Central Bank of Nigeria Governor Sanusi Lamido Sanusi (SLS) responds
to some Internet Inquiries on fuel subsidy and wrote: If you will
patiently read this mail to the end you will understand my position. I
won't be able to repeat everything I have said over the past few years
on fuel subsidy, but in summary; Fraud like theft thrives not only
because of the existence of greed and benefit but of opportunity.
Place yourself in
the shoes of the average nigerian "businessman" or
"entrepreneur"-polite euphemisms for rent seeking parasites.

You establish an elcee for importing 20,000MT of PMS and the PPPRA
says this is at a landed cost of N145 for example per litre. So u know
that for every litre in that vessel you will get at least N85 as
subsidy. Now you have a number of "possiblities":
1. You can off load 5,000 MT and bribe customs and other officials to
sign papers confirming u offloaded 20k MT. Then do the same across the
chain with a paper trail showing you delivered 20k MT to a tank farm,
and maybe even that u transported it to Maiduguri entitling you to a
share of the price equalization fund. Maybe for N20-N30 per litre u
bribe all those who sign the papers. The 15k MT you take to Benin or
Ghana or Cameroun and sell at market price thus makin an additional
"profit" of N55/ltr on 15,000MT!

2 you can just forge documents and have them stamped without bringing
in anything and collect the subsidy-PPPRA pays based on DOCUMENTS.

3 you can bring in the fuel, load on tankers, sell some at N65N some
at 80 some at 100 some across the land borders.

You can do all this and no one can catch it or prove it because
somebody was paid to sign off on docs. And with a high enough margin
there is too much temptation to be resisted and firepower for bribing
officials.

When I spoke to the house of reps I told them why I was suspecting
fraud. It starts from PPPRA "allocations" based on "capacity". You
will find a company like Mobil with capacity for say 60,000 MT and a
relatively unknown name with a capacity of say 90k MT. Red alert
number 1.

Although PPPRA is supposed to give license only to marketers with a
national distribution network you see names of companies where you
have never seen a filling station in their name.
I was a chief risk officer in UBA and in FBN for many years approving
loans so I know the name of every big player in every industry that
nigerian banks lend to as these are among the biggest banks in the
country. I see names on the list I don't recognise either from
portfolios. I looked at or industry studies over the years. Red alert
number 2.

I studied the papers presented to PPPRA in a short period in 2010 (I
won't tell you how I got them!). And I was surprised that on some days
over 10 vessels are said to have discharged cargo in lagos on the same
day-clearly the same officers stamping and "verifying" that the
vessels were SEEN. Is it really realistic that on the same day 13-15
vessels can discharge in Lagos? Red alert number 3.

Why was I interested in fuel marketing. Because the two sectors that
led to the near collapse of the banking industry were capital markets
and oil marketing. I am not giving any confidential info out as AMCON
MD has already disclosed publicly that two companies alone-zenon and
AP-owned by the same businessman owed the nigerian banking industry
N220b. And we all saw the amount of subsidy paid to those companies
published by BusinessDay.
So money had been taken, subsidy had been collected but loans were not
repaid, and we couldn't see the money either as product in tank farms
or in fuel stations or credit sales. So I became obsessed with trying
to understand how that industry operated and the more I saw the more I
hated it and I started the war against subsidies.
It is actually better to do a direct cash payout or add a line item to
salaries called petroleum support or transport allowance capped at say
N300b p/a than to keep paying it. It goes to pay middle men,
rent-seekers and corrupt officers and there is no amount of preaching
that will stop this fraud so long as the policy is so badly defined.
Everytime oil price goes up and everytime the naira is devalued and
everytime the quantity of imports increases the "subsidy" and thus the
"rent" increases and there is more gravy to go round. So every year we
"import" more and more and deplete our reserves, and the government
borrows more and more to pay for subsidy and the beneficiaries are a
smal group of marketers, govt officials and neighbouring countries
which get fuel without losing forex! And while a person who applies
intelligence can see what is happening you can't prove it in a court
of law. If the man says he sighted the vessel and it was 20kMT you
have to accept it. It was a year ago!

So for two years I have been convinced that this thing is a scam and
that it cannot be stopped because the entire controls have been
compromised. NNPC sells domestic crude, Pays whatever subsidy PPPRA
says and then gives the balance after JVC to the federation account.
And while fani kayode is right to speak up, the truth is that it was
obasanjo who first subverted the process by allowing NNPC to make the
deductions before paying into federation account. Because once money
goes into that account it is to be shared among 3 tiers of government
so strictly speaking the deductions have always been unconstitutional
as the FG was paying subsidy on behalf of itself and state and LGs
without their approval.

So yes, I am willing to take all the criticism and labels and be
unpopular but this has to stop and govt can find other ways of
alleviating pain. Iran removed subsidies and started cash transfers
directly to the poor. It is up to fiscal authorities to figure out
safety nets but from where I sit and what I know this decision is not
only correct but necessary and overdue. I also confirm that I have
revealed nothing here I haven't spoken about before in public and it
is just that Nigerians never listen!

I am not complaining about insults I am used to that. I just believe
that an insult is not an argument and when people resort to personal
abuse they have run out of logic.

But to then go beyond me and extend it to my dead grandfather and his
"descendants" ie my late father his siblings etc I think goes beyond
the pale. As a Nigerian-and as an economist- I can take a position on
economic matters and this position is one I have had for years even
before coming in to the central bank.

I have also explained the position on several occasions and criticised
government for not doing this before. In 2010 at a public hearing in
the House of Reps on the 25% saga I alerted the nation of what I
considered a potential big scam around subsidies and urged for its
removal. No one paid attention. The economics is very clear to me.
That it is unpopular is also understandable.

The British public is unhappy with Tory budget cuts. The Greeks went
on riot over austerity. Italian parliamentarians came to blows before
Berlusconi was thrown out of office. The US congress is yet to approve
Obamas tax increases.

Economic decisions-by definition-ALWAYS must involve a cost or an
opportunity cost since for them to qualify as economic they must
involve a choice in resource allocation among competing uses. An
enlightened debate is one that weighs the pros and cons of removing
subsidy and continuing with it.

Removing it has costs in terms of nigerians paying more for PMS-which
by the way is not the fuel for genrators, power plants, production
facilities, heavy duty goods transportation trucks and even luxury
buses.
It is fuel used by the middle class and car owners to drove around
town and from city to city not to employ workers and produce goods and
services. Diesel which is critical to manufacturing and employment
creation is not subsidized as the subsidy was removed years ago by
obasanjo. Nigerians said nothing then because it was blue collar
workers that got retrenched by factories.

Those speaking now on the internet and facebook and twitter and
newspapers are not workers but middle class elite who use PMS in their
smart cars so let's stop all the ideological pretence. This is not
about elite and masses but an intra-elite discourse.

I will summarise the issues and I write as a Nigerrian economist and
public intellectual not as a public servant:

1. I am a strong advocate for subsidies if they are for production and
not consumption, and if they benefit the poor and not middle men and
rent seekers. The US government subsidizes cotton and wheat farmers
and nigeria spends its reserves importing wheat from america and
keeping american farmers employed. The OECD countried pay subsidies to
cattle farmers. Today Promasidor imports powdered milk from New
Zealand and packages in nigeria using our foreign exchange while we
have cattle. WAMCO imports milk from the UK and adds water and tins it
and calls it "production" of Peak milk. We use our forex to import
petroleum products and keep refineries and jobs open in europe.
Meanwhile precisely because of market distortions there can be no
private sector investment in refineries since no one can make profit
seling at the regulated price unless we are going to provide private
refineries with crude for next to nothing. Certainly no one can
purchase crude at market price, refine it and sell at N65 without huge
losses so this explains why there are no private refineries.

2. what I mention above is at the heart of the problem with government
economic policy which needs to be changed. The economy since SAP is
one that supports imported consumption and not local production,
perpetuating dependency, non inclusive growth and insecurity. Why is
it that the economy is growing at 7pct annually but the people are
getting poorer. Because growth gains are not evenly distributed.
Personal income is skewed towards people in the oil industry,
telecomms, high finance, stock market, real estate and yes civil
servants and politicians who feed on corruption. We produce crude oil
but import petroleum products (today the UKs highest exports to
nigeria are petroleum products). We have a large cotton belt but
import textiles from china (thus keeping their subsidized factories
open and jobs in china). We are the world's number 1 producer of
cassava but import cassava starch from europe. We have a huge tomato
belt in kadawa, jigawa and chad basin but are the world's largest
importer of tomato paste-from China and Italy. We can produce rice but
we import rice from Thailand and India-most of it from grain reserves
that have been in stock for over 5

3. If above is clear then it is evident that this trajectory can only
lead to disaster. We will continue to spend our resources promoting
growth and employment in our trading partners. Terms of trade shift
against us, we can only have foreign reserves because by the good
grace of God we have Oil which will be exhausted soon and with new
discoveries may become so cheap it loses value. We don't create any
value added jobs as the only real production is peasant farming. Oill,
telecomms, finance and real estate are not employment intensive. So
everyone becomes a civil servant as the economy cannot create jobs.
Result? In 2012 budget out of a total N1.8tr recurrent expenditure for
the executive arm N1.6tr is on personnel costs not overheads. To
reduce this you have to cut salaries or pensions or retrench civil
servants. This is the classic trajectory of underdevelopment,
de-development and de-industrialisation.

4. For the above reasons I am a strong proponent of structural reform
and this begins from the fiscal framework. The limited resources of
government should be allocated to supporting production-especially if
we are running a budget deficit. We cannot keep borrowing to support
conspicuous consumption. To support a job creating economy we need to
fund power, transportation infrastructure, market infrastructure and
access, technical and vocational education etc. We need to build rice
processing plants, produce starch and cassava flour and ethanol,
process our tomato and milk locally, regenerate our textiles firms
(which used to employ 600,000 workers but now employ 30,000!), refine
our own crude etc. We cannot even begin to do this if 30pct of govt
expenditure is on fuel subsidy, if out of the balance 70pct is
recurrent spending, 10pct is debt service, 10pct goes to the niger
delta and only 10pct is capital expenditure. So it is about a
choice-what do we spend money on and how do we allocate resources?
5. We often compare ourselves to other oil producing countries like
saudi arabia. What are the facts? With a population of over 160m we
produce 2mbpd ie 1 barrel for every 80+ citizens daily. Govt share of
revenues if like 50pct of every barrel so it is effectively a barrel
for 160 citizens. Saudi Arabia with a 24m population produces over
8mbpd or one barrel for every 3 citizens. In fact in 2010 the nearest
OPEC country to nigeria in production per capita was Algeria with a
barrel for 30 and algeria is more gas than oil.

With one barrel for 3 citizens dailt saudi arabia is able to provide
infrastructure, education, healthcare and social safety nets and have
huge savings. It can provide subsidised fuel at a total cost that is a
fraction of its savings and even export refined products. It is paying
for subsidies ouy od its fiscal savings and not borrowing to pay. We
are like a poor man with a rich neighbour. The neighbour buids a good
house, buys several cars, eat expensive food, travel abroad every year
and still have huge balances in sevral current accounts. Then you
choose to live that lifestyle and mortgage your house, take an
overdraft from the bank to finance it. Next year it is time to repay
the bank, u don't have the money so u go to another bank, borrow
enough to pay the first bank principal plus interest and also fund the
continuation of the lifestyle. It continues till u can't borrow
anymore and the bank throws u and your family out of your house and
you everything.

A responsible father would have long since faced reality and told his
family he doesn't earn as much as his neighbour and expectations need
to be moderated if they to keep their roof. Of course the children
won't be happy at not going to Hawaii for summer and having to take
public transport rather than own cars like their neighbour's children.
Maybe they will even abuse the father behind his back and call him a
miser. That is the cost of leadership.

Finally: removing subsidy is not a silver bullet that solves our
economic problems. And there is a huge trust deficit that government
has to address. Government needs to investigate subsidy payments and
punish any violations of extant guidelines. It needs to cut on
unnecessary and waste ful expenditure. It needs to fight corruption
and show seriousness in that. It needs to deliver on capital projects,
power and infrastructure including irrigation, farm-level storage and
agri-processing. These are all valid issues that are to be taken IN
ADDITION to and not in place of subsidy removal.

Since someone has decided to make insinuations about my grandfather I
owe it to him to defend his record. it was my grandfather as emir that
repealed an obnoxious rule started from the days of Emir Usman that
disenfranchised women from inheriting property. It was sanusi that
built the groundnut pyramids to the point where Kano NA was
contributing 40pct of the revenues of the northern region. It was emir
sanusi who built the Bompai Industrial Estate, and turned kano into
the industrial nerve centre of the north. He was acting governor of
the northern region, minister for pilgrim affairs, chief Imam of
friday mosque, judge and leader of the Tijjaniya order. As for his
"descendants" my father was one of the very first batch of 12
Nigerians recruited by the British to set up the foreign service in
1957 and he remained in public service and rose to be permanent
secretary before retirement. He set up in the 60s the research dept of
the ministry- the present NIA so he was the first external
intelligence officer in Nigeria. As permanent secretary he was the
architect of Murtala Mohammed's policy on decolonisation of Africa and
oversaw the independence of Mozambique and Angola and the final push
to liberate Zimbabwe and South Africa.

So yes Sanusi was not perfect. He was a feudal aristocrat. And my
father was not perfect. He was also a prince and priviledged to go to
Oxford and LSE. But please if you want to abuse my grandfather and
father kindly tell us what contributions your own grandfather and
father made to the people.

Sanusi Lamido Sanusi is the governor of Nigeria's Central Bank

Summary: My economic brain = Sanusi's economic brain

Perfect explanation of all I've been preaching. Sigh.


Errr. . . OP, pls where's d source

@OP, sorry but the topic does not match with the content.

Why should Sanusi's pedigree stop us from protesting hardship imposed by his economic chat?

As an economist, why did he not advise the FG to cut down the excessive spending on operating the state instead of costing the public hoi polloi to subsidize Jonathan's cabinet?

It should be 'leadership by example' and Jonathan should cut the cost of governance first, and then invite us to sacrifice some in some way, maybe subsidy.

Initially i was against fuel subsidy but, reading this article and looking at things on ground, i'm having a change of heart. From the perspective of things on ground transportation has doubled yes, infact some transporters are having a change of heart and have reduced the initial increase of transportation by half . So lets say point a to b, before subsidy was 100 naira, and after subsidy it went up 2 200 naira, it is now 150. Price of food only added 10 naira on most commodities, while a good number stayed thesame. Only a few and greedy sellers added alot of profits. Prices of electronics remained thesame. The thing is, we are not dead yet, but if we most protest, it is if the govt. Wastes the money saved from the removal of subsidy.

I have always been against the fuel subsidy, but after reading what Sanusi has said, I actually now see the protesters as subversives and enemies of Nigeria.

Beaf:

I have always been against the fuel subsidy, but after reading what Sanusi has said, I actually now see the protesters as subversives and enemies of Nigeria.

Simple as abc

Rather than burden the masses - Tackle those who break the law. Who is bigger, the state or an individual.

A few who corrupt the system is not valid reason to remove subsidy.

Will the Uk government remove train subsidy if i have a free ticket printing machine at home.

He hasn't told us anything new. We are not against the policy we are against the timing and corruption in the system. If customs officers sign documents for products not delivered why haven't they been arrested. If people produce fake documents why haven't they been arrested?Those are the kind of questions we are asking to be addressed.

blacksta:

Simple as abc

Rather than burden the masses - Tackle those who break the law. Who is bigger, the state or an individual.

A few who corrupt the system is not valid reason to remove subsidy.

Will the Uk government remove train subsidy if i have a free ticket printing machine at home.

It is obvious that you did not read the article, I can't understand why anyone would be too mentally lazy for something as fundamental as this:

You can do all this and no one can catch it or prove it because somebody was paid to sign off on docs. And with a high enough margin there is too much temptation to be resisted and firepower for bribing officials.

When I spoke to the house of reps I told them why I was suspecting fraud. It starts from PPPRA "allocations" based on "capacity". You will find a company like Mobil with capacity for say 60,000 MT and a relatively unknown name with a capacity of say 90k MT. Red alert number 1.

Although PPPRA is supposed to give license only to marketers with a national distribution network you see names of companies where u have never seen a filling station in their name. I was a chief risk officer in UBA and in FBN for many years approving loans so I know the name of every big player in every industry that nigerian banks lend to as these are among the biggest banks in the country. I see names on the list I don't recognise either from portfolios I looked at or industry studies over the years. Red alert number 2.

I studied the papers presented to PPPRA in a short period in 2010 (I won't tell u how I got them!). And I was surprised that on some days over 10 vessels are said to have discharged cargo in lagos on the same day-clearly the same officers stamping and "verifying" that the vessels were SEEN. Is it really realistic that on the same day 13-15 vessels can discharge in Lagos? Red alert number 3.

Why was I interested in fuel marketing. Because the two sectors that led to the near collapse of the banking industry were capital markets and oil marketing. I am not giving any confidential info out as AMCON MD has already disclosed publicly that two companies alone-zenon and AP-owned by the same businessman owed the nigerian banking industry N220b. And we all saw the amount of subsidy paid to those companies published by BusinessDay. So money had been taken, subsidy had been collected but loans were not repaid, and we couldn't see the money either as product in tank farms or in fuel stations or credit sales. So I became obsessed with trying to understand how that industry operated and the more I saw the more I hated it and I started the war against subsidies. It is actually better to do a direct cash payout or add a line item to salaries called petroleum support or transport allowance capped at say N 300b pa than to keep paying it. It goes to pay middle men, rent-seekers and corrupt officers and there is no amount of preaching that will stop this fraud so long as the policy is so badly defined. Everytime oil price goes up and everytime the naira is devalued and everytime the quantity of imports increases the "subsidy" and thus the "rent" increases and there is more gravy to go round. So every year we "import" more and more and deplete our reserves, and the government borrows more and more to pay for subsidy and the beneficiaries are a smal group of marketers, govt officials and neighbouring countries which get fuel without losing forex! And while a person who applies intelligence can see what is happening you can't prove it in a court of law. If the man says he sighted the vessel and it was 20kMT u have to accept it. It was a year ago!

A sensible country will not subsidize a commodity that can easily be exported out of their region. We are foolish to subsidize for the entire West Africa and it's not easy to deal with that because there is a natural flow created by price gradient. Putting more restrictions to the flow will only increase customs "bribe fees" or perhaps the business will be left in the hands of customs officials. Best thing is to remove the gradient and then make everyone work for their money. Do you know that commodity prices in are fairly the same in EU member countries? Why is that? Will Spain subsidize a commodity that can easily be taken to France where the same commodity is not subsidized? Think. Regional economics matters alot especially where cross-border trade agreements apply. Every one is pushing for regional integration and we must not remain in a silo.

I have always had a different idealogy to the control of corruption. Man is inherently corrupt. There is corruption in USA, Spain, Nigeria and everywhere. The difference is the control measures in place in these different places. Until we begin to make corruption unprofitable, we cannot suceed in the fight against it. The moment you create an avenue for it to thrive, IT WILL THRIVE. Subsidy is an open invitation for corruption to thrive in the downstream petroleum sector.

@Beaf

I have read the article  - The truth about the article. Everything stated is already a known fact.   Subsidy removal must go , we agree but timing must be right.  You cant expect the nations to tigthen it belts whilst we observe government wastage everyday.  Leaders must lead. How do you explain the yearly government office renovations - Beaf, do you buy furniture every year? or 1 billion allocated for feeding two families and may be somes guests.

If a governments acknowledges it cant deal with leakages - then it has no business leading.  In the whole of Nigeria  - Are you telling me we cant find indivduals or organisation who will man fuel import stations and provide government with actual figures.

Actually Sansusi's message is  - because of a weak government - the best thing would be throw the baby and bath water away.

Nothing new. It is general knowledge that the subsidy is not sustainable in the long-term. However, the manner in which the government is implementing its removal is callous. Keep in mind the reaction of the crowd at the town hall meeting last month. It doesn't take a prophet to know that if a similar meeting were called again the reactions would be negative. Put  simply, Sanusi's stance fails on account of how the government approaches the issue of removing the subsidy.

blacksta:

@Beaf

I have read the article - The truth about the article. Everything stated is already a known fact. Subsidy removal must go , we agree but timing must be right. You cant expect the nations to tigthen it belts whilst we observe government wastage everyday. Leaders must lead. How do you explain the yearly government office renovations - Beaf, do you buy furniture every year? or 1 billion allocated for feeding two families and may be somes guests.

If a governments acknowledges it cant deal with leakages - then it has no business leading. In the whole of Nigeria - Are you telling me we cant find indivduals or organisation who will man fuel import stations and provide government with actual figures.

So long as you agree that the subsidy had to go, I'm cool.
As for profligate spending in govt, I also agree.

Beaf:

I have always been against the fuel subsidy, but after reading what Sanusi has said, I actually now see the protesters as subversives and enemies of Nigeria.

The above statement is unfortunate. I, like you, am against fuel subsidy and agree that it should be scrapped. Having said that, I do not believe that we should be paying more than N65 per litre.

Corruption, which is the root of the subsidy brouhaha, is what the government should be addressing with the same vigor and promptness it is using to remove the fuel subsidy. It is quite dishonest of you to equate protesters of abruptly high fuel costs and costs of other goods and services, with supporters of thieves and corrupt businessmen. Shame on you for this act.

^
Shame on you to.

Well said Mr. Sanusi.

I think it is about time the government create a new PR department to reorient citizens mind. Majority of Nigerians don't read, they're gullible and ready to follow the media hype blindly. What needs to be done is to create an environment, through necessary channels to reach target masses; where government will preach and support Whistleblowers in every industry, economic theories as it affects Nigeria / Nigerians can be debated, preach about discipline attitude and why this is good for common Nigerians.

Nice read. The facebook and twitter brigade should take time to read this, and after it ask themselves if they are the President, whether they will remove the subsidy or not. Having said all that, GEJ should come out and convince the masses why he had to remove the subsidy when he did, because it left a lot of questions unanswered as regard the plight of the masses.

I think labour unions are wrong this time, they allow subsidy to go and then agitate for improve welfare and minimum wage.

my question is simple, how was yaradua able to bring down fuel price from 75 to 65 naira and yet died leaving so much in our reserve.
is it that consumption/importation was far far less in the last two years compared to non?
is that we import 100%?
what happens to the little our good for nothing refineries are able to produce.
lets look at what is produced locally per day vis a vis consumption per day.
i think we'll be able to get a clearer picture of what needs to be imported.

As for the corruption at nnpc, ppra and the customs, why cant we confront it headon instead of working through these agencies, we are trying to work about them.

Shame on the TUC, shame on the NLC, Shame on the Nigerian Press who will see the truth and bend it on its head (Reuben Abati and Segun Adeniyi). meanwhile this same corrupt individuals are members of the TUC and NLC. All too powerful criminals. Subsidy must go and the time is now!!!!!!!!!

hope this is on the home page. coz that home page is littered with foolish protest pictures. and unfounded rumors.

I am a Sanusi supporter and as one, I support what he has to say, having said that, if he really believes in all of what he is saying, he should leave the government as he has just called GEJ and his ministers OLE. We know subsidy has to go, but, the government should come with clean hands, nobody knows the landing cost of these items, how come our leaders are the highest paid in the world, what kind of nonsense is that, if you are asking us to sacrifice, then nothing stops you guys from doing the same.

they should start by removing the subsidy in Aso Rock, simple!

ndu_chucks:

The above statement is unfortunate. I, like you, [size=15pt]am against fuel subsidy and agree that it should be scrapped.[/size] Having said that,[size=15pt] I do not believe that we should be paying more than N65 per litre.[/size]

Gbammmmmmmmmmmmmm If we have refineries we would not be paying that much at the first place

If refineries are built, then fuel would even be less than 65 naira but since we export out crude product then we need to be paying that much

samstels:

Central Bank of Nigeria Governor Sanusi Lamido Sanusi (SLS) responds
to some Internet Inquiries on fuel subsidy and wrote: If you will
patiently read this mail to the end you will understand my position. I
won't be able to repeat everything I have said over the past few years
on fuel subsidy, but in summary; Fraud like theft thrives not only
because of the existence of greed and benefit but of opportunity.
Place yourself in
the shoes of the average nigerian "businessman" or
"entrepreneur"-polite euphemisms for rent seeking parasites.

[b]You establish an elcee for importing 20,000MT of PMS and the PPPRA
says this is at a landed cost of N145 for example per litre. So u know
that for every litre in that vessel you will get at least N85 as
subsidy. Now you have a number of "possiblities":
1. You can off load 5,000 MT and bribe customs and other officials to
sign papers confirming u offloaded 20k MT. Then do the same across the
chain with a paper trail showing you delivered 20k MT to a tank farm,
and maybe even that u transported it to Maiduguri entitling you to a
share of the price equalization fund. Maybe for N20-N30 per litre u
bribe all those who sign the papers. The 15k MT you take to Benin or
Ghana or Cameroun and sell at market price thus makin an additional
"profit" of N55/ltr on 15,000MT!

2 you can just forge documents and have them stamped without bringing
in anything and collect the subsidy-PPPRA pays based on DOCUMENTS.

3 you can bring in the fuel, load on tankers, sell some at N65N some
at 80 some at 100 some across the land borders.

You can do all this and no one can catch it or prove it because
somebody was paid to sign off on docs. And with a high enough margin
there is too much temptation to be resisted and firepower for bribing
officials.

When I spoke to the house of reps I told them why I was suspecting
fraud. It starts from PPPRA "allocations" based on "capacity". You
will find a company like Mobil with capacity for say 60,000 MT and a
relatively unknown name with a capacity of say 90k MT. Red alert
number 1.[/b]

Although PPPRA is supposed to give license only to marketers with a
national distribution network you see names of companies where you
have never seen a filling station in their name.
I was a chief risk officer in UBA and in FBN for many years approving
loans so I know the name of every big player in every industry that
nigerian banks lend to as these are among the biggest banks in the
country. I see names on the list I don't recognise either from
portfolios. I looked at or industry studies over the years. Red alert
number 2.

I studied the papers presented to PPPRA in a short period in 2010 (I
won't tell you how I got them!). And I was surprised that on some days
over 10 vessels are said to have discharged cargo in lagos on the same
day-clearly the same officers stamping and "verifying" that the
vessels were SEEN. Is it really realistic that on the same day 13-15
vessels can discharge in Lagos? Red alert number 3.

Why was I interested in fuel marketing. Because the two sectors that
led to the near collapse of the banking industry were capital markets
and oil marketing. I am not giving any confidential info out as AMCON
MD has already disclosed publicly that two companies alone-zenon and
AP-owned by the same businessman owed the nigerian banking industry
N220b. And we all saw the amount of subsidy paid to those companies
published by BusinessDay.
So money had been taken, subsidy had been collected but loans were not
repaid, and we couldn't see the money either as product in tank farms
or in fuel stations or credit sales. So I became obsessed with trying
to understand how that industry operated and the more I saw the more I
hated it and I started the war against subsidies.
It is actually better to do a direct cash payout or add a line item to
salaries called petroleum support or transport allowance capped at say
N300b p/a than to keep paying it. It goes to pay middle men,
rent-seekers and corrupt officers and there is no amount of preaching
that will stop this fraud so long as the policy is so badly defined.
Everytime oil price goes up and everytime the naira is devalued and
everytime the quantity of imports increases the "subsidy" and thus the
"rent" increases and there is more gravy to go round. So every year we
"import" more and more and deplete our reserves, and the government
borrows more and more to pay for subsidy and the beneficiaries are a
smal group of marketers, govt officials and neighbouring countries
which get fuel without losing forex! And while a person who applies
intelligence can see what is happening you can't prove it in a court
of law. If the man says he sighted the vessel and it was 20kMT you
have to accept it. It was a year ago!

So for two years I have been convinced that this thing is a scam and
that it cannot be stopped because the entire controls have been
compromised. NNPC sells domestic crude, Pays whatever subsidy PPPRA
says and then gives the balance after JVC to the federation account.
And while fani kayode is right to speak up, the truth is that it was
obasanjo who first subverted the process by allowing NNPC to make the
deductions before paying into federation account. Because once money
goes into that account it is to be shared among 3 tiers of government
so strictly speaking the deductions have always been unconstitutional
as the FG was paying subsidy on behalf of itself and state and LGs
without their approval.

So yes, I am willing to take all the criticism and labels and be
unpopular but this has to stop and govt can find other ways of
alleviating pain. Iran removed subsidies and started cash transfers
directly to the poor. It is up to fiscal authorities to figure out
safety nets but from where I sit and what I know this decision is not
only correct but necessary and overdue. I also confirm that I have
revealed nothing here I haven't spoken about before in public and it
is just that Nigerians never listen!

I am not complaining about insults I am used to that. I just believe
that an insult is not an argument and when people resort to personal
abuse they have run out of logic.

But to then go beyond me and extend it to my dead grandfather and his
"descendants" ie my late father his siblings etc I think goes beyond
the pale. As a Nigerian-and as an economist- I can take a position on
economic matters and this position is one I have had for years even
before coming in to the central bank.

I have also explained the position on several occasions and criticised
government for not doing this before. In 2010 at a public hearing in
the House of Reps on the 25% saga I alerted the nation of what I
considered a potential big scam around subsidies and urged for its
removal. No one paid attention. The economics is very clear to me.
That it is unpopular is also understandable.

The British public is unhappy with Tory budget cuts. The Greeks went
on riot over austerity. Italian parliamentarians came to blows before
Berlusconi was thrown out of office. The US congress is yet to approve
Obamas tax increases.

Economic decisions-by definition-ALWAYS must involve a cost or an
opportunity cost since for them to qualify as economic they must
involve a choice in resource allocation among competing uses. An
enlightened debate is one that weighs the pros and cons of removing
subsidy and continuing with it.

Removing it has costs in terms of nigerians paying more for PMS-which
by the way is not the fuel for genrators, power plants, production
facilities, heavy duty goods transportation trucks and even luxury
buses.
It is fuel used by the middle class and car owners to drove around
town and from city to city not to employ workers and produce goods and
services. Diesel which is critical to manufacturing and employment
creation is not subsidized as the subsidy was removed years ago by
obasanjo. Nigerians said nothing then because it was blue collar
workers that got retrenched by factories.

Those speaking now on the internet and facebook and twitter and
newspapers are not workers but middle class elite who use PMS in their
smart cars so let's stop all the ideological pretence. This is not
about elite and masses but an intra-elite discourse.

I will summarise the issues and I write as a Nigerrian economist and
public intellectual not as a public servant:

1. I am a strong advocate for subsidies if they are for production and
not consumption, and if they benefit the poor and not middle men and
rent seekers. The US government subsidizes cotton and wheat farmers
and nigeria spends its reserves importing wheat from america and
keeping american farmers employed. The OECD countried pay subsidies to
cattle farmers. Today Promasidor imports powdered milk from New
Zealand and packages in nigeria using our foreign exchange while we
have cattle. WAMCO imports milk from the UK and adds water and tins it
and calls it "production" of Peak milk. We use our forex to import
petroleum products and keep refineries and jobs open in europe.
Meanwhile precisely because of market distortions there can be no
private sector investment in refineries since no one can make profit
seling at the regulated price unless we are going to provide private
refineries with crude for next to nothing. Certainly no one can
purchase crude at market price, refine it and sell at N65 without huge
losses so this explains why there are no private refineries.

2. what I mention above is at the heart of the problem with government
economic policy which needs to be changed. The economy since SAP is
one that supports imported consumption and not local production,
perpetuating dependency, non inclusive growth and insecurity. Why is
it that the economy is growing at 7pct annually but the people are
getting poorer. Because growth gains are not evenly distributed.
Personal income is skewed towards people in the oil industry,
telecomms, high finance, stock market, real estate and yes civil
servants and politicians who feed on corruption. We produce crude oil
but import petroleum products (today the UKs highest exports to
nigeria are petroleum products). We have a large cotton belt but
import textiles from china (thus keeping their subsidized factories
open and jobs in china). We are the world's number 1 producer of
cassava but import cassava starch from europe. We have a huge tomato
belt in kadawa, jigawa and chad basin but are the world's largest
importer of tomato paste-from China and Italy. We can produce rice but
we import rice from Thailand and India-most of it from grain reserves
that have been in stock for over 5

3. If above is clear then it is evident that this trajectory can only
lead to disaster. We will continue to spend our resources promoting
growth and employment in our trading partners. Terms of trade shift
against us, we can only have foreign reserves because by the good
grace of God we have Oil which will be exhausted soon and with new
discoveries may become so cheap it loses value. We don't create any
value added jobs as the only real production is peasant farming. Oill,
telecomms, finance and real estate are not employment intensive. So
everyone becomes a civil servant as the economy cannot create jobs.
Result? In 2012 budget out of a total N1.8tr recurrent expenditure for
the executive arm N1.6tr is on personnel costs not overheads. To
reduce this you have to cut salaries or pensions or retrench civil
servants. This is the classic trajectory of underdevelopment,
de-development and de-industrialisation.

4. For the above reasons I am a strong proponent of structural reform
and this begins from the fiscal framework. The limited resources of
government should be allocated to supporting production-especially if
we are running a budget deficit. We cannot keep borrowing to support
conspicuous consumption. To support a job creating economy we need to
fund power, transportation infrastructure, market infrastructure and
access, technical and vocational education etc. We need to build rice
processing plants, produce starch and cassava flour and ethanol,
process our tomato and milk locally, regenerate our textiles firms
(which used to employ 600,000 workers but now employ 30,000!), refine
our own crude etc. We cannot even begin to do this if 30pct of govt
expenditure is on fuel subsidy, if out of the balance 70pct is
recurrent spending, 10pct is debt service, 10pct goes to the niger
delta and only 10pct is capital expenditure. So it is about a
choice-what do we spend money on and how do we allocate resources?
5. We often compare ourselves to other oil producing countries like
saudi arabia. What are the facts? With a population of over 160m we
produce 2mbpd ie 1 barrel for every 80+ citizens daily. Govt share of
revenues if like 50pct of every barrel so it is effectively a barrel
for 160 citizens. Saudi Arabia with a 24m population produces over
8mbpd or one barrel for every 3 citizens. In fact in 2010 the nearest
OPEC country to nigeria in production per capita was Algeria with a
barrel for 30 and algeria is more gas than oil.

With one barrel for 3 citizens dailt saudi arabia is able to provide
infrastructure, education, healthcare and social safety nets and have
huge savings. It can provide subsidised fuel at a total cost that is a
fraction of its savings and even export refined products. It is paying
for subsidies ouy od its fiscal savings and not borrowing to pay. We
are like a poor man with a rich neighbour. The neighbour buids a good
house, buys several cars, eat expensive food, travel abroad every year
and still have huge balances in sevral current accounts. Then you
choose to live that lifestyle and mortgage your house, take an
overdraft from the bank to finance it. Next year it is time to repay
the bank, u don't have the money so u go to another bank, borrow
enough to pay the first bank principal plus interest and also fund the
continuation of the lifestyle. It continues till u can't borrow
anymore and the bank throws u and your family out of your house and
you everything.

A responsible father would have long since faced reality and told his
family he doesn't earn as much as his neighbour and expectations need
to be moderated if they to keep their roof. Of course the children
won't be happy at not going to Hawaii for summer and having to take
public transport rather than own cars like their neighbour's children.
Maybe they will even abuse the father behind his back and call him a
miser. That is the cost of leadership.

Finally: removing subsidy is not a silver bullet that solves our
economic problems. And there is a huge trust deficit that government
has to address. Government needs to investigate subsidy payments and
punish any violations of extant guidelines. It needs to cut on
unnecessary and waste ful expenditure. It needs to fight corruption
and show seriousness in that. It needs to deliver on capital projects,
power and infrastructure including irrigation, farm-level storage and
agri-processing. These are all valid issues that are to be taken IN
ADDITION to and not in place of subsidy removal.

Since someone has decided to make insinuations about my grandfather I
owe it to him to defend his record. it was my grandfather as emir that
repealed an obnoxious rule started from the days of Emir Usman that
disenfranchised women from inheriting property. It was sanusi that
built the groundnut pyramids to the point where Kano NA was
contributing 40pct of the revenues of the northern region. It was emir
sanusi who built the Bompai Industrial Estate, and turned kano into
the industrial nerve centre of the north. He was acting governor of
the northern region, minister for pilgrim affairs, chief Imam of
friday mosque, judge and leader of the Tijjaniya order. As for his
"descendants" my father was one of the very first batch of 12
Nigerians recruited by the British to set up the foreign service in
1957 and he remained in public service and rose to be permanent
secretary before retirement. He set up in the 60s the research dept of
the ministry- the present NIA so he was the first external
intelligence officer in Nigeria. As permanent secretary he was the
architect of Murtala Mohammed's policy on decolonisation of Africa and
oversaw the independence of Mozambique and Angola and the final push
to liberate Zimbabwe and South Africa.

So yes Sanusi was not perfect. He was a feudal aristocrat. And my
father was not perfect. He was also a prince and priviledged to go to
Oxford and LSE. But please if you want to abuse my grandfather and
father kindly tell us what contributions your own grandfather and
father made to the people.

Sanusi Lamido Sanusi is the governor of Nigeria's Central Bank

Didnt finish this essay but,is it not a shame that some few crop of people will be able to deceive the government.Why dont Sanusi and the Government get the crooks behind the forgery and deceptions at the port.Should dubious dealings by a handful of cabals be a reason for subsidy removal.Its a big shame to our corrupt government and some of their toothless employees like Sanusi,that just complains about a cabal and will not do something about it.

Does it mean,that we cant fight corruption in this kwountrii eehhh?

then there are only two ways out of this mess,

1. build refineries

2. build refineries

its as simple as that, we dont have any business importing fuel to start with. is this how its going to be forever? there is no way Sanusi will win an argument saying private refineries can not do well in Nigeria. that's not true, if we can afford to export crude and import refined fuel and d landing cost is 140 naira per litre then if refined here without transportation and transfer fee, without demurhage then it shouldn't sell more than a 80 naira per litre and then we create jobs and help our naira.

Even Santa claus will not build a refinery in 9ja with subsidy in place.

Obamaa:

Didnt finish this essay but,is it not a shame that some few crop of people will be able to deceive the government.Why dont Sanusi and the Government get the crooks behind the forgery and deceptions at the port.Should dubious dealings by a handful of cabals be a reason for subsidy removal.Its a big shame to our corrupt government and some of their toothless employees like Sanusi,that just complains about a cabal and will not do something about it.

Does it mean,that we cant fight corruption in this kwountrii eehhh?

If you had finished reading it, you have found the answers to your questions. Why do Nigerians hate reading and enlightening themselves?

People should read and see the truth, we only like immediate benefits and not long term gains.

Sanusi has given indept account of the subsidy mess and the need to remove subsidy. Good.

Did Sanusi know the implication in terms of harship on the masses on removal of subsidy? Why remove subsidy when nothing is on ground to cushion the effect? Why did Sanusi not advise on the need to put palliative measures in place before removing the subsidy knowing fully well that the removal will render our minimum wage of N18k useless?

As far as I am concern, Sanusi has given an academic lecture without leadership and people oriented consideration/action.

SLS left more questions than answers.

1. Who is supposed to ensure efficiency in the fuel importation chain? Is it nuclearboy or govt?

2. If answer to above is "govt", then who is the failure at his job(s)?

3. If I fail at my job, who should be punished for failing? Me abi ba Beaf?

4. Why even, are we talking about importation? Why are we NOT talking about local refining? Who failed Nigeria there?

5. He says corruption is "heavy" - how many have been punished for corruption? What deters anyone from wrong when there's no punishment for it?

6. Why did GEJ promise transformation when he knew the system was stronger than he is? Why should the man on the street suffer for his inability to deliver what he promised?

7. On govt wastage, let's be honest - govt uses maybe 40% of all the PMS imported on motorcades, senseless driving around! 40% of 1.3trillion is 520Billion. That alone exceeds subsidy in previous years and SLS gets part of that. Why not do something about this "fat-cat" benefit before visiting mayhem on poor people?

These people cannot face a one on one debate is why they avoid such and just give "lectures" then run away!

When will the useless GEJonzer government remove subsidy on corruption by having a REAL EFCC like the Ribadu days? How come government cannot effectively verify that petroleum products were delivered correctly before signing? Now that the government knows, is it not time to investigate and prosecute them? I know it won't happen because goatluck is the most corrupt and a big foole!

From the SURE programme (palliatives).