Junior Officer to become Accountant General of Lagos and the Auditor General of Local Governments. Those heights are not attained by politics.

Why not Jimi Agbaje?

Beyond his very good mannerisms and lucid English, the man has got no substance. He doesn't say how he plans to do anything. His private sector experience is also rather watery. I still don't know what he brings to the table. His supporters I've interacted with have not made a valid case for him either.

Why the choice of Ambode is a no-brainer

With the dwindling income from oil, Nigeria needs to look at other means of income. Lagos has been at the forefront of generating its own income and depending less on oil. We cannot afford to have Jimi Agbaje become Governor at a time like this. Ambode's experience of working in Lagos under Tinubu, when Obasanjo withheld the state's allocation forcing Lagos gov't to look for other revenue streams, is very critical at this point. I'm a pragmatist.