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SLS, Atedo Peterside and the Subsidy Argument - The Power of Pause!

Category: Oil Sector


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SLS, Atedo Peterside and the Subsidy Argument - The Power of Pause!

January 10, 2012 / Olufemi AWOYEMI
 

 

“The subsidy conversation is one thing. Holding govt accountable is another. The second conversation should continue”.  – Sanusi Lamido Sanusi
 

At moments like this, it is quite dangerous to stay mute.
 

Yet the majority of esteemed professionals and respected citizens in both the middle class and upper middle class, in doing so, have given way to a cacophony of voices that is more noise than facts or reason.
 

For those that “contribute” to the debate, being politically correct has been their main pre-occupation. They are neither for nor against, and rightly so and yet they never seem to have a well articulated position, alternative or way out of the conundrum we find ourselves.
 

In a nation like Nigeria where patronage, sycophancy, access to power, allocation, quota system and being with the “in crowd” are essentials to wealth and status, there are compelling reasons why people would thread cautiously and seek to be politically correct.
 

Strangely, for those who are blessed enough to discern a moment in history, this is not one of such period to place too much weight on ‘political correctness’. The enormity of the situation we are confronted with is too grave and too polarising to avoid building consensus on a common or negotiated way out.
 

Fact is that the sovereign is under siege from within - its own government and the citizens.
 

Everybody is talking and no one is listening. Innuendos pass for facts, illusions and perceptions pass for beliefs and emotions replace informed reasoning. I ask, are we allergic to common sense?
 

The current situation as at today is that Nigeria is on an indefinite pause.
 

We have a strike action without a terminal date in view, parties who are not willing to yield grounds on their interpretation of what is best for the economy; and most disheartening, a citizenry left to recall such metaphors as “worse situation than the civil war”, “better rapport during the military era”. “Federal Government has been infiltrated by terrorists (BH)” and “The poor will have nothing left but the rich”.

 

The comments and contributions inspired by the Sanusi Lamido Sanusi (Subsidy Removal – In our Best Interest!) and Atedo Peterside (Subsidy removal will support fiscal viability of Nigeria, says Peterside) are well reasoned convictions are well noted.

 

We ought to acknowledge and give kudos for these patriots for speaking up and sharing their knowledge, insight and perspectives on the issue.
 

I personally admire SLS for his courage, consistency, and tenacity in saying that the culprits in the subsidy fiasco ought to be prosecuted. He must equally be commended for saying that the need to reduce wastage in governance is a clear and present danger to our economy.
 

I wish others did the same – whether for or against. Rather than knock them for ‘manning up’, we should take the gauntlet thrown down to advance a more superior logic to the central issues of an unfortunately convoluted debate.
 

Personally, I am not entirely convinced, but persuaded to acknowledge this view points as an analyst. I will always give a benefit of doubt as to the motives and reasoning behind the removal as advanced by these gentlemen, perhaps not the chaotic and disorientated arguments put forward by government officials before now which included the tokenism with transit buses and reduction in basic salaries, and actual elimination of wastages that increase the unreasonable cost of governance immediately.
 

The subsidy will have to go. On that I am resolute but untrusting of government and its ability to hold itself accountable. Government is a key part of the problem and our lack of institutions makes this all the more worrisome.
 

My stand is not predicated on any doubts as to the intentions, sincerity and macro economic arguments advanced by the two most articulate proponents of the government action. No, my stand is premised on the following unresolved issues:
 

1.   The conversation is not structured and we appear to be addressing different sides of a sovereign crisis with a simplistic assumption that the fuel subsidy removal is the sole issue. Fact is that the people of Nigeria are sick to their guts of funding an inefficient, fiscally irresponsible and personal example vacant government that has not shown any measure of prudence, accountability and responsibility in the management of its affairs;

2.    The attempt at establishing a correlation between the role of a CEO of a ‘for-profit’ business and that of a President of a nation is ill informed. This is more so in a country where the social contract between the leaders and the citizens is frail and now more strained and fragile;

3.    The role of the Federal Government in the Oil & Gas sector is critical to understanding why there exists a trust and integrity deficit in relation to the plans/intentions and expectations. If the government (this regime and those before it) has confirmed its inability to contain the ‘collusion inspired corruption’ that is taken place, it will in all probability be unable to do so when it has washed its hands clean of the scheme;

4.    The facts and data/statistics related to consumption, prices, production, players, budgeted payments and role of the banking sector is murky, unavailable and deliberately distorted as to allow for an informed discussion using a common set of data.

5.  The contributors to the debate may not in the main be altruistic and may be unfairly targeting a government that its’ only, but perhaps fatal flawed in its inability to sell and secure a ‘buy-in’ for a decision long anticipated. There are consequences for such colossal mismanagement of a defining course of action as intended here. So this reaction from the people is not unexpected.
 

By way of synthesis, let me share some views on the thread on this subject matter from three different perspectives gathered while covering the subject in the last one month:

 

*       * That the more vocal argument that “It is a fallacy that removing the fuel subsidy has costs in terms of Nigerians paying more for PMS, which by the way, is not the fuel for generators, 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 drive around town and from city to city not to employ workers and produce goods and services” does not stand up to the ‘poverty linear equation’ for Nigeria.

 

First, the Federal Government’s Petroleum Policy is based on a 100% importation of Petrol. Second, the country operates a zero local production of petrol. Third, it is wrong to conclude that petrol subsidy is for the rich and not the poor because BRT buses run (which according to the proponents of the argument are for the poor) run on diesel which isn't subsidized.

 

It would interest this community of informed practitioners to note that BRT buses run only in Lagos which is only 1 out of 36 states? It is also a fact that BRT buses cover less than 10% of Lagos State and the Danfos, Okadas and Keke Marwas (well restricted in certain areas) that transport most Lagosians to their homes where they power their homes with the notorious "I better pass my neighbour generator sets" all run on petrol?

 

This is the starting point of the ‘generator economy’ for majority of Nigerians below the middle class who also run hairdressing, barbing, vulcaniser, and other artisan related work in the cities and villages.

 

I bet the argument can be made that there overall contribution to the economy (if the removal holds as it is expected) will be minimal. I agree as much as I agree that an increase in interest rates by the CBN is far less an issue for Nigerians as would be the increase in exchange rates. Yet, we seem to ignore another cost – deviancy, insecurity, unemployment, health issues, educational gaps and social restlessness that would ensue if a large majority of the people end up on the wrong end of the social ladder with very little chance at a decent life.

 

*             *There are 4 categories of people involved in the current discussion:

1.    Those who are genuinely bothered about the immediate and long term impact of this decision on their lives:

o   The 99% who operate under the ‘generator economy’ who will feel the impact and are scared that their ‘Nigerian Dream’ may soon evaporate;

o    The students and graduates that are either jobless or starring joblessness in the face and feel they need to stand up against this decision;

o    The everyday people who simply felt hurt by a bad news.

2.    Those who are committed to undermine the administration of GEJ and have not been able to build a coherent and formidable coalition against the government but now see in this the most authentic excuse to launch their agenda and appear at the same time as “heroes of the struggle” to an unsuspecting citizenry.

3.    Those who recognise this as a money making opportunity had to pass on by from all sides and would like to see it go on and become more intense enough to extract a huge rent till the next problem from a government that seems prone to such open and mortal wounds; and

4.    Those who have been driven to the point of desperation and exploitation who have no positive contributions to make to the current discourse but to inflict there own pound of flesh on their perceived enemies – especially symbols of the state – police, taxmen, govt. agencies, landlords, employers, schools and religious organisations. They are the underground that have always waited for such an opportune time to strike.

 

*              *The third and most crucial for me must be the need to preserve the sovereign state and ensure that the government is returned to effective functionality – focussed, responsible and able to overcome the perception war launched against it. There exists an absence of a clear and well-thought-out strategy for effectively advancing this reform agenda. To say that the government has handled this issue in a ‘thought-led’ manner is a falsehood beyond comprehension. The follow-up has been treacherous at best, yet the inevitability of a decision range from removal of subsidy to the listing of the NNPC will always reveal some false starts and powerful resistance from those who gain from it, those to be affected and those who might capitalise on such a core input in our personal and economic life. This, I believe is where the government bottled it. But then this is not the end of the story, just a part in an unending drama about a nations journey.
 

 

Now what needs to be done?
This is where the regarded and esteemed members of the forum have to rise above our personal fears, anger and shock about the developments and be counted in bringing about order in the decision making process that would engender this change.
 

We need to articulate a data-backed, concern relevant and sovereign inspired position for the parties to consider. It is my belief that we are in the spring of our revival as a nation and this may yet be our finest hour to once again show the world that we are capable of self-determination, governance and resolve.
 

It is dangerous to remain mute. Remaining mute is what got us into this quagmire? Now is the time to speak up, speak out but do so with clear, common sense data that can inform, enlighten and heal.
 

 

About the Author(s): Olufemi AWOYEMI, FCA, AIoD, ACIT is the CEO/MD of Proshare Nigeria Limited, Advisor to the House of Representative Capital Market Committee, Member of the Editorial Board and Strategy & Research committee of the Chartered Institute of Bankers of Nigeria. He is also on the board of many thought led consultancy firms locally and internationally.

 
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While the website is checked for accuracy, we are not liable for any incorrect information included. The details of this publication should not be construed as an investment advice by the author/analyst or the publishers/Proshare. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All opinions on this page/site constitute the author’s best estimate judgement as of this date and are subject to change without notice. Proshare encourages its staff members to freely express themselves on non-client related issues and disclose their interest as a way of helping them horn their analytical and writing skills. Subscribers and Investors should see the content of this page as one of the factors to consider in making their investment decision. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions. This information is published with the consent of the author(s) for circulation in/to our online investment community in accordance with the terms of usage. Further enquiries should be directed to the author at
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