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INSTITUTE OF HUMAN RIGHTS AND HUMANITARIAN LAW
PRESS STATEMENT -PORT HARCOURT, January 13, 2012
A CALL ON NIGER DELTA SELF STYLED LEADERS, PERSONS AND GROUPS TO BE PRINCIPLED ON ISSUES OF NATIONAL IMPORTANCE
IHRHL is most constrained to call on all self-styled Niger Delta region’s leaders, persons and groups to foreclose sentiments being ridiculously and spuriously expressed through sponsored press conferences, newspaper advertisements or forums, and face issues and realities presented by the announcement, by President Goodluck Jonathan, in regard to the withdrawal of fuel subsidy on January 1, 2012; and join others in protesting the injustice of the moment which spells no ethnic, religious nor political boundaries. These people should shun forthwith, their agenda of promoting threat situations that does not exist, and defending the indefensible. Social and Economic inequalities, and absolute poverty across Nigeria, which has been compounded by the insensitivity displayed by Mr. President, in the manner in which he arbitrarily removed the subsidy should be completely condemned, rather than anybody anywhere justifying what is clearly a policy pronouncement that smacks of incompetence, bad thinking and timing.
IHRHL insists that time is ripe for ethnic jingoist, groups and so-called leaders of thoughts, in the region to retrace their steps, stand up and be counted on issues of principles, rather than engaging in senseless ethnic-based and irrational arguments or positions that are unsustainable or cannot stand the test of any measure of rationality. It would serve the short and long term interest and up the standing of Mr. President, who hails from the region, and the first one at that, to be properly advised, both at closed door sessions, and in the open on right policy principles in the interest of the peoples of the region specifically and Nigerian in general. Voices of the peoples of the region who have suffered most incalculable injustice over time, must be clearly heard and openly, when and wherever there is any sign of injustice in the land. There is absolutely nothing like the President of the Niger Delta region in the Nigerian Constitution; but rather the President of the Federal Republic of Nigeria. Incapacity, incompetence, corruption, abuse of the rule of law and arbitrariness in policy framework, must reserve their full meaning, whether the President or governor is the son of the Niger Delta or Sokoto. These killer viruses have no place in civilized societal relationships. It is absolutely wrong for the same leaders, persons and groups to say one thing in the open, and support protests for subsidy removal in secret, as most of them are doing presently.
IHRHL therefore, calls on well meaning peoples of the region, to defend the interests of the ordinary people of the Niger Delta, that have for the past decades been subsidizing petroleum exploitation with their lives and livelihoods, without any dividend to show for it, inspite of the huge revenues that accrued to the region; and indeed would suffer more than any one else across the country, if the abrupt removal of subsidy by Mr . President were to hold. The peoples of the region should support other socially concerned Nigerians on the streets on peaceful protests, and urge Mr. President and his team to show political will, build trust and confidence by dealing with corruption with impunity in the petroleum sector, especially bringing to book those who have benefited illicitly through subsidy payments; assure turnaround maintenance of existing refineries, engage qualified hands in building new ones; assure local content in the petroleum industry by persuading the National Assembly to pass the Petroleum Industry Bill (PIB) into law without any further delay; reduce the cost of governance drastically; sack all incompetent and visionless personal aides and advisers who had brought him to the present state of disrepute, no matter where they come from; urgently deal with the debilitating issue of insecurity in the land, which resulted from prolonged state terrorism against the citizens; and untie himself from the hold of insignificantly unmeritorious wealthy Nigerians who may have bank rolled him into power, and side himself with the yearning millions of deprived Nigerians who own the mandate.
IHRHL, finally calls on these self-styled leaders to urgently check the fatalities of their present immoral and unjust positions, by noting most carefully that the unacceptable level of injustice across Nigeria today, especially so, since the transition of May 1999, is largely the result of a society that has been deliberately and systematically dismantled over these years, of wicked governance, and mismanagement of the nation’s wealth, leaving the youth and other citizens with little hope for a promising future. It should be understood as a period of executive lawlessness and recklessness. Indeed, a failure of leadership which persists under President Jonathan’s watch.
Signed
Anyakwee Nsirimovu
Executive Director
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INSTITUTE OF HUMAN RIGHTS AND HUMANITARIAN LAW
PRESS STATEMENT -PORT HARCOURT, January 13, 2012
A CALL ON NIGER DELTA SELF STYLED LEADERS, PERSONS AND GROUPS TO BE PRINCIPLED ON ISSUES OF NATIONAL IMPORTANCE
IHRHL is most constrained to call on all self-styled Niger Delta region’s leaders, persons and groups to foreclose sentiments being ridiculously and spuriously expressed through sponsored press conferences, newspaper advertisements or forums, and face issues and realities presented by the announcement, by President Goodluck Jonathan, in regard to the withdrawal of fuel subsidy on January 1, 2012; and join others in protesting the injustice of the moment which spells no ethnic, religious nor political boundaries. These people should shun forthwith, their agenda of promoting threat situations that does not exist, and defending the indefensible. Social and Economic inequalities, and absolute poverty across Nigeria, which has been compounded by the insensitivity displayed by Mr. President, in the manner in which he arbitrarily removed the subsidy should be completely condemned, rather than anybody anywhere justifying what is clearly a policy pronouncement that smacks of incompetence, bad thinking and timing.
IHRHL insists that time is ripe for ethnic jingoist, groups and so-called leaders of thoughts, in the region to retrace their steps, stand up and be counted on issues of principles, rather than engaging in senseless ethnic-based and irrational arguments or positions that are unsustainable or cannot stand the test of any measure of rationality. It would serve the short and long term interest and up the standing of Mr. President, who hails from the region, and the first one at that, to be properly advised, both at closed door sessions, and in the open on right policy principles in the interest of the peoples of the region specifically and Nigerian in general. Voices of the peoples of the region who have suffered most incalculable injustice over time, must be clearly heard and openly, when and wherever there is any sign of injustice in the land. There is absolutely nothing like the President of the Niger Delta region in the Nigerian Constitution; but rather the President of the Federal Republic of Nigeria. Incapacity, incompetence, corruption, abuse of the rule of law and arbitrariness in policy framework, must reserve their full meaning, whether the President or governor is the son of the Niger Delta or Sokoto. These killer viruses have no place in civilized societal relationships. It is absolutely wrong for the same leaders, persons and groups to say one thing in the open, and support protests for subsidy removal in secret, as most of them are doing presently.
IHRHL therefore, calls on well meaning peoples of the region, to defend the interests of the ordinary people of the Niger Delta, that have for the past decades been subsidizing petroleum exploitation with their lives and livelihoods, without any dividend to show for it, inspite of the huge revenues that accrued to the region; and indeed would suffer more than any one else across the country, if the abrupt removal of subsidy by Mr . President were to hold. The peoples of the region should support other socially concerned Nigerians on the streets on peaceful protests, and urge Mr. President and his team to show political will, build trust and confidence by dealing with corruption with impunity in the petroleum sector, especially bringing to book those who have benefited illicitly through subsidy payments; assure turnaround maintenance of existing refineries, engage qualified hands in building new ones; assure local content in the petroleum industry by persuading the National Assembly to pass the Petroleum Industry Bill (PIB) into law without any further delay; reduce the cost of governance drastically; sack all incompetent and visionless personal aides and advisers who had brought him to the present state of disrepute, no matter where they come from; urgently deal with the debilitating issue of insecurity in the land, which resulted from prolonged state terrorism against the citizens; and untie himself from the hold of insignificantly unmeritorious wealthy Nigerians who may have bank rolled him into power, and side himself with the yearning millions of deprived Nigerians who own the mandate.
IHRHL, finally calls on these self-styled leaders to urgently check the fatalities of their present immoral and unjust positions, by noting most carefully that the unacceptable level of injustice across Nigeria today, especially so, since the transition of May 1999, is largely the result of a society that has been deliberately and systematically dismantled over these years, of wicked governance, and mismanagement of the nation’s wealth, leaving the youth and other citizens with little hope for a promising future. It should be understood as a period of executive lawlessness and recklessness. Indeed, a failure of leadership which persists under President Jonathan’s watch.
Signed
Anyakwee Nsirimovu
Executive Director
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IMF and Fuel Subsidy Removal |
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IMF AND ‘FUEL SUBSIDY’ REMOVAL by Izienlen Agbon
“The prices of everything will increase, transport, housing, school fees, food, etc. The common man will not be able to survive. We will say no and oppose bad government policies. We will say no and oppose IMF (International Monetary Fund) policies.” – Mrs. Ganiat Fawehinmi, January 3, 2012.
IS ‘fuel subsidy’ removal an IMF policy? Is Mrs. Ganiat Fawehinmi right? Yes. The present ‘fuel subsidy’ removal is an IMF programme/policy. The IMF has promoted and supported fuel subsidy removal as government policy in most developing nations. It is part and parcel of the IMF liberalisation policies and programmes which it imposes on developing nations whenever the opportunity arises. Let me explain. I will limit this analysis to the last 10 years (2002-2012) for brevity. I will focus on ‘fuel subsidy’ removal.
“Hide nothing from the masses of our people. Tell no lies. Expose lies whenever they are told. Mask no difficulties, mistakes, failures. Claim no easy victories, ” – Amilcar Cabral (Unity and Struggle).
IMF working papers and staff position papers are discussion tools for IMF policy formation. They start off with the usual disclaimer that the positions and conclusions in the papers are those of the authors and not of the IMF or its policies. These papers are circulated for discussions within IMF and the World Bank. Sometimes, an IMF executive board workshop or seminar is organised around the ideas expressed in them. These discussions, meetings, seminars and workshops form the foundations of IMF policies. So, all we have to do is find the roots of the fuel subsidy campaign in the past IMF working papers and the subsequent implementation of these policies in developing nations with special attention to Nigeria. I will proceed to do just that.
IN 2002, Sanjeev Gupta and a few colleagues in the IMF wrote a working paper on domestic petroleum pricing in oil producing countries. (Gupta Sanjeev, Benedict Clements, Kevin Fletcher and Gabriela Inchauste, 2002, “Issues in Domestic Petroleum Pricing in Oil Producing Countries”, IMF Working Paper 02/140 , Washington: International Monetary Fund). Sanjeev Gupta is the Deputy Director in the Fiscal Affairs Department of the IMF. Prior to this, he was the Assistant Director in the African Department. Gupta and his colleagues argued that petroleum product prices were heavily regulated. Domestic petroleum product prices were below international prices and this implied foregone revenue. The foregone revenue constitutes a hidden subsidy for its citizen (price-gap methodology). This hidden subsidy benefited high income more than low income groups. The solution was to pass international prices into the domestic market and increase fuel prices. They therefore recommended the imposition of international prices on the domestic petroleum product market and the removal of fuel subsidies. They advised on how to identify political opponents of the fuel subsidy removal programme, how to do a publicity campaign, how to set up a programme aimed at using the money generated, how to time the subsidy removal, how to make promises of transport buses, education, health, roads and give money to the poor if necessary. Their paper is the blueprint of the fuel subsidy removal programme that the Federal Government is unleashing on Nigerians today…step by step. It is all in the IMF working papers.
Let us look at this economic argument closely. We will leave the Federal Government and IMF corridors of power and enter the realms of household economics where ordinary Nigerian farmers, workers, students, market women, housewives, unemployed make rational economic decisions. A Nigerian farmer produces yams for household consumption and sales. This price-gap theory might argue that the yams that the farmer uses to feed his household constitute a hidden subsidy because he has forgone revenue or profit by not selling the yams in the market. Transparency demands that the hidden subsidy be acknowledged and recorded in the household budget and family members made to pay market prices for their meals. The theory might further argue that grownups benefit more than children (they eat more). Hence, the household yam subsidies should be removed and special programmes (run by a honest uncle) should be put in place to help the children. A publicity programme would be needed to explain the yam subsidy removal programme to the mother and all other powerful family opponents. I do not need to go much further. Soon, the household members will demand market prices for their labour in the farm (market wages) so they can pay market prices for the yams they eat at home. The wife would demand market wages for the housework. The farmer’s household will collapse. Every rational farmer knows that you first feed the family and it is only the excess that you sell in the market. No amount of Leontief Input-output model, Social Account Matrix (SAM) or Computable General Equilibrium model (CGE) can explain away this basic common sense fact.
Not long after Gupta IMF paper was published, the Fedreal Government decided to increase the price of crude supply to the NNPC from $9.50 per barrel to $18 per barrel. International spot oil prices for Bonny Light Crude were $25.15 per barrel. NNPC was now invoiced by the Federal Government in US$ for domestic crude allocations (445000 barrels of oil per day) and expected to pay the Naira equivalent to the Federation Accounts using CBN quoted exchange rates. This is where and how they created a non-existent subsidy. Since NNPC had no money, it paid the amount received from petroleum product sales minus the subsidy into the Federal Accounts. NNPC sent PPPRA a bill for the subsidy. NNPC then requested the Ministry of Finance to pay the subsidy amount from the PSF into the Federation Account. The Federal Government was left with this buck passing of a fuel subsidy payment. The IMF was not finished.
In 2003, Shahabuddin Hossain of the IMF African department wrote an IMF working paper on fuel subsidy in Nigeria (Hossain, Shahabuddin Mosherraf , 2003, ”Taxation and Pricing of Petroleum Products in Developing Countries: A framework for Analysis with Application to Nigeria.” IMF Working Paper 03/42 , Washington: International Monetary Fund). He pushed the same ideas as Gupta with the same arguments. He recommended measures to protect consumption of the poor and politically powerful to stop any strong protest and social unrest after subsidy removal. Using Nigeria as an example, he calculated the fuel subsidy and called for a 115.4% increase in the price of petrol (from N26 to N56 per litre), a 89% increase in the price of diesel and a 37% in the price of Kerosene. He claimed that these were not specific suggestions for policy reforms in Nigeria. Maybe it is just coincidental, but a 115.4% increase of N65 /litre is N140.01/litre.
A few months after Hossain’s IMF working paper was published, the Federal Government increased petrol prices from N26 per litre to N55 per litre using some of the arguments in his paper to support the decision.
IN 2006, David Coady published another working paper on fuel subsidy removal (Coady, David, Moataz El-Said, Robert Gillingham, Kangni Kpodar, Paulo A. Medas, and David Locke, 2006, “The Magnitude and Distribution of Fuel Subsidies: Evidence from Bolivia, Ghana, Jordan, Mali, and Sri Lanka,” IMF Working Paper 06/247, Washington: International Monetary Fund). David Coady is the Deputy Division Chief of the Expenditure Policy Division of the Fiscal Affairs Department of the IMF. Coady and his colleagues examined the impact of fuel subsidy removal in places like Ghana where there was a decrease of 9.1% in the real income of the poorest quintile after fuel subsidy removal. Ghana’s fuel removal programmes included free primary and junior secondary education, health and mass urban transport. Ghana (the Tema Refinery) buys crude oil from Nigeria at a discount on world prices.
The Obasanjo executive increased fuel prices to N100 per litre when he was leaving office in 2007. The Yar’Adua executive decreased it to N65 per litre in the face of mounting opposition from labour and Nigerian civil society.
David Coady was back in 2007. (Baig, Taimur, Amine Mati, David Coady, and Joseph Ntamatungiro, 2007, “Domestic Petroleum Product Prices and Subsidies: Recent Developments and Reform Strategies,” IMF Working Paper 07/71 Washington, International Monetary Fund). In this paper, the authors developed the strategies for imposing fuel subsidy removal. First, the subsidy is made explicit (NNPC to pay international prices). Secondly, the expenditure is reflected in the budget. This creates a seemingly fiscal budget crisis. Then, a propaganda programme is started. The support of state governments and local governments for fuel subsidy removal is obtained by promising to give them their share under revenue sharing formula. A programme for the poor is published. Care is taken to get the timing and size of the price increase right in order to minimize social unrest and resistance. A publicity campaign for public trust and political support is unleashed on the populace. The whole strategy is laid out elaborately in this working paper.
In 2008, the Executive Directors of the IMF held a Seminar on Food and Fuel Price Subsidies: Issues and reform options. The seminar was based on staff papers written by the Fiscal Affairs Department of the IMF. The papers included Food and Fuel Price Subsidies: Recent Developments, Macroeconomic Impact and Policy Responses and Food and Fuel Price Subsidies: Issues and reform options. The IMF executive directors supported the fuel subsidy removal programme and divided responsibility with the World Bank. The IMF would focus on the macro-fiscal impact of subsidies and subsidy removal while the World Bank would assist countries in the design and implementation of subsidy removal programmes.
IMF Public Information Notice (PIN) No. 08/135, October 10, 2008
The IMF and World Bank pushed for adoption of their fuel subsidy removal policies in the September 2009 G-20 leaders meeting in Pittsburgh, USA. The G-20 supported fuel subsidy removal worldwide. They called on the IEA, OPEC, OECD and World Bank to provide an analysis of the scope of the energy subsidies and suggestions for the implementations of the initiative.
David Coady and his colleagues pushed very hard in 2010 with the same arguments advocating price-gap methodology and fuel subsidy removal programmes worldwide. (Coady, David, Robert Gillingham, Rolando Ossowski, John Piotrowski, Shansuddin Tareq and Justin Tyson, 2010, “Petroleum Product Subsidies: Costly, Inequitable, and On the Rise,” IMF Staff Position Note 10/05 Washington, International Monetary Fund) and (Arze del Granado, Javier and Coady, David, 2010, “The Unequal Benefits of Fuel Subsidies: A Review of Evidence for Developing Countries”, IMF Working Paper 10/202 Washington, International Monetary Fund).
“ However, it is worth noting that the price-gap methodology has shortcomings. OPEC is of the opinion that the benchmark price to be used in the case of energy resource well-endowed countries should be the cost of production. Consequently, OPEC could not associate itself with the above estimation of fossil fuel related consumption subsidies.” – OPEC/IEA/OPEC/OECD/WB Joint Report, June 2010
The report prepared by the IEA, OPEC, OECD and World Bank was released in June 2010. (IEA, OPEC, OECD, World Bank Joint Report, “Analysis of the Scope of Energy Subsidies and Suggestions for the G-20 Initiative”, Prepared for submission to the G-20 Summit Meeting, Toronto, Canada, June 26-27, 2010; June 16, 2010). OPEC rejected the price-gap methodology of the IMF, World Bank and IEA . OPEC insisted that fuel prices should be calculated on the basis of the cost of production in oil producing nations. Nigeria is an OPEC member and petrol prices calculated on the basis of the cost of production is N39.30 a litre.
In 2011, the Ministry of Finance carried out a review of the economy based on the IMF price-gap methodology. The Federal Government insisted that the fuel subsidies must be passed on to the consumers. It advocated fuel subsidy removal and the implementation of the IMF plan. It carried out the IMF inspired publicity to the best of its ability. It involved the NNPC, the Ministry of Petroleum Resources, the State Governors (revenue sharing) and other arms of government as planned by the IMF. It even prepared a list of projects called Subsidy Reinvestment and Expenditure Programme (SURE) as advised by the IMF and published it. It set up a committee to disburse funds. It did everything according to the IMF play book. It talked to labour and some opinion leaders in civil society. But, Nigerians did not accept the arguments or fuel subsidy removal programme. So, the Federal Government forgot the Nigerian people and imposed the fuel subsidy removal programme as a New Year gift. We have gone into details to show the IMF roots of the fuel subsidy removal policy and programme in Nigeria because we, as a people, deserve the truth. Knowledge is power. We mask no difficulties and claim no easy victories. Victory is certain when we stay firm and resolved.
• Izielenagbon @yahoo.com |
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What the Government Should Do Before Deregulation |
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What the Government Should Do Before Deregulation
Beneath is a summary of some ideas contained in my position paper:
- A deregulated market is desirable, but I disagree with the path to deregulation which the FG has chosen as it punishes Peter (the people) for the sins of Paul (the government).
- The critical problem is insufficient local refining capacity.
- We will need to put in place a transition phase that will enable us deploy dynamic measures to get finished products to Nigerians at reasonable price levels while giving us the time to grow our local refining capacity.
- Transition Phase stop gap measures include:
- Offshore refining of Nigerian crude, wherein we ship our crude to refineries offshore, pay them to refine it and then ship finished products back home (the Rilwan Lukman approach)
- Crude for Finished products arrangement, wherein we supply refineries offshore with a defined quantity of Nigerian crude and they pay for it not in cash, but by supplying us with a defined quantity of finished products which will be just a portion of total output (e.g. 60%). The balance of finished products can be sold by the refineries to cover their costs and provide them with profit. Note that this will benefit the refineries in many ways e.g. no need to borrow to buy key raw material (crude), insulation from volatility in int'l price of crude, guaranteed supply of crude... (The Tam David West Model)
- All arrangements in 4 can be signed for say 5yrs, while the FG enters into agreement with promoters of refineries in Nigeria as follows:
- That it will deregulate fully in 3yrs
- The promoters will have that as their deadline to have their refineries up and running
- Liquidated damages clauses should be inserted in the agreement for any defaulter (FG or promoters), which as any lawyer knows will be upheld by the court of law (this means there will be financial penalties for any defaulter to cover expected losses of d counter-party).
- Note that under the above model we will be able to deliver petrol at under N65 and diesel at around the same price level, without spending cash subsidizing anything!
- As we speak refineries in the east coast of the US are experiencing a price crash in what they charge for refining and thus provide scope for us to leverage on by offering them a higher amount per barrel for - say a 5yr contract.
- Some financial tools may be deployed to make our offer more attractive e.g.
- Acquiring controlling interest in target refineries (i.e. buying over 51% of their shares); disposable after end of arrangement perhaps at a profit!
- Acquiring minority interest (b/w 20-50% of their shares) - this and acquisition of controlling interest will lead to an expansion of target refineries long term capital
- Providing them with a credit facility (cheap credit)
- Guaranteeing credit obtained from other sources, - e.t.c.
- 9. Under this plan we will fix the present supply problem, eliminate subsidy, and set the stage for full deregulation in 3yrs without triggering inflation, talk-less of hyper-inflation! Instead the price of petroleum products will drop (to the delight of Nigerians), exerting a downward pressure on inflation.
So there you have it: indeed as you can see there are better solutions to this challenge than Okonjo and Sanusi are touting. Please let everyone know! And let Okonjo and Sanusi respond!
Elo Eriri BSc (Applied Accounting, UK), ACCA (Part Qualified), ACCA Certificate of (Global) Achievement Awardee (Paper F1).
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