A Misguided Judgment: How President Jonathan Squandered A Golden Opportunity on the Petroleum Subsidy Debate

Blogger's Comment: 

There are Bloggers and there are Bloggers. Social Media is not all about "bashing" of government and the leadership. The essay you are about to read was my Candid Opinion, written May 09, 2012, supporting the Removal of the Petroleum Subsidy by President Jonathan. Also referenced in the essay are my comments on Sahara Reporters, published on January 04 and 05, 2012, at the height of the "Occupy Nigeria" protest, supporting the removal. And I am Progressive - innate and unrepentantly Progressive. The essay and comments were written, without regards to ethnic, ideological, political or partisan consideration. They are reproduced here, because of the timelessness of the contents. That we have a new government in town at the moment doesn't make any difference; the institutional failure and economic forces that defined the planned removal in 2012, have not changed that much. Except, of course, the precipitous decline in crude oil prices in the international market. 

Disclaimer: My glowing opinion of Rep Farouk Lawan and his Ad-Hoc Committee on the subsidy scandal expressed in the essay that you are about to read does not by any stretch of the imagination constitute an endorsement of his decision to accept $500,000.00 bribe from the SSS. Let it also be on the record that the Aig-Imoukhuede Subsidy Scandal Panel subsequently set up by President Jonathan on the same matter, came out with an indictment of all the major characters fingered in the Lawan's report, proving beyond reasonable doubt every element of crime contained in the report. Here is the essay...

A Misguided Judgment: How President Jonathan and His Advisers Squandered A Golden Opportunity. May 09, 2012

Introduction

Over the years, in spite the skepticism or suspended judgment that I have in the petroleum subsidy scheme in Nigeria, I have always resisted the temptation to engage myself in the arithmetic of the funding methodology for the obvious reason: I hate Mathematics. Nevertheless, I am quite familiar with the basic principles of economics and strategic management. In a similar vein, I have a good understanding of the fundamentals of subsidy as they relate to pricing and competitive markets.  Thus, it is reasonable to assume that when government intervenes in the market and help to defray the cost of production or part of it, it makes the final product less expensive for the final consumers to buy than it would have been without the intervention or the subsidy. In the area of export, it enhances competitive edge in relation to similar products by other suppliers in the same market - foreign or domestic - because the subsidized products are cheaper to buy.

Sadly, those assumptions do not hold water in our (Nigerian) domestic petroleum market in terms of availability and pricing. The more funding our government injects into the petroleum subsidy scheme, the more scared petroleum products remain and the more expensive the final prices are at the gas pump. In hindsight, what I take away from the petroleum subsidy scam in Nigeria is that before we condemn the usual suspect - international financial institutions that we love to hate for, in our reckoning, always recommending deadly economic pills as panacea for our sluggish economic growth - we must first ask ourselves whether the patients (African countries) administer the drugs as prescribed by Doctors (the international financial institutions).

During the sit-in-protest that heralded the reported removal of petroleum subsidy by President Goodluck Jonathan in January this year, my concern was the long term implications of the removal. I supported the removal during the "Occupy Nigeria" protest, believing in my mind that something is inherently wrong somewhere in the subsidy regime that is preventing us from reaping the reward of the intended subsidy. The inability of the administration and those before it, to eliminate the loopholes in the regulatory framework, makes continuation of the subsidy economically imprudent. No one knows where the money is going. Not even the President.

On that ground, I took a stand in favor of removal and made my position public via my comments on social media. My position was (1), if subsidy must exit, it should be handled by a separate and independent government institution and not private companies as presently the case, and (2) that, economically speaking, it is unwise and unsustainable for the Federal government to continue to subsidize importation of fuel on behalf of private companies, while they reap millions of dollars in profit. Finally, I made a reference to the current trends in the disbursement of student loans in the US, introduced by President Obama - an initiative that has saved the administration billions of dollars in student loans since its inception. Please see my comments at the end of this piece, reproduced courtesy of Sahara Reporters.

Missed Opportunity

In hindsight, if President Jonathan has a firm grasp of his energy policy and governance in general, April 2012, would have been the finest moment in his short, but eventful political career. The recent revelation by the House of Representatives Ad-Hoc Committee on Fuel Subsidy Regime, detailing the large scale frauds in the management of the petroleum subsidy funds by Nigerian National Petroleum Corporation (NNPC) and Petroleum Product Price and Regulatory Agency (PPPRA), apparently, is a vindication of President Jonathan. Surprisingly or maybe, naively, the President and his Advisers didn't buy into Representative Farouk Lawan's report. They saw friction, instead of triumphant and vindication.

The same administration that argued vigorously in January that funding petroleum subsidy is no longer sustainable because of the existence of a cabal scamming the subsidy regime of available funds, couldn't fathom a nexus between their proposition and the report of the House of Rep.

A month after the release of the report by the Speaker of the House, the President, and his Advisers were still searching for what to make of the report. They (Attorney General and the President) told the world that the report is a 'fact-finding’ and ‘we will react appropriately a soon as the investigation is concluded.’

It remains very troubling that the administration couldn't link their “unproven cabal in the subsidy regime” to the subsequent discovery "of massive frauds in the regulatory bodies" by the House of Representative to justify their January argument and convince the Nigerian people that they were right while the demonstrators were wrong. I feel like crying for the inept bunch.

If the administration had taken that stand, Nigerians wouldn't have had a problem connecting the dots, to wit, that the frauds that the President referred to, actually do exist. Thus, making continuation of the funding inadvisable. They didn't make that argument! Rather, they want to punch holes on the House report with a view to discrediting Farouk and discarding the report.

That is not unusual in Nigeria.  The only difference this time is that Nigerians are not buying the silence. Unless President Jonathan and his Advisers have a good understanding of the subsidy, the scams, and the frauds that the rest of us do not have; I want to conclude that given what we know so far, the President is not getting the right counsel and certainly not making the right judgment.

Analysis: Blinded Judgment or Shielding the Cabal?

The Farouk Lawan’s report, objectively speaking, vindicates President Jonathan on the issue of cabal scamming the Subsidy Regime. Why the administration did not take advantage of the report is beyond my understanding. From all indications, it is either the attempted removal scheme was haphazardly assembled and no one close to the President comprehends the general import and the underlying economic philosophy, or simply put, the administration lacks depth in communication management. Otherwise, they would have been able to see the nexus between "unsustainable" argument they made in January and report of "endemic, sleaze, incompetence, entrenched inefficiency and scam" in the regulatory regime as revealed by the House Committee.

To a reasonable administration, the report, no doubt, presents reasonable grounds for reasonable talking points for the Presidency to create a superior public policy mindset that is presently a challenge for Mr. President. And then, leverage that to develop a coherent narrative for eventual removal of the subsidy in future, if ever the need arises. They never did.

Twice, the President and his Advisers failed in the petroleum subsidy debate.

First, they couldn't frame plausible arguments for the removal, and second, when the outcome of an investigation of the House of Rep that they were not a party to and did not approve of, seemingly lend weight to their position, they developed cold feet and backed away. Unbelievable!

Without missing words, it is politically and strategically naive, and patently timid on the part of the President’s men not to dwell on the removal debacle and the "Occupy Nigeria" crusade that took place in January as well as the subsequent discovery of frauds in the regulatory regime to elevate the credibility of the Presidency at home and abroad. Unless the President is telling the whole World that he never really had a genuine reason to gamble with the subsidy removal as he did in January 2012.

According to the AGF, the report of the House of Rep is simply a ‘fact-finding’ investigation and therefore, not conclusive of any criminal conduct on the part of marketers to warrant an expedited response from the Presidency. Calling the House report a fact-finding exercise is a systematic calculation to trivialize it for eventual rejection.  Why do we have a court system in the country? Why do we have a separation of powers? The AGF and EFCC on the one hand and the Executive (the Presidency) on the other do not need to wait for the Senate to act or conclude its investigation before initiating its own investigation or making an arrest.

If AGF cannot see anything of value in the House report, then it is reasonable to conclude that the President and his negotiation team lied to the country when they claimed in January that there is a cabal frustrating the subsidy initiative. On the other hand, if the seeming rejection is to protect the same "cabal" that the President vilified in January, then, this administration wasted a golden opportunity to shine.

The credibility of the President is at stake. And whatever energy left in the President's commitment to the war against corruption, has been dissipated. As events unfold as predicted - failing to indict the thieves - the administration should brace for outrage from Nigerians at home and abroad.

Furthermore, failing to make an arrest, or at least, suspend some of the top personnel at NNPC and PPPRA, given the magnitude of the scam and the egregious nature of the profligacy in the two departments, is an indictment on the part of the Presidency. And It manifests complicity. The burden of proof is now on the President to convince Nigerians that he or his administration is not part of the scam.

Conclusion:

The importance of subsidy cannot be overemphasized. The economic and social benefits are enormous if the funds are judiciously managed. Prices of petroleum and related products are always on the rise because the funds meant to stabilize the market and lower prices at the gas pump are either stolen or diverted to spurious use by the management and staffs of NNPC and PPPRA in collaboration with bogus petroleum marketers. Therefore, it is incumbent on the part of this administration to arrest and prosecute those who made the realization of the intent and purposes of the petroleum subsidy in Nigeria, unreachable.

The argument by AGF that they do not want a repeat of what happened in the trial of some rogue Bankers is indirectly an indictment of EFCC, the Police, and ICPC. Because the report of the House of Rep is well-detailed, thorough and conclusive of malfeasance.

Mr. President, orientation is over and it’s time to govern. Your Presidency says something is wrong with the management of petroleum subsidy funds, yet EFCC, Justice Department, SSS, Ministry of Petroleum and Finance, didn't consider it prudence to initiate investigation since January.

The truth is that, if the House of Representatives had not intervened, the Presidency would not have considered investigating the cabal a political priority. That is the Nigerian story since the Second Republic and throughout the successive military regimes. The outcome of the ongoing investigation of the subsidy scam is what will make or mar President Jonathan's Presidency. The President must choose the part of righteousness, the part of glory; stay on the side of the people and cooperate with EFCC to rid NNPC/PPPRA of corruption and shenanigans. The President has nothing to lose by following the part of righteousness. Let the revolution be televised. If the Presidency does that, the entire Armed Forces, the Police, the Security agencies, and the Nigerian people will stand by it. It is a choice between good and evil.

Addendum:

My posts on SAHARA REPORTERS during the Subsidy Protest.

In a news report by SaharaReporters.com, titled “Sorry Nigerians, But The Fuel Price Increase Has Come To Stay – Government” Published, January 4, 2012 - 21:40, I posted this comment.

Submitted by Hamiltonatlarge.blogspot.com (not verified) on January 5, 2012 - 16:12.

“Hitherto, in the US Uncle Sam used to provide grants and loans to university students through the banks – they guarantee the loan, while the banks reap the interest accruing from the loans. That is no longer the case, the Department of Education, through the Financial Aid Offices in all the universities, now prepare the loans and grants and disburse them directly to students. If Uncle Sam and the Department of Education are to bear the cost and forbearance of the loans or in a case of default by borrowing students, they should as well take advantage of the interest being paid on the loans by students.” “It is economically stupid for the Federal government to continue to subsidize importation of fuel for people in the private sectors, while they reap millions of dollars in profit.”

The following day, I posted a similar message on Saharareporters discussion board, titled, ‘There is Sense in the Removal.” In it, I urged President Jonathan to emulate President Obama’s new regulation in the disbursement and management of student loans in the US, adding that it is uneconomical for our government to continue the subsidy funding while private companies are in charge.

A few minutes later, another blogger responded to my post and questioned the effectiveness of special advisers to the President in the subsidy debate. Below, you will find just the title of the article originally written by Dr. Reuben Abati for the Guardian Newspaper, when he was not in government, reproduced by Sahara Reporters to lampoon him, as well as, my post and that of the blogger mentioned earlier.

“We Shall Start Stoning The Economists In Official Corridors.” – By Reuben Abati In 2009 Posted: January 5, 2012 - 01:34 by Sahara Reporters

See Part I and Part 11 of my post, below:

"There is a sense in the Removal" - Part 1

Submitted by Hamiltonatlarge.blogspot.com (not verified) on January 5, 2012 - 16:07.

"Hitherto, in the US Uncle Sam used to provide grants and loans to university students through the banks – they guarantee the loan, while the banks reap the interest accruing from the loans. That is no longer the case, the Department of Education, through the Financial Aid Offices in all the universities, now prepare the loans and grants and disburse them directly to students. If Uncle Sam and the Department of Education are to bear the cost and forbearance of the loans or in the case of default by borrowing students, they should as well take advantage of the interest being paid on the loans by students. Our Federal Government has a problem with communication - we speak complex English in Nigeria, even when we are sending a message to a wider audience, It is economically stupid for the Federal government to continue to subsidize importation of fuel for the people in the private sectors, while they reap millions of dollars in profit."

"There is a sense in the Removal" - Part 2

Submitted by Hamiltonatlarge.blogspot.com (not verified) on January 5, 2012 - 16:06.

"What the Fed must do, therefore, is to transfer the importation to NNPC or government agencies, so that the profit going to the private oil importers, as published by Senate last year,  would go to the government. The money saved should be reinvested into the sector. That is the only way that the Nigeria people will benefit from the removal. Removing the subsidy and leaving the importation in the hands of the same private sectors, is economically disastrous."

A few minutes later, another blogger sent this feedback, reacting to my post above.

Re: "There is a sense in the removal."

Submitted by dere (not verified) on January 5, 2012 - 19:13.

“Your piece makes sense but what beats me is whether our so-called advisers don't drill deep to consider all options with a view to proffering the best option for the people and the nation! Why do we have special advisers who are not specialists in their field? May the Lord help us indeed!” - dere

There is no doubt; subsidy regime is economically beneficial, if well managed. Because this government has not shown (1) the gravitas and rectitude to ensure transparency in the management of the subsidy funding, and (2) the legal muscle to prosecute the marketers   who perpetrate scam and the staffs of NNPC and PPPRA who facilitated the scam as revealed by the House of Representative, continuing the subsidy regime would constitute further drain on our lean financial resources.

 Mr. Alex Aidaghese