Saturday, January 7, 2012

Neoliberal Fuel Subsidy Removers


Above (4:00 in), Nigeria's CBN governor, Lamido Sanusi, making the frank--many will say unfair--neoliberal argument for the removal of the country's fuel subsidy on the BBC Africa Today podcast a few days ago (David Harvey's 'neoliberalism and the city' lecture springs to mind about now). If neoliberals weren't so smug by how right they are, this necessary enterprise could be phrased in over time, with each phrase marking the end and start off of the infrastructure projects the government keeps talking about. An addendum to that interview will be the alleged Sanusi email below that's been making the rounds:

Subject: Fwd: Biggest Expose - by CBN Gov.
You establish a company 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 "possibilities":
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 N80 some at N100 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 90,000 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 our 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.
Sanusi Lamido Sanusi - CBN Governor

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