Nigeria in 2012 (2)

Nigeria’s economic fundamentals and outlook should ordinarily be considered excellent-large population, labour force and market; 7-8% GDP growth; strong oil markets; interest from foreign investors; a democracy that has lasted from 1999, the longest since independence; a consumerist society with strong inclination to purchase goods and services; entrepreneurial, resourceful people, reasonably educated and enlightened people who speak English. These advantages are however offset by corruption; and since the 2011 elections, by the post-election violence which forewarned of regional tensions; “Boko Haram” fundamentalist terrorism; the fuel subsidy crisis; some elements in the opposition who seem bent on the overthrow of the current government; and strong anti-reform lobby and vested interests opposed to privatisation and economic reforms. Given the “dangerous demographics” which I highlighted last week, and the shocking poverty data just released by NBS, the potential for social crisis is high! By NBS’ figures, absolute poverty (minimal requirements for minimal standards of food, clothing, healthcare and shelter) was 60.9% (99.28million people); relative poverty (by reference to living standards of the majority) was 69% (112.5million); and by the World Bank’s dollar per day measure, 61.2% (100.5million) were poor! Subjectively 93.9% of Nigerians considered themselves poor!!! NBS projects that relative, absolute and $/day poverty may have risen to 71.5%, 61.9% and 62.8% in 2011. Why doesn’t economic growth translate to lower poverty and greater employment in Nigeria? As I have argued several times, the answer lies in the structure of our GDP and governance! Around 75% of GDP (in Q3 2011, it was 76.2%) is made up by only three sectors-agriculture (43.64%), crude petroleum and natural gas (14.27%) and wholesale and retail trade (18.29%). Agriculture is sub-modern, largely subsistence, non-value adding, not sufficiently linked to agro-allied and manufacturing, and does not create jobs. The oil sector is dominated by crude export carried out by multinationals who simply pay governments share of revenue over to the treasury-for appropriation and spending by corrupt politicians and bureaucrats! The downstream refining, petrochemicals and allied sectors are undermined by a misguided petroleum subsidy and the industry value-chain remains undeveloped. Our traders import and sell foreign produced goods and most manufacturing raw materials are also imported. In effect, across sectors we add no value domestically, and whenever we consume, we create jobs offshore. Consequently GDP growth makes no impact on poverty and unemployment irrespective (by and large) of the growth rate. The large size of government (numerous federal MDAs, large recurrent spending, multiple and overlapping commissions and agencies; 36 states with inefficient bureaucracies and 774 local governments; and the relatively large expenditure devoted to maintaining the legislature at federal and state levels and a myriad of political appointees) means there is very little left for capital and social spending. Poverty and unemployment indices will not change iuntil we restructure both our economy and our politics! In terms of sectors, telecommunications remains the outstanding growth sector in Nigeria at over 35% in Q3 2011 (it remains a mystery that Nigerians refuse to apply the lessons of telecommunications to downstream petroleum and power), far ahead of wholesale and retail trade (11.84%), hotels and restaurants (11.81%), solid minerals (11.5%), and building and construction (10.72%). With the exception of the low value-adding (!) trading sector, all the other high-growth sectors are too small to matter! Manufacturing has shrunk to 3.51% of GDP, grows by 8.15% and utilises only 57-58% of its capacity! Upstream oil GDP growth has slowed in 2011 and was actually negative (-0.34%) in Q3 2011 due to the absence of clear industry structure and fiscal terms which the petroleum industry bill was supposed to provide. Until recently agricultural sector growth was a function of divine benevolence (rainfall) and not policy-hopefully the new minister is changing that. For now the sector grows at a low 5.82%. Finance and insurance has also contracted to a shocking 2.98% of GDP, with abysmal growth rate of 3.98%, due almost certainly to incessant policy changes, industry restructuring and effects of industry mistakes made between 2005 and 2009. The capital market remains well below its 2008 peak, and the likelihood is that recovery, both in financial and capital markets may yet be deferred at least to second half of 2012, or beyond! All indications are that 2012 will be an inflationary year, with multiple drivers-petrol prices, electricity tariffs, tariffs on some imported food commodities mid-year, wages, fiscal push, high interest rates and depending on oil sector developments, possibly higher exchange rates as well. While stressed European and developed country economies may lower global oil demand, geo-political issues in the middle-east (especially Iran versus Israel) may push prices in the opposite direction. However we expect Saudi-Arabia to attempt to bridge absence of Iranian oil in global supply and therefore mitigate a sustained rise in prices. We are likely to see gradual rise in electricity output from 2012 and greater investments in the sector. It is critical that government completes it power sector privatisation this year, having missed earlier deadlines. Consumer purchasing power will be lower, and business operating costs will be higher! Policy makers, managers and entrepreneurs have their work cut out in 2012-global risks; difficult reforms and fiscal stress; domestic inflation and challenging markets; concerns over security of assets and people; and rising operating expenses. We may take solace in the fact that peers all over the world may face similar challenges!

Nigeria in 2012 (1)

Nigeria will be confronted with various challenges in 2012. Externally we will face a risky global environment while at home we grapple with self-inflicted political wounds and difficult economic reforms and structural change. Macroeconomic fundamentals will remain strong, but all the post-election optimism about the country’s outlook may be dissipating somewhat in the face of insecurity, socio-political and religious tensions and deferred financial and capital market recovery. Risky Global Context! One word will characterize the global economy in 2012-“difficult”! The World Bank in its Global Economic Prospects 2012 says, ““The world economy has entered a very difficult phase characterised by significant downside risks and fragility”. The principal cause is resumed financial turmoil induced by European fiscal crisis which is spreading to developing and high income countries. The Bank also notes declining capital flows to developing economies and probability of European recession accompanied by slowing growth in developing countries. Based on the above, the bank lowered its growth prospects for 2012 to 2.5percent. UNCTAD similarly revises projected global growth downwards to 2.6percent, noting that “the world economy is on the brink of another major downturn” and expresses concerns about continued jobs crisis, European sovereign debt, banking and financial sector concerns, fiscal austerity, unemployment and poor business and consumer confidence. The IMF notes that “global recovery stalls, downside risks intensify” in its January 2012 World Economic Outlook Update and also revised projected growth down to 3.5per cent. Many European economies have suffered ratings downgrades and have negative outlooks, and all three reports highlight significant downside risks! In this sombre context, global demand may fall and oil prices (and other food and commodity prices) which appear to have peaked since April/May 2011 may be susceptible to decline. With our lower reserves cushion, high foreign currency demand and budget deficits, a shock in global oil and commodity markets will affect Nigeria, probably severely. Dangerous Demographics!! Domestically the biggest cause for concern, and probably the fundamental underpinning of our socio-political problems may be the looming demographic catastrophe Nigeria faces! According to NBS data, Nigeria has over 104 universities; 75 polytechnics, more than 30,000 junior and senior secondary schools; and almost 100,000 primary schools. Our universities had an average of 800,000 students over the last five years; over 1.37 million students were enrolled in universities, polytechnics and colleges of education in 2006, and over 1.98million in 2007, meaning that perhaps 2-3million graduates will enter the labour force by 2011/2012! Our 2011 population was 164million people, with a potential labour force of 67.2million people, of whom 16million (or 23.9%) were unemployed! Unemployment has risen from 13.4% in 2004 to 23.9% by 2011. Within the restive age group of 15-24 years, unemployment is 37.7%! Twenty percent of graduates of all tertiary institutions are unemployed! In 2011, 2.217million persons joined the ranks of the unemployed!!! In many states (Yobe, Zamfara, Sokoto, Imo, Bauchi, Gombe, Jigawa, Katsina, Rivers, Delta, Borno, Kano, Kaduna, Benue), unemployment is higher than the national average! Meanwhile this idle and disaffected population is angry, more engaged and better connected! There are 95.3million active telephone lines (as at November 2011) according to NCC data, and the telecommunications sector now has capacity to provide every Nigerian with a telephone line (with total installed capacity of 172.4million lines. Internet penetration is rising and more people are connected to social media. The potential for citizen action is significantly higher as well-demonstrated during the fuel subsidy protests. Policy Challenges! Elevated Political Risk!! Nigeria’s government barely scraped through a mini-insurrection over removal of fuel subsidies. The 6-day nationwide strike, by our firm RTC’s calculations cost the nation N215.77billion ($1.4bn). Our assumptions note that the upstream petroleum sector was not on strike leaving oil production and export unimpaired. We also included a (probably) generous discount of 25percent of agricultural output to account for front-end activities including possible transportation delays. Several other policy battlegrounds however remain-power privatisation; rise in electricity tariffs; resistance to economic reforms and privatisation; rationalisation of federal MDAs; petroleum industry bill; cashless Nigeria, and the deferred battle over downstream petroleum deregulation. We expect some intra-government tensions and a possible confrontation between the House of Representatives and the Executive. Vested interests-regional interests, crony capitalists, bureaucrats and their allies in parliament and others, along with labour will oppose economic reforms all the way! The best policy outcome in 2012 will be successful power sector privatisation. There are dangerous political scenarios in 2012 and beyond. The 2011 elections and anger over North-South power sharing; and “Boko Haram” terror and insecurity are straining national unity and cohesion. We expect Nigeria to step back from the brink, as usual, but worse outcomes are possible! There are elements in the political space who appear willing to over-extend political brinkmanship beyond margins of safety, and it is easy to project the activities of “Boko Haram” to a point in which citizens head back to their home regions.

The Evolution of "Boko Haram" (2)

It seems Bauchi State Governor Isa Yuguda was instrumental in persuading late President Yar’adua to curtail the menace of “Boko Haram”. Yuguda having decamped from PDP to ANPP, duly won the governorship in 2007. He subsequently became Yar’adua’s son-in-law, and returned to the PDP, possibly losing some political goodwill in the process. He may have dreaded returning to the electorate in 2011 with “Boko Haram” roaming free in Bauchi! I have previously noted that having fallen out with the sect, then Borno governor Modu Sherrif was also eager to see off Boko Haram. When security forces turned on “Boko Haram” between July 26 and 29, 2009, they responded in a surprising manner-in Maiduguri, they exacted “revenge” in a perverse manner by turning on the nearest Christians! While under attack from the army and police, Muhammed Yusuf ordered his followers to capture hundreds of Christians. The male captives had a simple choice-renounce your faith or die! For the females, it was renounce your faith or stay as captives, meaning slavery, servitude or worse! The worst treatment was reserved for Christian clergymen-three pastors were be-headed, with the executioners shouting “Allah Akbar” in wild celebration accompanied by celebratory gunfire. Pastor George Orjih of Goodnews Church, Wulari, Maiduguri was one of the three. Muhammed Yusuf personally urged him to renounce his faith and live, which the Pastor rejected and instead actually preached to Yusuf to accept the Christian salvation! Incensed, Yusuf ordered his immediate slaughter! Fortunately for most of the captives, government prevailed in that confrontation, so most of them were released after Yusuf’s capture. Once it launched its Jihad in 2010, Boko Haram has had four categories of targets-specific Islamic clerics who disagreed with its teachings or methods; government and security institutions and personnel; institutions which they considered abhorrent to Islam particularly hotels and beer parlours; and Christians and/or Churches. It is easy to understand why they would attack the first three groups-opposing Islamic clerics could potentially undermine their theology and legitimacy; government and security agencies had attacked them and killed their leaders; the disdain Moslems are supposed to have for alcohol and prostitution is well-known. The resort to targeting Churches and Christians, who till then had played no part whatsoever in this essentially intra-Muslim quarrel was inexplicable-the then president, governors of all states in which BH were attacked, the then National Security Adviser, etc, all being Muslims. The trend of BH attacking Churches and Christians has since accelerated, rather than decline culminating in the Christmas day 2010 attacks on Churches in Jos; 2011 bombing of the Madalla Church and killings in Yobe, Adamawa, Gombe, Borno, Bauchi, Niger and Plateau States. As previously stated, one can observe a clear transition from BH when it was pre-occupied with local politics in the North-East and Kano, and the newer version which seems to have a national or even international agenda (evidenced by the attack on the UN headquarters). It is clear that BH has been influenced by Nigerian politics in general, and the North-South power struggle that ensued after Yar’adua’s death in particular. Indeed it is possible to interpret their January 2 2012 ultimatum on Southerners to leave the North in explicit political terms-perhaps an attempt to reverse the April 2011 scenario in which a Christian Southerner obtained twenty-five per cent of the votes or more in most Northern states! One could also draw a parallel between the objectives of this ultimatum and the post-election violence which erupted across Northern Nigeria last April. Northern politicians such as Adamu Ciroma, Lawal Kaita, Yahaya Kwande, Muhammadu Buhari and Atiku Abubakar had made statements which may have contributed towards creating an environment conducive to or indifferent to political violence. Changes in Boko Haram’s methods and activities (such as suicide bombing) also suggest a link-up with Al Qaeda. The body language of some Northern leaders (such as Borno elders who spoke out only whenever government took military action and the initially tepid response of the Northern establishment) while not establishing complicity with BH, indicated at least mixed emotions! The Arewa Consultative Forum (ACF) very recently issued a shocking statement claiming falsely that BH’s ultimatum was in response to an earlier one issued by the “South-South”, in effect justifying same! The most blatant justification of BH has however been the one by CBN governor, Sanusi Lamido Sanusi who claimed to the Financial Times, that the BH phenomenon was a consequence of divergent federal resource flows to the South-South and North-East since the 13 per cent derivation principle in 1999! Sanusi ignored any facts that contradicted his logic-Cross-River and Edo States (both in South-South) which get next-to-nothing from derivation should then be consumed by terrorism; South-West and North-Central States who do not benefit from derivation haven’t shown the same tendency; the South-East zone actually receives lower federal allocations than North-East; and how does Sanusi explain pre-1999 religious riots in the North (when Northern States took the highest allocations based on population figures) including the 1980 Maitatsine crisis, or the 1995 beheading of Gideon Akaluka in Kano? I recommend that anyone interested in resolving the crisis of poverty, unemployment and ignorance in the North, should seek the solution in education, skills acquisition, focus on economic development and avoidance of extremist religious philosophy! The BH crisis has its roots in a dangerous combination of extremist religious ideology, abysmal social conditions and political brinkmanship!!!

The Evolution of "Boko Haram"

Muhammed Yusuf, founder of “Boko Haram” (BH) was a devout student and follower of Sheik Jafar Mohammed, a notable and influential Islamic scholar before he encountered a radical ideology (modelled on the Afghan Taliban) which counselled a total boycott of democracy, government and western education. Yusuf was attracted to this “pure” form of Islam, which led to a confrontation with his former mentor, who regarded such teachings as extremist, and who was later assassinated, probably by Yusuf’s followers in Kano in 2007. Shehu Sani claims that BH’s actual origin dates back to 1995 when it was called Sahaba and led by one Abubakar Lawan who later proceeded to the University of Medina for studies, paving way for Yusuf’s take-over. Some others trace the “Boko Haram” tendency to the Maitatsine group of the 1980s. The group is however formally believed to have started in Maiduguri in 2002. The group’s formal name is Jama’tu Ahlis Sunna Lidda’wati Wal-Jihad (People Committed to the Propagation of the Prophets’ Teachings and Jihad) though observers nicknamed them “Boko Haram” (consistent with their teachings and conduct) which meant “western education is sacrilege/sin/forbidden”. They seek to abolish the secular Nigerian constitution in favour of an Islamic state, and want to establish a complete Sharia-based state in the 19 Northern states and all over Nigeria. Sometimes known as “Yusuffiya” after its founder, BH also abhorred banking, taxation and western jurisprudence/court systems, and regarded the mixing of boys and girls in schools as improper. Yusuf also rejected scientific explanation for natural phenomenon. It appears clear (and was recently admitted by the new leader, Imam Abubakar Shekau, a hardline assistant of Yusuf now reportedly based in Qoundere, Cameroun) that the groups’ membership includes Chadians, Nigeriens, Camerounians and other non-Nigerians and its organisational structure provided for “Amirs” in Chad and Niger! Yusuf’s landlord and in-law, late Baba Fugu allowed him build a mosque in the railway quarters area of Maiduguri, and along with Shekau, Yusuf developed his “state-within-a-state”-including a cabinet, ruling council (Shura Council), departments, brigade of guards, military wing (with the “armies” recruited from the large pool of “Almajiris”), Hisbah, a large farm, and court with Yusuf as judge! As Yusuf’s empire expanded, there is little doubt that security agencies and the Nigerian state were aware of these developments. But in its dysfunctional state, they either looked the other way, or when security warned, their counsel was ignored! Yusuf’s message resonated with the large number of pious, poor, uneducated, unemployed and disaffected youth and even some undergraduates and university lecturers joined his ranks. As his influence expanded, Boko Haram became attractive to politicians and soon was to form an “alliance” with the Borno State Government under Senator Ali Modu Sherriff who became governor in 2003. Sherrif appointed one of Yusuf’s associates, Alhaji Buji Foi as Commissioner for Religious Affairs and Water Resources, and took the group under his wings, further expanding their influence and power, and making Yusuf quite wealthy. There was a political and social context to all this. Modu Sherrif was an opposition ANPP governor who was ready to use any means possible to defend his power base from the marauding PDP. Sherrif and his fellow ANPP governors, as well as their presidential candidate, then Muhammadu Buhari had championed what Obasanjo called “political Sharia” to insulate themselves from the ruling PDP onslaught. BH expanded to Bauchi, Yobe, Kano, and other Northern states, and quite plausibly helped ANPP sustain their holds on Borno and Yobe, and to capture Bauchi and Kano from the PDP. Then Sherrif and Yusuf fell apart! Knowing the power of his Frankenstein creation, Sherrif (and Isa Yuguda who having secured power on ANPP platform in Bauchi had headed back to PDP) launched a “pre-emptive” (in Yuguda’s words) strike against BH between July 26 and 29, 2009 routing the group in Bauchi, Maiduguri, Yobe and Kano States….or so it then seemed! It was convenient to all concerned to kill Yusuf, Boi and Baba Fugu! Meanwhile the political environment was changing in favour of BH’s narrative! President Yar’adua who gave the order to crush BH died and Northern politicians, Imams, Emirs and elite appeared unhappy that his Vice-President, Jonathan, a Southern Christian would take-over from him. To make things worse, Jonathan proceeded to contest and win the 2011 elections against Northern threats and intimidation. BH duly underwent a transformation. To provide troops, jail breaks were organised-on September 8, 2010 from Bauchi Prisons; and Yola Prisons on April 22, 2011 where detained members were freed. A transition in terms of funding, logistics, training, operational capabilities, intelligence and audacity were also evident. How and who oversaw these transformations? At the latest, by January 2010 when BH launched its Jihad with its first terrorist attack in Maiduguri, it may have linked with Al Queda as recently confirmed by the Nigerien foreign minister. From ride-by shootings on “okadas” in Maiduguri and environs, they graduated to audacious attacks on police headquarters in Abuja; bombing the United Nations Headquarters also in Abuja; and the Christmas day bombing of the St. Theresa’s Catholic Church in Madalla, Niger State! Suicide bombings also came into the mix! The suspicious circumstances of the “escape” of Kabiru “Sokoto” (of Biu), the alleged Madalla bomber in the custody of Zakari Biu confirms that BH may have links high up in the police, security agencies, traditional and religious establishment, and political and elite circles.

Fallouts of Subsidy Crisis

President Jonathan was in a weak strategic position when the fuel subsidy removal was announced on January 1, 2012. He also underestimated public resentment of the policy. Nigeria’s politicians and ruling class were also yet to understand the implications of telecommunications industry changes on the ability of citizens and civil society to organise themselves! NCC data indicates over 127.2million connected; and 95.3million active lines; plus 172.4million installed capacity in Nigeria as at November 2011. Internet penetration has also improved, and a significant number of youths and middle class Nigerians have blackberries and are on facebook. These demographics in effect have altered the balance of power between government and citizens, in favour of the citizenry! It was this dynamic (also at play in the “Arab Spring”, “Tea Party” and “Occupy Wall Street” protests) that left government surprised at the popular reaction during the oil subsidy strike. The strike illustrated the power and possible abuses of the internet and social media! Information and (a lot of) disinformation is enabled by the internet. Ranged against government in the subsidy protests were several disparate groups-labour exercising its legitimate duty of protecting its constituency’s interests, as it perceived it; youths and middle class Nigerians who sought to prevent what they considered an adverse policy, which would take away their “right” to cheap oil; social and civil society activists, who were fulfilling their self-assigned roles in society; Life-long “comrades” and socialists (such as Dr Fashina, former ASUU president who chaired the Joint Action Committee) who interpret deregulation as a capitalist philosophy which would take Nigeria away from their socialist utopia; the broad political opposition, especially ACN and ANPP, which felt they had no reason to help a PDP government sell an unpopular policy; and CPC politicians led by Nasir El-Rufai, Tunde Bakare, Yinka Odumakin and Kayode Ogundamisi (supported by Femi Fani-Kayode and Dino Melaye) whose agenda progressively appeared to be an unconstitutional take-over of power! This last group had many active collaborators and supporters (and probably a few silent ones too!) whose advocacy for regime change would ultimately help government re-define the protests as a security threat and attempted treason, which put labour in an untenable position and led to the suspension of the strike! Nigerians exhibited great passion during the period; even though the space for reasoned debate of the deregulation of downstream petroleum sector (or oil subsidy removal) policy was often severely constrained and the discussion reduced many times to vulgar abuse, demonization and demagoguery! Many found pleasure in abusing Jonathan, Ngozi Okonjo-Iweala, Sanusi Lamido Sanusi and Atedo Peterside, the only government officials (later joined by Shamsudeen Usman and Bolaji Abdullahi) who had the courage to speak in defence of government policy. In the media, only Ijeoma Nwogwugwu of THISDAY and this columnist expressed pro-deregulation viewpoints. Which brings me to one of the less-savoury fallouts of the crisis-the ethnicization of the issue, which THISDAY’s Segun Adeniyi discussed in his article, “Their Son, Our President” of January 19, 2012. While it may or may not have been legitimate for Segun to disclose his earlier aggravation by respected banker Atedo Peteside during the transition from Yar’adua to Jonathan and pro-Jonathan sentiments by Niger-Delta leaders, I was shocked by the completely unnecessary and unjustifiable attack on well-respected President of the Christian Association of Nigeria (CAN), Pastor Ayo Oritsejafor who the columnist referred to as “otherwise respected”! Contrary to Segun’s assertion, Pastor Oritsejafor, an Itsekiri (they are not known to be best friends to Ijaws and Urhobos, two of the dominant groups in the Niger-Delta) has never made any pro-Niger-Delta comments since President Jonathan’s assumption of office. Instead his two concerns appear to be Islamic Banking, and “Boko Haram” terrorism/killings of Christians in Northern Nigeria. I would imagine that these are legitimate concerns of a leader of the country’s Christians. I have warned earlier in this column that there seems to be intense anger in some quarters (an anger that apparently led Professor Jubril Aminu to call for the banning of CAN!) at Oritsejafor’s support for Northern Christians and his audacity in seeking to protect his congregation. I have also heard that some non-Christians are so upset that they seek to sponsor an alternate leadership for CAN that is more amenable to their interests! Hopefully everyone has learnt something from this crisis. Government now knows that it can’t take the people for granted. It must communicate and engage with the populace on policies before implementing them, and our democracy is probably stronger. Government can no longer neglect the imperative of fighting corruption, and enthroning transparency and accountability in government business. On the other hand, most Nigerians now concede the necessity for downstream deregulation, and the crisis has indeed taken the nation closer to a deregulated oil sector. There is now consensus around the need to investigate and punish all abuses of the subsidy scheme. I would recommend that government should return the scheme exclusively to oil majors and scrupulously implement the reduced SURE programme so that benefits can be visible to all. Government must resume consultations towards correcting industry lapses, enacting the petroleum industry bill, and commence consultations towards setting a date for full industry deregulation. I would urge government to consider issuing full investment guarantees to all prospective investors to commence action in the expectation that the sector would be deregulated by the time construction is complete.

The Fuel Subsidy Palaver (2)

There is a socio-political, economic and global context to the fuel subsidy removal crisis. When President Jonathan overwhelmingly won the April 2011 general elections, his major opponents vehemently rejected the outcome. Their contrived angst couldn’t really be the actual polls conduct, but a carry-over of the sense of entitlement and anger felt by Northern politicians, traditional rulers and elites after the region’s perceived loss of power due to late President Umaru Yar’adua’s death. The promise to make Nigeria “ungovernable” was soon to manifest in escalation of religious tensions and “Boko Haram” terrorism leading to heightened insecurity across the country, especially the North East and North Central. Government’s confused and confounding response to the bombings, shootings and killings carried out in the name of “Boko Haram” angered most Nigerians. Meanwhile a more insidious de-legitimisation of Jonathan commenced in the media and hearts of citizens, especially in “core” North and South-West. The media onslaught was on two fronts-social media and mainstream press. Most “civil society activists” and vocal youth, the type that inhabits and dominates internet and social media tended to support either Nuhu Ribadu or Muhammadu Buhari, candidates of Action Congress of Nigeria (ACN) and Congress for Progressive Change (CPC) respectively in last year’s elections. Typically idealistic and highly passionate (though sometimes lacking commensurate insight), they favoured change from the PDP status quo. While the South-East, South-South and North-Central had made up their minds long before the voting to back Jonathan, the battle was really over South-West votes. When ordinary South-Westerners turned to Jonathan, the activists became an often-angry minority determined to prove the majority had made a grievous error! They were joined by a large number of Northern facebook activists whose pro-Buhari posture was unequivocal, though nicely expressed in nationalistic terms. The mainstream media, particularly three strategic ones (a trusted medium that projects Northern intelligent opinion; a relatively new but powerful national newspaper reflecting dominant thinking in the South-West; a very influential daily which acquired very strategic anti-Jonathan columnists!) also turned against Jonathan. Jonathan’s public image steadily became “clueless”, weak, indecisive and floundering and his wife portrayed as a laughing stock! Meanwhile Jonathan’s communication machinery went to sleep, with key Jonathan supporters pre-occupied with the spoils of office!!! Jonathan who had brought Facebook into Nigerian politics and governance, became its most savage victim, and fared little better in mainstream press, where editors surprisingly found access to Jonathan’s media managers difficult. In governance, signs were mixed as Jonathan assembled a fair cabinet and an initial policy vacuum around the inchoate “transformation agenda” began to be filled. But government appointed prominent businessmen into an otherwise sound economic management team, an error that signalled prospects of crony capitalism. Disturbing rumours began to emerge about import duty waivers, and in the petroleum sector about management of the subsidy regime, which almost certainly contributed to ballooning subsidy figures. It was soon apparent that oil marketers were quite enamoured of petroleum minister, Dieziani Allison-Maduekwe as they flooded newspapers with congratulatory adverts every time she collected a honourary doctorate, national award or celebrated a birthday! The regime crowned these with a badly-managed jumbo national honours ceremony in which up to 350 persons-the bad, ugly, good and not-so-good received high honours. Meanwhile corruption, poverty and unemployment remained high; and middle-class Nigerians and youths having seen people power demonstrated in the so-called Arab Spring and “Occupy” protests were anxious to stage a Nigerian version, irrespective of history and context! In six short months, Jonathan well-meaning, simple but naïve, and lacking a vibrant political, strategy and communications backbone had lost so much goodwill that his sensible policy of downstream petroleum sector deregulation erroneously sold as subsidy removal, was going to be badly-received by the populace! There were also reasons to believe that Jonathan’s government and security services contained not a few persons whose loyalty to the regime was probably questionable! Ironically deregulation of downstream petroleum is the first real bold and transformational action taken by the Jonathan administration! The initiation of a Nigerian Sovereign Wealth Fund was positive and the 2012 budget proposals made the right calls on the big issues-deficit reduction, structural reform, fiscal consolidation, changing the ratio of recurrent to capital expenditure, social sector investments in education, health and employment generation, and agricultural policy and incentives, but all these positives were lost in social media bluster and anger. Deregulation of downstream petroleum is one of the most important and critical actions government can take in helping fulfil our economic potentials. We have finest grade crude oil, but we import refined petroleum products because we prefer the short term and short-sighted benefits of a wasteful and corrupt subsidy scam. Deregulation would promote huge private sector investments in refineries, petrochemicals and the value chain. It would create jobs and resolve permanently and sustainably petroleum product supply issues and is the structural solution (like import licensing and foreign exchange trading earlier) to the huge arbitrage opportunities that provide incentive for corruption. It is unlikely that the inflationary impact of N141 petrol would be fully reversed even if today the price was returned to N65. It is wiser to reach agreements on palliatives, anti-corruption, reduction in government waste and profligacy, and monitoring of the SURE (Subsidy Re-Investment and Empowerment) Programme and let Nigerians reap the benefits of a deregulated downstream petroleum sector.

The Fuel Subsidy Palaver

Government case for subsidy removal is unwisely based more on the need to increase government revenue, rather than deregulation to ensure investment, massive job creation and sustainable product supply in the downstream petroleum sector. Why should Nigerians want corrupt, inefficient and often dysfunctional governments to have enhanced revenue (and this is not about Jonathan, but ALL Nigerian governments to date!)? Of what significant benefit has government revenue been to our people? Nigerians don’t trust government, for good reasons, and Jonathan hasn’t yet given Nigerians overwhelming reasons to believe his is different. Nigerians are right to demand that the executive and legislature demonstrate willingness to make sacrifices, as requested of Nigerians. Personally I think Jonathan means well, and I trust Ngozi Okonjo-Iweala (irrespective of the irrational social media ranting), but the essential character of the Nigerian state remains the same! However I have always supported downstream petroleum sector deregulation! Deregulation and liberalisation have transformed several sectors in Nigeria-financial services; airlines and aviation; broadcasting and media-radio, television and newspapers; upstream petroleum; universities and polytechnics; and telecommunications. Every sector which relatively “works” is conducted by the private sector; those that don’t-power, refineries, railways, water, public education, public health, security, judiciary, roads etc are managed by government! But not every sector can be deregulated and liberalised e.g. security, public health and education. Even there private players can play critical roles such as in the Lagos State Security Trust Fund by its private sector partners, which has transformed the security sector in Lagos. Clearly downstream petroleum sector should be deregulated so that private capital and investment can build refineries, petrochemical plants and invest down the sector’s value chain. The best insight is drawn from telecommunications experience. Imagine this was 2000 and we were pondering how to provide 100 million telephone lines for Nigerians. Would we hand over $20 billion to then corrupt and inefficient telecommunications monopoly, NITEL and given it “marching orders” to ensure it provides 100 million lines within ten years? That would have been sheer foolhardiness!!! We would simply have made individuals rich-Minister for Communication, senior civil servants, NITEL officials, contractors, and their friends and cronies, as we had done since independence! Ten years later, NITEL may have moved from 470,000 lines (actually less were working) to may be 750,000!!! Instead we acted sensibly-deregulated the industry, sold licenses to private investors (earning billions of dollars from digital mobile license auctions, 3rd generation licenses, second national carrier licenses; additional operator licences) and earned additional revenue from taxes, import duties, spectrum sales. We created thousands of jobs, with employees paying P.A.Y.E taxes to government and the sector impacted other industries-media and entertainment; advertising and public relations; professional practices; small and medium enterprises (even micro enterprises); and telecommunications enhanced overall economic productivity. Private capital in excess of $20 billion flowed into the economy, and government corruption in the telecommunications sector has disappeared! Today the Nigerian telecommunications sector has 125million connected lines, capacity for 167.8million lines and tele-density of 67.09 percent!!! Why would we so resolutely insist on not using a similar strategy for downstream petroleum??? If we hate corruption, one of our most important actions would be ending the petroleum subsidy scam which is now the largest single source of corruption in the Nigerian economy. The evident irony is that if subsidy stays, the happiest people will be the oil importers!!! I also think many of the opposing arguments are escapist-a gradual removal (that is what we have been doing since 1986! Global oil prices and exchange rates will go up, while petrol prices remain fixed, so a bigger subsidy will re-emerge and we will have merely postponed the evil day); the timing is wrong (evidence suggests that there could never be a right time to ask Nigerians to pay more for petrol. A sense of entitlement to cheap petrol has developed and prior governments have got negative reactions irrespective of timing); there was insufficient consultation (we hear stories of labour leaders who privately agree with government, but refuse to admit so publicly to preserve their populist base-they may later “change their minds” when they get into government!); it is IMF/World Bank policy (no intelligent observer needs an international conspiracy to know that spending one-third of your budget on a corrupt subsidy scam which stunts a potentially huge industry, while you lack jobs, infrastructure and social spending on education, health and transportation, is nothing short of insanity!) The big challenge is how government will calm the populace and alleviate the short-term impact on the poor and struggling masses. Government must urgently implement credible and well-thought out measures to ameliorate the impact on the vulnerable. I support downstream deregulation and I hope the policy is successful, but government must offer deep and meaningful sacrifices of its own. Government must also unequivocally begin the process of transforming itself before it can transform Nigeria! Jonathan must fight corruption, inefficiency and lack of commitment of government officials to the people. The people must henceforth see that government exists for public good and not private benefit!