Government is mortgaging Nigerians future on unproductive domestic debts

The Federal Government of Nigeria rolled out its 2012 borrowing train last week issuing three different bonds with different maturities. The interest rates on the bonds were the highest the Federal Government has paid since 2003 when it started issuing bonds again in the Nigerian market.

Goodluck Jonathan, Nigeria's President.

Figures from the Debt Management Office (DMO), the Office in charge of issuing local bonds, shows that the Nigerian government raised a total of N89.76 billion last week Wednesday in three different tranches. This was the government’s first debt auction this year. The interest rate the government had to pay on all the bonds were higher than all bonds previously issued by the government, an indication that the cost of borrowing money from Nigerians by the Nigerian government has gone up.

The Federal government issued a fresh 10 year N35 billion bond due to mature in 2022 with the interest rate on the bond hitting a new high of 16.39 per cent. What this simply means is that the Federal government will be paying an average of N5.74 billion on this loan as interest for the next ten years. In ten years, the interest the government would have paid on this loan will be about N57 billion. In effect, for borrowing N35 billion today, the government will have to pay N57 billion in total interest payments for the next ten years and still pay back the N35 billion at the end of the 10th year. The government will have to pay a total N92 billion in the next ten years for borrowing N35 billion today.

For the total of N89.7 billion bond issued by the Federal government last week at an average interest rate of 17 per cent, the Nigerian government will have to pay an average of N15 billion on a yearly basis on this debt for the next ten years. This will amount to about N150 billion in interest payments only on the original N89.7 billion borrowing. At the end of the tenth year, the government would have to pay back the N89.7 billion to the bond holders. In other words, for borrowing N89.7 billion today, the government has effectively created a future cumulative debt obligation of approximately N240 billion over the next ten years.

Ngozi Okonjo-Iweala, Nigeria's Minister for Finance

The picture will become scarier if you realize that the Nigerian government has just started its borrowing spree for 2012. Based on the 2012 budget, which is still before the house of assembly, the total amount the federal government is likely to borrow this year will be about N1.11 trillion. This is the difference between the revenues available for the government to spend in 2012 and its planned expenditure. If the government were to borrow the whole N1.11 trillion through the issue of bonds to Nigerians at the same interest rate it just issued last week’s bond and for the same ten year period, then the government will have to pay holders of those bonds an average of N160 billion on a yearly basis for a period of ten years. This will mean that the government will pay an average of N1.6 trillion in interest payments alone over the next ten years in addition to repaying the N1.1 trillion debts back to the bond holders in the tenth year.

So if the Federal Government goes ahead to borrow the whole N1.1 trillion through bonds this year, it would have created a financial obligation of about N2.7 trillion which it has settle in the next ten years. The N2.7 trillion interest payments may even go higher if interest rates go up further. The Central Bank of Nigeria (CBN) is already saying that it expects that interest rates will go up further this year. This will mean the cost of government borrowing will also go up further raising the amount of money the government will pay as interest rates on the money it borrows from Nigerians.

Signs are that if the Nigerian government continues borrowing at this pace, it may soon be spending a good chunk of its revenues paying down its debts. The 2012 budget shows that the Federal government will pay N511 billion as interest rates on its existing domestic debts of N5.32 trillion   this year. This is about 14 per cent of the Federal government’s projected revenues for 2012. It also represents about 39 per cent of the government planned expenditure on capital projects.

Assuming the Nigerian government decide today to pay down only the interest on its debts in the next ten years, without paying down the principal and without taking on additional new debts in the next ten years, at the end of the tenth year, that is in 2022, the Nigerian government would have paid a total of about N5.11 trillion in interest payments alone, almost equivalent of its domestic debts of N5.32 trillion and still owe the N5.32 trillion.

However, with the Federal government still showing a healthy appetite to borrow the scenario looks even scarier. Assuming the Federal government goes ahead to borrow, the total of N1.1 trillion from Nigerians this year, the total domestic debt of the Federal government will rise to about N6.4 trillion by the end of 2012. The interest payment obligations of the FGN on this debt will average about N671 billion at the minimum with a good chance of it hitting a trillion naira.

What should also really worry Nigerians is what the Federal government is doing with the money and the impact the government’s huge appetite for domestic debts is having on the economy. From 2003 to date, the Federal Government has borrowed more than N4 trillion through the issuance of bonds with a more than 70 per cent of the issuance taking place from 2008 to 2011.

Interestingly, the period 2008 to 2011 has also seen a significant expansion in the government recurrent expenditure which shows that a good chunk of the money borrowed from 2008 to 2011 has just gone into sustaining the huge bureaucracy of governance. For example, the government recurrent expenditure currently stands at about 72 per cent of its 2012 budget down from 74 per cent of the 2011 budget.

The recurrent expenditure is mainly made up of salaries and wages of government workers, political functionaries and the cost of running government’s huge bureaucracy. Part of the recurrent expenditure is also what goes into sustaining the huge salaries of the national assembly members and the many many special assistants and quasi special assistant hanging around government.

 The implication of this current borrowing pattern is that though the government is borrowing heavily, it is not spending the borrowed funds productively. So someday, not too far way, Nigerians will wake up owing a lot of money and wondering what was achieved with the huge funds. 

Insights: NNPC, dead refineries and the quest for new refine...

Insights: NNPC, dead refineries and the quest for new refine...: It is interesting that despite the woeful track record of the Nigerian National Petroleum Corporation (NNPC) in the management of the nation...

NNPC, dead refineries and the quest for new refineries

It is interesting that despite the woeful track record of the Nigerian National Petroleum Corporation (NNPC) in the management of the nation’s refineries, there is an on-going process to build  additional three refineries by the corporation.

This plan by the NNPC to partner with the Chinese government to build an additional three refineries has been around for a while but the Minister of Works, Mike Onolememen, confirmed it again in the heat of the crisis over the removal of fuel subsidy.        

      Diezani Allison Madueke, Nigeria's Minister for Petroleum Resources 

The refineries are to be located in Lagos, Bayelsa and Kogi states. The one in Lagos is expected to have a capacity of 200,000 barrels per day, while the ones in Kogi and Bayelsa will have the capacity to produce 100,000 barrels per day each.            

Currently, NNPC is managing Nigeria’s four existing refineries with a combined capacity to process 445,000 bpd of crude oil. There are two refineries in Port Harcourt with a combined capacity of 210,000 bpd. There is another refinery in Warri with an installed capacity of 125,000 bpd and another refinery in Kaduna with an installed capacity of 110,000 bpd.

The story of how the NNPC has managed these four refineries is a classic case study of why government should not be in business especially where that government has established brand equity in inefficiency fuelled by corruption.

At an international conference on the Nigeria oil and gas industry last year, Tim Okon Group General Manager, Planning Transformation and Strategy of the NNPC  had revealed that Nigeria’s four refineries made a cumulative loss of N25 billion in 2009.

He did not say if the refineries also made losses in 2008 and 2010 but going by what he said, the refineries could not have made any profits in both years. The four refineries, he said, have managed to achieve just 30 per cent capacity utilization in the last ten years.

Specifically, the four refineries located in Kaduna, Warri and Port Harcourt managed to achieve 13 per cent capacity utilization in 2009 while actual PMS yield stood at just an average of 18 per cent when compared with a target of 30 per cent for the same year and global average of about 46 per cent.

What comes out in this message is that Nigeria’s four existing refineries have been more dead than alive for at least ten years. If the four refineries were listed on a stock exchange, they will be penny stocks by now and if they were operated by the private sector, they would have been shut down by now if there was no chance of making them produce at a minimum of break-even capacity. However, they are operated by the Nigerian government, for whom waste of money is not an issue.

 However, since the NNPC refineries are more dead than alive, Nigeria has become a major importer of refined fuel within the same period.  Even gloomier is the fact that the refineries are dead despite the billions spent on them in the name turnaround maintenance (TAM). It is estimated that the several TAM that has been done on the refineries may have cost the nation as much as N35 billion in the last ten years.

Yet the NNPC has embarked on a new round of TAM on the same dead refineries which they say will take the capacity of the refineries to 90 per cent. This time they say they have invited the original builders of the refineries to undertake the TAM to ensure it is successful. The question though is will the original builders of the refineries stay behind to maintain the refineries after the TAM. The challenge has always not been in raising the capacity, it has always been in sustaining the capacity which NNPC has shown it does not have the skill or ability to do.

And despite having shown that it does not have the capacity to manage the existing refineries, it is even more surprising that the NNPC is in the process of building an additional three refineries with an estimated cost in the range USD25 billion for three greenfield refineries. Besides, the obvious fear that the three new refineries will in a few years end up like the existing four refineries that NNPC has been managing, the idea of NNPC building three more refineries also goes against the aim of government eventually deregulating the downstream sector of the Nigerian oil and gas industry.

Allowing NNPC to build and manage three additional refineries is really like rewarding inefficiency. It is like saying the reward for inefficiency is additional responsibility. If NNPC could not manage four refineries successfully, on what basis is it expected to be able to manage seven refineries? Besides, I do not know of anywhere in the world where a single entity manages seven refineries. It is just unwieldy and a recipe for failure. It will add new debts to the country without the expected benefits.

I personally think the government is encouraging a further waste of Nigeria’s resources by allowing NNPC to sink more money into new refineries as well as embark on a new TAM of the existing refineries when there is a good chance that it will not end up in any sustainable efficiency being achieved by the refineries.

It is best the government start cutting its costs of exposure to the nation’s refineries. The existing refineries should be sold to private investors. The government can provide a guarantee to buy the refined products from the refineries until it musters the political will to fully deregulate the downstream sector. The government can create a bulk buyer model like it has done in the power sector to buy all refined products from the sold refineries at market based prices and sell to the public at the subsidized prices. This can be done until the downstream sector is fully deregulated.

The advantage of this model is that it will create jobs, ensure that the refineries are managed efficiently, reduce the platforms for corruption that the refineries have become, ensure that our crude oil is refined locally creating the feeder businesses that will develop as a result and provide a platform for the take-off of the downstream end of the oil and gas industry.

The government should also scrap the idea of helping NNPC build three Greenfield refineries. If NNPC wants additional refineries, it should wait till after the passage of the Petroleum Industry Bill (PIB), when hopefully it will be a fully incorporated entity. It can then raise money privately to build any number of refineries that it may choose to without using public funds.

What the Nigerian government should concentrate on currently is the introduction of incentives that will encourage the private sector to build Greenfield refineries. The global appetite to build new refineries is low due to excess capacity in most parts of the developed world. So the government will need to give proper incentives for refineries to be built in the Nigerian market since most of their products will have to be consumed locally.

Besides, it really does not make sense for the government to give out licenses for the private sector to build refineries and then use public money to fund new refineries at the same time. The private sector does not have the capacity to compete against public sector money which comes at zero cost most of the time or is highly subsidized. The government must choose between deregulation, competition and efficiency in the private sector or controlled prices, public sector monopoly and the inefficiency and corruption it breeds. 

Biu, Borno, and Boko Haram the different angles of a triangle of terror

Friday, 13 January, 2012, the Nigeria Police makes a great breakthrough in its quest to unravel the mystery behind the series of bombings that have sent a lot of innocent Nigerians to an early grave. A key suspect behind the tragic Christmas day bomb blast in Madalla, Niger State is arrested in Abuja. The interesting part of the arrest is that he is arrested in the Borno’s State Governor’s lodge in Abuja in the company of an unidentified friend and serving Air force officer said to be giving him protection. The name of the suspect is Kabir Sokoto, said to also hail from Borno State, known to be the hotbed of Boko Haram. With this arrest, it looked like a major breakthrough in the fight against Boko Haram has been made.

The suspect is immediately taken into custody. He is transferred to the police station for interrogation. Those who are familiar with the Nigerian police understand the full meaning of the word interrogation in a Nigerian police cell. The chances of surviving it without physical body injuries are narrow. Also the chances of you not confessing to known and unknown sins are also narrow.

What the officers that arrested Kabir Sokoto and detained him for interrogation did not know was that his arrest has gotten some high powers uncomfortable. Kabir Sokoto was not to be subjected to the interrogation tactics of the Nigerian police by all means. An Emir whose sons are said to be close friends to Kabir Sokoto and who is said to wield a lot of influence with top political figures was making the required calls.  Pressure was mounting on the Nigeria police force to let their catch walk free. Unfortunately, the arrest of the top Boko Haram suspect had already broken out in the media. So, letting Kabir Sokoto walk free would not be an easy task. There had to be a good plan to make that happen.

Monday Morning three days after the arrest of Kabir Sokoto, Nigeria’s most important suspect in unravelling the Boko Haram menace, Commissioner of Police Zakari Biu, who also incidentally hails from Borno State, appears at the police station where Kabir Sokoto, who also hails from Borno state, is being kept and ask that he be handed over to him for special interrogation. He claims he has special instructions to search the suspect’s house in Abaji part of Abuja where the suspect lives.

For those who do not know Zakari Biu, a little background on him will provide some insight. His profile reads like fiction. Biu is a man who has experienced the two faces of terrorism. He is said to have lost a Son to the Independence Bomb blasts in Abuja. His Son was a staff with Nigeria’s anti-corruption agency, the Economic and Financial Crimes Commission (EFCC).

However, Biu also has been linked with planting two different bomb blasts in the past as late Sani Abacha’s anti-terrorism chief. Two high profile deaths linked to Biu are the deaths of Bagauda Kaltho, a journalist working for TheNEWS magazine, and Dr. Sola Omatsola, former Chief Security Officer of Murtala Muhammed International Airport.  Both of them died through bomb blasts which Biu claimed they were trying to plant though it is believed that Biu himself may have had a hand in the planting of the bombs that killed both men because of their stand against the Abacha regime.  

Biu was sacked from the Nigeria Police after the terrorism of the Abacha days came to an end with the sudden death of Abacha. However, he got a reprieve after his former classmate Ringim was made the inspector general of police. He was reinstated by the Police Service Commission and promoted to the position of commissioner of police in charge of CID zone 7 of the Nigeria police.

So Monday morning,  Zakari Biu  walks into the Abaji local police station and walks away with Kabir Sokoto on the pretext that he was going to search the suspect’s house. Kabir Sokoto is handed over to four armed police officers to take him to his house for a search. Kabir Sokoto is assumingly in hand cuffs on his hands and feet, the usual drill when Nigeria police is taking a suspect out of the station.

At Abaji, a mob comes out from nowhere taking the police men by surprise and asking that Kabir Sokoto is handed over to them. Surprisingly, the four armed police men, without firing single shot hands over Kabir Sokoto to the mob. It is not clear if the mob insisted that they also remove the handcuffs on Kabir Sokoto’s legs and hands before taking him away. But miraculously, a suspect that was supposed to be in handcuffs on both his legs and hands is able to walk away. The Nigerian police with a reputation to shoot at unarmed civilians without provocation suddenly ran out of the will to shoot when it came to preventing Nigeria’s most dangerous suspect from escaping.

But then Zakir’s Sokoto’s miraculous escape seems to have suddenly stirred the hornets’ nest. In focus suddenly was Biu, who very few people knew has been reinstated into the police and Ringim’s reputation and job suddenly was placed on the line as a fall out of Kabir Sokoto’s escape and also his apparent links with Biu, whose reputation  raises a lot of questions. The Presidency queries the Inspector General of Police mandating him to fish out Kabir Sokoto. The inspector general police suddenly announce a N50 million reward for the arrest of Kabir Sokoto. Rumour circulate that he has been arrested. It is denied and then suddenly bombs starts exploding in Kano State, the home state of the inspector general of police.

This time it is not Christians that are under attack. The police are the ones under attack with unconfirmed reports that the IG’s own house was also attacked. The casualty figures are the highest since the first Boko Haram attacks began in Borno State with reports now estimating that between 120 to 180 people may have lost their lives in the Kano bomb blasts.

The Kano attack by Boko Haram is the first major attacks carried out by Boko Haram in Kano State and it is the biggest outside Borno State. It is also the biggest attacks on the Nigerian police since Boko Haram claimed the attacks on the Nigeria Police Head office in Abuja. It comes a few days after the miraculous escape of a major Boko Haram suspect. It also comes after what seems like a clear link is being established between Boko Haram and the security forces and a State. It looks like the desperate last stand before a fall. This is the time the uncompromised part of the Nigeria security agencies need to dig deep and move very fast on the obvious leads that they have currently.

The Kabir Sokoto escape story has some loose ends the Nigeria security forces are yet to answer. He was arrested in the company of two men. What happened to the two men? Were they allowed to walk free or are they still in police custody? Was Kabir Sokoto allowed to escape to enable him carry out the Kano Bombings? I would not be surprised if the story comes out tomorrow that he was the suicide bomber that carried out the attacks in Kano? In that case, he is dead and in no position the implicate anyone.

 Borno State government has come out with several stories trying to deny its connection with Kabir Sokoto. The stories all sound lame. Everyone knows that you do not get access to the governor’s lodge in Abuja unless you have connections in government house. Who are the contact men of Kabir Sokoto and his friends in Borno State government house?

Borno State is known to the hot bed of Boko Haram. Boko Haram also originated from Borno State. Too many links point to a close association between Boko Haram and political functionaries from Borno State that it is high time the Federal Government and intelligence agencies placed a laser focused eye on the state. The politicians sponsoring Boko Haram from the state have to start feeling uncomfortable. Indications are that if Boko Haram has to be stopped, it has to be stopped in Borno State. The Boko Haram genie left the bottle in Borno State; it has to be corked in Borno State. 

Is Boko Haram becoming Nigeria’s Mafia?

Buried in the middle of the lead story of Nigeria’s Thiday newpaper’s of today (Thursday, January 19, 2011) was another story. It was big enough to be the paper’s main story but it was surprisingly buried in the middle of another story, which though important was not big enough to swallow this other story in my estimation.

This buried story was the granting of bail to Boko Haram suspects that were facing charges over the planting of bombs in Suleja, a town in middle belt Nigeria. The charges the suspects faced included the detonation of bombs at various public places which led to the deaths of 16 persons at the electoral commission’s office in Suleja on April 8, 2011.

Other offences alleged to have been committed by them include the death of three persons at a political rally in Suleja on March 3, 2011; deaths of three Peace Officers on May 23, 2011 at Dakwa Village in Bwari Area Council of the FCT; and the deaths of three persons at the All Christian Fellowship Church Suleja on July 10, 2011.

Basically, these six suspects are facing trial over the deaths of a minimum of 25 persons through a devilish bombing campaign. Yet they were granted bail with terms that made it look like they killed their neighbour’s goat. They were granted bail in the sum of N2 million and one surety in like sum with the provision that the  surety must be a Grade Level 12 civil servant working under the Federal Government or the Federal Capital Territory (FCT) authority and must be resident in Abuja.

Anyone familiar with the Nigerian legal system, which could jail a man for smiling at another man’s wife, will be highly surprised at this development. From the story in Thisday, these men were not granted bail because the evidence brought against them by the Nigerian police was weak, they were granted bail because the judge considered them eligible for bail, eligible to walk the street even if there is enough evidence to show that these men may be very dangerous.

The bail granted is even more surprising considering that murder is not a bail able offence in Nigeria as in many other jurisdictions. So on what basis is the judge of a Federal High Court granting bail to suspects accused for series of bombings that led to 25 deaths? Has Boko Haram members also infiltrated the judiciary?

Increasingly, it is becoming obvious that the Boko Haram terrorist group are embedded in government or have active support from official sources. The on-going controversy over the escape of the main suspect behind the Madalla Catholic Church bomb blast that killed about 40 people, after being arrested in a governor’s lodge and then escaping while hand cuffed and with police escort further raised the possibility of high level conspiracy being hatched using Boko Haram as a cover.

The Leadership newspaper, based in Northern Nigeria had reported that the Boko Haram suspect may have been allowed to escape due to “the alleged involvement of two sons of a prominent traditional ruler in the Madalla bombing.”

According to Leadership Newspapers quoting an unidentified source “the suspect’s escape might have been stage-managed by the police. “The suspect, who is also known to be an arms dealer, was reportedly tracked down by the security forces and investigation had linked him to the sons of the traditional ruler who is said to enjoy political patronage from people in the corridors of power” The paper reported.

Also interesting revelations has been made about   Zakari Biu, the commissioner of police, under whose watch the chief suspect in the Madalla bombing escaped. A profile of him in Thisday today read like fiction. Zakari Biu who is said to have lost his son to the Independence day bomb attacks at Eagle Square, Abuja on  October 1 st 2010, however is also suspected to have been behind a series of bomb attacks on civilians under the late President Sani Abacha, according to Thisday. The Independence Day bomb attack was suspected to have been carried out by the Movement for the Emancipation of the Niger Delta (MEND).

Interestingly, Zakari Biu is also from Borno State, where Boko Haram originated and the hot bed of Boko Haram activities in Northern Nigeria. The suspect that was allowed to escape is also from the State and was arrested in the Borno’s State governor’s lodge.  Are all these just coincidence of happenings or a trail to unravel the Boko Haram mystery? Did Zakari Biu develop sympathy for the Madalla bomb suspect and allow him escape or he has been one of the link men in the security forces for Boko Haram all these while?

The link between Boko Haram and the security forces and the judiciary has always been an issue even before the Nigerian President raised the alarm that the Boko Haram sect members have infiltrated his government. There have been allegations in the past of how members of the sect when arrested are quietly released by the police due to pressure from top traditional rulers or political office holders. In some instances, charges are dropped against them quietly or in some cases they are granted bail and the case is never prosecuted again. The emerging picture is a mafia like inter linkages between the Nigerian security forces, political office holders, judiciary and the members of the Boko Haram sect. What is still not very clear is their agenda. Obviously, they are not bombing the lives out of innocent Nigerians for the fun of it.

Breaking News as I am about posting this on my blog is that the Madalla Catholic Church bombing Boko Haram suspect has been arrested again. Good news. But I hope it is the same person, since the person initially arrested was not shown to the media? I am sceptical? Well, strange things do happen. Forgive me.  

The many faces of Boko Haram

Boko Haram has become synonymous with terror in Northern Nigeria. There are indications however that Boko Haram may have many faces. In fact, from a careful analysis of newspaper reports, what emerges is the possibility of the existence of four different bodies all acting in the name of Boko Haram and all pursuing different agendas.

The first face of Boko Haram seems to be the real one. The existence of this Boko Haram was confirmed by Tony Momoh in an interview with Nigeria’s The Sun newspapers on Sunday. While denying that Boko Haram is the military arm of the party he chairs, the Congress for Progressive Change (CPC) he went on to say that the organisation exist to fight social injustice.

 He explains that the demands of Boko Haram are the bringing to justice the security forces that killed their leader extra judicially. The violence perpetrated by this arm of Boko Haram is targeted at the Police, Army, other security agencies and government institutions. Other targets include Northern governors who are Muslims and refuse to rule according to Islamic sharia law and who are also corrupt.

The more interesting revelations in the Tony Momoh interview is that this sect of Boko Haram claim that  they have never bombed a church, or never robbed a bank because they have enough money to finance their activities. Momoh view seems to suggest that this Boko Haram sect has no hand in the killings of Southern Christians in Northern Nigeria.

Tony Momoh’s revelation tallies a lot with the reports by BluePrint Newspapers which he quotes a lot in his interview on Boko Haram. BluePrint Newspapers, which seem to have the confidence of the Boko Haram sect, was the first paper to publish a detail expose of the suicide bomber that carried out the attacks on the Headquarters of the Nigerian Police force showing pictures and giving details of the suicide bomber’s identity and life before death.

Also the initial target of Boko Haram killings after their re-emergence was mainly against top Muslim clerics and security forces in North Eastern Nigeria. It is on record that they killed  the Brother of the Borno State governor and the Brother of Shehu Borno, who is the second highest authority in Islam in Nigeria and they consistently attacked the Nigerian army and policemen posted to especially Maiduguri.

In these early days of Boko Haram, there seem to have been a clear target at avenging the massive killings of their members in 2007 by the Nigeria security forces and also killing all those who they considered had betrayed them.

The question now is if it is this same Boko Haram that metamorphosed into attacking the UN head office, attacking churches and robbing banks. From Tony Momoh’s interview this seems not to be the case.  There seem to be in existence other variants of Boko Haram pursuing their own agenda.

Same Sunday, Tony Momoh gave his interview, the Nigerian security agencies announced the arrest of one Mallam Kabir Sokoto, said to be the person behind the Christmas day bombing of a St Theresa’s Catholic church in Madalla, Niger State.  The interesting revelation in most newspaper reports on that day was the fact that he was arrested in Borno’s State Governor’s lodge in Abuja. Another interesting revelation was the fact that he had a serving military officer giving him protection during his stay in the Governor’s lodge.

Interestingly, the media was filled with stories yesterday of the miraculous escape of Kabir Sokoto from Police Custody. The story of his escape is miraculous considering he was being transported in hand cuffs yet managed to escape while an innocent man was killed in the process of stopping the Boko Haram suspect from escaping according to a report in the Daily Trust of today which carried the report.  

The Leadership Newspapers of today (Tuesday 17, January, 2012) was even more detailed in its report of the escape of the Madalla Bomb suspect disclosing that the police had come under intense pressure to release the suspect immediately he was arrested. Here is a quotation from the report

 The paper writes that it “learnt that the pressure over the suspect might not be unconnected with the alleged involvement of two sons of a prominent traditional ruler in the Madalla bombing.”

“According to our (Leadership Newspaper) source, who does not want his name in the print, the suspect’s escape might have been stage-managed by the police as he was said to have been taken back to Abaji as part of the investigation where he was said to have been rescued by some militant youths who had laid siege on the palace. The suspect, who is also known to be an arms dealer, was reportedly tracked down by the security forces and investigation had linked him to the sons of the traditional ruler who is said to enjoy political patronage from people in the corridors of power.” 
The paper's report only confirms the fear by many that Boko Haram may be a platform by some politicians to settle some scores or pursue a personal agenda. 

The December (2011) arrest  in Kaduna of one Comrade Nuhu Mohammed, former chairman of Petrol Tankers Drivers Union (PTDU) lends further credence to the existence of a political arm of Boko Haram following developments after his arrest. He was arrested by soldiers who acted on a tip off and caught him red handed distributing guns and ammunitions to his followers according to news reports in several papers.

Leadership Newspapers on Sunday quoting an anonymous police source wrote “the soldiers acted on a tip off that the suspect was housing weapons. And we also gathered that the suspect was distributing weapons to some people to carry out attacks on innocent Nigerians. And when the soldiers went to the house, they found guns, bullet, military and police uniforms. He is with the military now.”

A few days after the arrest of Nuhu Mohammed, there were speculations in the media again that the security agencies have come under pressure to release him. It is not clear what has happened to him almost two months after his arrest.

This raises the possibility of the existence of the political arm of Boko Haram which is in existence for some political objective. It would be recalled that the President had raised the alarm that members of the Boko Haram sect have infiltrated his government and the security agencies. The allegation that there is a political motive for the activities of Boko Haram has always been there. In fact, the history of Boko Haram is said to be political as some Northern politicians seeking political office had armed jobless youths to gain political advantage. They lost control of these boys who having been trained realized they are being used and decided to fight back. The authorities then used the power of the state to crush them and hence their attack on the state and political officers when they regrouped.

The aim of this political sect of Boko Haram seems to be to use violence as a form of political leverage. They seem to be aimed at instigating insecurity through the types of attacks like the church bombing in a bid to create doubts about the capacity of the presidency to govern. This seem to be to serve as a deterrent in case President Jonathan ever considers a second term presidency or use their ability to control the violence as bargaining tool to shore up their political bargaining power in future elections.

There is also a document floating around indicating the existence of a variant of Boko Haram using the violence as a means to penetrate the Nigerian security agencies. This group is the one said to be orchestrating the attacks to make it look like a Christian Muslim fight in order to ignite and exploit the decades old mutual suspicion existing between Nigerian Christians and Muslims. This group of Boko Haram are said to be stage managing attacks along both ethnic and religious lines.

Some recent attacks have learnt credence to the existence of this group. Almost a week after the Christmas day bombing of St Theresa’s Catholic Church, in Madalla Niger State, a bomb blast also rocked a Mosque in the centre of Maiduguri killing four people. This happened on December 31^st, 2011 according to news reports and happened as Muslims were leaving the Mosque almost similar to the way that the Catholic Church in Madalla was attacked. Unlike the Madalla bombing which Boko Haram claimed responsibility, no one claimed responsibility for the attacks on the Mosque in Maiduguri.

The Mosque attack look like it was stage managed to present a picture of revenge attacks by Christians on Mosque and instigate a religious crash in one of the most volatile cities in the North. This did not happen however a few days after, Boko Haram is said to have issued a notice asking all non-Muslims to leave the North. They followed this up with attacks that killed about 20 Southern Christians in Maiduguri who were shot dead in cold blood as they were having a meeting on how to bury other southerners earlier killed by the same Boko Haram violence.

The aim of this third face of Boko Haram seems to create as much insecurity as possible and use it as a platform to infiltrate the Nigerian security agencies. According to the document which is not authenticated, their aim is to eventually turn Nigeria into a drug route to Europe.

There is a fourth face of Boko Haram. This is the criminal face. They are the ones riding on the Boko Haram platform to extort money from people. They are said to be ones robbing banks and kidnapping and threatening people in the name of Boko Haram.

It is not unlikely that there are no strict dividing lines between all these emerging faces of Boko Haram. It may be the same organisation metamorphosing into a different face depending on its objectives at a particular point in time. It may also be possible that some of the faces may exist as distinct groups.

 I suspect that the government also believe in the possibility that the different arms of Boko Haram exist as distinct groups hence the move to pay N100 million compensation to the families of the Boko Haram leader that was killed extra judicially by the army. This may be an attempt to compensate and assuage the anger of the original Boko Haram group in a bid to isolate the other groups and deal with them.

Also this different faces of Boko Haram is not different from the structure of MEND at the height of the Niger Delta crisis. It was known that MEND had the political arm headed by Henry Okah which had purely political objectives. They also had the criminal arms operating in the creeks and making money from stealing oil and kidnapping while they had the arm like the MOSSOP that was more focused on self-determination and compensation for the years of crude oil exploitation and environmental damage done to their land.

The truth however, is that no matter the face of Boko Haram, they all have something in common currently, the killing of innocent men and women. This must be stopped by the government and all well-meaning Nigerians. 

Fuel subsidy removal-In whose interest is Labour negotiating?

One thing that has emerged clearly in the current fight over subsidy removal is that most Nigerians are not really opposed to subsidy removal if it will go along with also a drastic reduction in the cost of governance.

The argument that seem to come from Nigerians is that why should the government be asking that Nigerians make sacrifices in form higher fuel prices while at the same they keep all the perks of office.

googleimages 

The President has tried to respond to this concern by Nigerians by announcing a 25% cut in basic allowances at the Presidency, which most Nigerians find laughable. Most Nigerians have railed against other presidency expenditures items like the billion Naira eating bill among others.

Labour currently is negotiating with the government on behalf of Nigerians over the strike and the civil protest that has followed the removal of subsidy. However, the interest of labour and that of Nigerians are not the same on the negotiation table.

The negotiations are deadlocked and reports coming from the meeting shows that the deadlock is primarily about if the price of fuel should revert to N65 or not. For me, this totally misses the point for which so many Nigerians have lost their lives.

If all labour succeeds to achieve in this negotiation is to get another price fixing of fuel prices, many Nigerians would have died for nothing as it will not be long before another subsidy removal is moved by this government or the next government  simply because these subsidies are not sustainable.

What these current negotiations should achieve is a complete reduction in the cost of governance, transparency in government expenditure from the local government to the Presidential level and accountability in governance. This unfortunately is not what labour is negotiating.

It is not in the interest of the government to improve transparency and accountability in governance because it will reduce the avenues for graft while it is not the interest of labour to reduce the cost of governance because it would likely lead to retrenchment and reduction in the ranks of labour.

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Besides, I think the Nigerian civil society group should not send people on the streets if at the end of the day they have no say in the outcome of what they are fighting for. Many times in the past, Labour has been allowed to negotiate after each subsidy removal, the result has always been the same with Nigerians returning to the streets over subsidy removal a few months after.

This is basically because the government and labour always reach the solution that inconveniences their positions as little as possible. The government gets a higher price of fuel which they want and still keep the ability to dish out corrupt favours to its cronies. Labour also works away satisfied because, the government does not have to retrench any of their members to reduce the cost of governance and their members can continue to receive money running dead refineries and empty government agencies while helping politicians maintain the existing corruption infrastructure.

If Nigerians really want a change that benefits Nigerians, this is the time to also ask for a seat at the negotiating table. This is the only way that Nigerians will get a solution that is beneficial to Nigerians. It is naïve to believe that Labour is negotiating for Nigerians.

Nigerians would not have gained anything if at the end of the day this  strike and civil protest are called off, and the presidency keeps its N1 billion food bill among other perks, the National assembly keeps its N150 billion budget which comes to about N320 million per house member per annum and if Labour works away with its N1.6 trillion wage bill and N800 billion overheard expenditure.

Nigerians would not have gained anything if all the States keep spending billions of Naira in the dark without any form of accountability to any one on how they spend the billions they get from the Federation account every month and Nigerians would be the greater losers if this fight ends without us being able to check what our local governments do with the millions they collect every month.

If all Nigerians succeed in getting out of this fight is a reversal of fuel subsidy, it would really be sad indeed. We would have just endorsed corruption with the lives of innocent Nigerians. If the civil society is really serious about moving Nigeria forward, they should immediately seek a sit at the negotiating table and influence an outcome that will really benefit Nigerians.
I believe in the deregulation of the downstream end of the petroleum industry but it will be sad if the government gets away with it without a corresponding reduction in the cost of governance as well as greater transparency and accountability. 

Fuel subsidy removal-Be careful what you pray for

The Nigeria Labour Congress (NLC) is insisting that the Federal government reverts to N65 per litre in the current controversy over subsidy removal. This is my take on what will happen if government returns to any form of price fixing for fuel prices.

elombah.com/googleimages

Nigerians should immediately be prepared for a prolonged period of unstable fuel supply and the return of queues at the fuel stations. There are several factors that will lead to this situation.

The first and immediate reason is the pile up of ships at Nigerian ports said to be unable to discharge their cargoes because of the five day strike so far. This definitely means even if the strike is called off today, there is still bound to be some form of scarcity considering the NNPC reserves may likely not hold long enough to prevent it.

The bigger problem Nigerians should expect to face if the FG reverts to N65 per litre is the reluctance of major fuel importers to go back to importation after being demonized in the whole fuel subsidy controversy.

In this whole controversy, instead of being made to look like the normal business men who saw a good business opportunity to make easy money, they have been made to look like thieves stealing from the public purse. Their portrayal as a stealing cabal feeding fat on public wealth has put at risk their lives and businesses with reports of their head offices and personal house being picketed and some narrowly escaping death from angry mobs.

The likely implication of this demonization of the major fuel marketers is the possibility that some of them may willingly give up the importation of fuel either temporary or reduce their involvement on a long term basis. This will have dire consequences, since the major importers have the facilities and network that are needed to get fuel into the country. With refineries down, NNPC having limited capacity to import to meet local demand, the likely consequence of any move by the major marketers to reduce their involvement in fuel importation will be an acute scarcity of fuel in the country.

This is not scare mongering. It is the basic fact that most Nigerians would not want to listen. NNPC does not have the capacity to meet Nigeria’s local fuel demands and should not be relied on to get the refineries working. They have proved their incompetence in that direction over several years. They cannot change overnight.

I see a resurgence of the black market developing immediately after the strike with a litre fuel selling far above the deregulated price of N141 per litre. I also think the black market will not be a temporary one. We are likely to see a prolonged black market situation as new marketers and NNPC try to fill the gap left by the major marketers.  

There is also the challenge that the major marketers know that the government is in a dire financial situation and may not be in apposition to pay for subsidized fuel as easily as it has done in the past. This may also discourage some of them from importing if they are not certain of being paid fast enough.

So, if we get N65 per litre official price, be prepared to pay N200 per litre in the black market or sleep at the fuel situation. It will simply be because you asked for it, so do not blame your Goodluck on Jonathan when it happens and remember you read it here first. 

Who is sending the guns to Nigeria?

As Nigerians were on the street protesting over fuel subsidy removal, a British based man was being arraigned in UK over the shipping of 80,000 rifles and pistols and 32 million rounds of ammunition to Nigeria. The shipment included 40,000 AK47 assault rifles, 30,000 rifles and 10,000 9mm pistols.

According to a report by the BBC, the man whose name is Gary Hyde, shipped these huge arm cache without receiving permission from the relevant government department in the UK.

Gary Hyde was not alone in this deal. It was carried out with his business partner Karl Kleber, a German national based in Germany, the court was told.

Gary Hyde (pic from The Observer/AP)

The pair acted as middle men between two Polish companies acting for the Nigerian buyers and Chinese companies, the court heard, according to the BBC report. Both men received commission payments for the deals totalling around $1.3m (£840,000) or N351 million.

The story apparently left several questions unanswered. Who were the Nigerian buyers? Were these guns really delivered to Nigeria eventually?

It is also interesting that since this story broke out in the British media, the Nigerian government has not come out with any specific statement on it. Were these weapons imported by the Nigerian government? If they were not imported by the Nigerian government, have they made any efforts to trace the importers of these large numbers of weapons into the country? Thirty two million rounds of ammunition are enough to kill thirty two million Nigerians, assuming each bullet will kill a Nigerian? This may be an exaggeration, but there is no doubt that if there is this amount of guns and ammunition out there outside the control of the government, then every Nigerian has a serious course to be worried at this time.

The reputation of Gary Hyde, the man at the centre of the storm shows that Nigerians have to be concerned that he has set his eyes on supplying arms to the country. A report in February 2011, in The Observer in UK shows that Hyde is also facing charges in the US for smuggling arms into the country. The Observer describes him as “Britain’s very own lord of war; an international arms dealer, whose chief currency is the AK-47 assault rifle”

The Observer reports that US officials arrested Hyde in connection with the alleged illegal import into the US of almost 6,000 Chinese-produced AK-47 magazines, each capable of holding up to 75 rounds of ammunition.

The Observer also quotes a Wiki leaks release of confidential US embassy cables which shows that in 2008 York Guns, where Gary Hyde is a director, tried to ship 130,000 of the assault rifles to Libya. The WikiLeaks revelation shows that Gary Hyde through his company acted as an intermediary between an unidentified Ukrainian arms manufacturer and Libyan officials. “The size of the deal raised eyebrows in diplomatic circles, as Libya has only 70,000 ground-force troops and these would be unlikely to use a weapon as dated as the AK-47. The cable noted that the export licence was rejected because the "UK is concerned that the intention may be to re-export the weapons, particularly to armed rebel factions backed by Khartoum and/or Ndjamena in the Chad/Sudan conflict".

Kleber, Gary Hyde’s German partner also has a reputation that does not sit well with the authorities. The Observer reports that “in 2008 the German federal police agency, the BKA, launched an investigation into Kleber to determine whether he had been involved in "the illegal sale of machine guns via Croatia to Iraq". This was in response to allegations that companies linked to Hyde had sold tens of thousands of guns to Ziad Cattan, the former head of military procurement at the Iraq Defence Ministry, without an appropriate arms brokering licence. Cattan fled Iraq after a warrant was issued for his arrest amid allegations that he had siphoned off millions of dollars in corrupt deals.”

What emerges from these reports is that the two men now being named in connection with supply of arms to Nigeria should raise serious concerns in Nigeria. Have they supplied some other arms into the country, that the authorities are not aware?

The concern becomes even more real considering the fact that at the same time Gary Hyde was being arraigned in UK, the Ghanaian authorities intercepted a truck loaded with arms and ammunitions heading to Nigeria. The ammunitions included pump action rifles and live rounds. These arrests are coming at time the Boko Haram insurgence is getting worse in Northern Nigeria as bombs explode on almost on daily basis and masked men go on killing spree with sophisticated weapons. The activities of Boko Haram, the continuous crisis in Jos is no doubt raising serious concerns and fears of retaliation from other ethnic groups. Could this inflow of arms be linked to ethnic groups arming themselves? Are they arming themselves to defend themselves or to go on the offensive?

This is a critical period in Nigeria’s history and all people of goodwill must stand up and douse the rising intention. As I said in my earlier post, the Rwanda trip will be a dangerous place for Nigeria to go. The government must also act and act fast.

This is also the time the international community must come to the aid of Nigeria. It is clear that the Nigeria intelligence agencies do not have the capacity to deal with the emerging challenge. They must offer their help at this time. They cannot wait for a Rwandan type crisis to develop before they intervene. China, especially, should caution its business community. This is not the time to fuel the crisis in Nigeria for monetary gains. Nigeria is China’s biggest market in Africa. An unstable Nigeria will not be good for China’s long term economic interest. 

All pictures sourced through google images. 

Rwanda is too dangerous a place to go for Nigerians

It is sad. The pictures and stories of killings and revenge killings coming out of Nigerians are very sad. The very agenda being pursued by the Boko Haram killers in the North is gradually taking shape in the south. The aim of their killings is deliberately targeted at provoking a response from the South with the hope that it will degenerate fast into the absolute lawlessness that they desire to take advantage.

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Unfortunately, some Nigerians are beginning to fall for this agenda with the killings in Benin yesterday. It is very sad for some people to think that the killing of one innocent man compensates for the killing of another innocent man. This will be seeking the Rwandan solution to our problem. It will spiral the country into the pits of hell in which very few people will live to tell the story.

For those who think revenge killings are the way to go, they should go and read about what happened in Rwanda. Nigeria as it is currently has a good number of the characteristics of Rwanda and even worse. We are not only divided along tribal lines we are also divided along religious lines. Unlike Rwanda, we do not have two major tribes; we have three major tribes that are divided into several sub ethnic groups and several non-major tribes.

In the North you have entrenched Christian states and Southerners who have lived all their lives in the North. In the South, you have entrenched Muslim communities and Northerners who have lived all their lives in the South. There are Igbos who speak more Hausa than Igbo and there are Hausa’s who speak more Igbo than Hausa. Yoruba’s have almost an equal number of Muslims and Hausas.

usafricaonline.com/google images

Whether we like it or not we have lived too long together as Nigerians to go our separate ways without serious collateral damage. It is the height of naivety to think Nigeria could easily be divided into two halves and everything will be okay. The truth is that Nigeria is not divisible into two halves, it is not divisible into three, it is not divisible into four, it is not divisible into five, it is not divisible into six and it is not divisible into any number of predictable parts. This is the truth. Do a critical study of the ethnic and tribal divisions and animosities among tribes and ethnicities and within tribes and ethnicities in the country, and it will be clear to you that Nigeria toys with division at great risk to the lives of everyone.

filipspagnoli.wordpress.com/googleimages

To understand the collateral damage that may arise in the break-up of Nigeria is to understand the complexity of the different intra-tribal and inter-tribal relationships. There are three major militant groups MEND in the South South, there is the Odua People’s Congress (OPC) in the South West and then there is Boko Haram in the Northern Nigeria. These groups are all heavily armed and uncontrolled by the Nigerian State.

But besides these known major militia groups, there are also known to be several sub militia cum political groups who owe no allegiance to any of these major militia groups and will fight for their own interest. In the South East, you have the Bakassi Boys, MASSOB, the Igbo People’s Congress and many others. In the Delta Edo axis you have the Egbesu boys which claim to be behind yesterday’s revenge attacks in Benin City, Edo State. You also have the Niger Delta People’s volunteer force and the Niger Delta Vigilante. There are several other militant groups active in Northern Nigeria with some having operated several years before the emergence of Boko Haram. These existing groups may not necessary share the ideals of Boko Haram.

Obviously, it will not be a piece of cake for Nigerians to break along tribal lines considering that there are 250 different distinct tribes, not counting ethnic affiliations.  This is the time for all well-meaning Nigerians to reach out across the religious and ethnic divide and preach peace and tolerance while isolating as fast possible the evil ones among us trying to tear this country apart. The same vigour that leaders across the divide have used to condemn the removal of fuel subsidy is needed right now to stop this evil descending on Nigeria. 

UK visa rules may get stricter over conflicting immigration reports

In a week, three different reports have come out in the United Kingdom (UK) on how immigrants impact on the increasing level of unemployment among UK citizens. Migration Watch, an independent body that campaigns for tighter immigration controls in the UK was the first to release a report which argued that immigrants coming from other UK countries are basically raising the level of UK youth unemployment in  the UK.

Source: www.telegraph.co.uk

The report notes a ‘remarkable coincidence’ between the rise in youth unemployment in the UK and the huge surge in immigration from Eastern Europe over the last eight years”

Migration Watch UK states that from the first quarter of 2004 to the third quarter of 2011, employment of workers born in the Eastern Europe or the so called A8 countries increased by over 600,000 while over the same period the number of unemployed young people in the UK almost doubled, from 575,000 to just over a million. For them, this is an indication that there is link between the number of immigrants coming into the UK from other EU countries and the increasing number of unemployment in the country among UK youths.

About 24 hours after the Migration Watch report, the National Institute of Economic and Social Research (NIESR) came out with the result of a study that concluded that there was "no association" between migration and the numbers of people claiming unemployment.

According a report by BBC, the NIESR study  looked at the number of migrants given National Insurance numbers between 2002-3 and 2010-11 and compared them with the number claiming unemployment benefit and concluded  that  "The results show a very small negative and generally insignificant correlation between the migrant inflow rate and the change in the claimant count rate”

The study therefore shows that “For all practical purposes, these results suggest that migration has essentially no impact on claimant count unemployment." In other words the number of immigrants coming to the UK has no impact on the number of UK citizens that cannot find jobs.

However, even before that NIESR report left the press, the Migration Advisory Committee, which is the UK government’s official advisers on immigration, came out with its own report that states that immigration from outside the European Union leads to job losses in the UK for UK citizens.

The report states that for every 100 new migrants that are allowed into the UK from outside the EU, 23 UK citizens are unable to get jobs estimating that 160,000 jobs for UK citizens have been “displaced” since the 1995 due to an increase in immigration from non EU countries.

So basically, there are three reports out there. One says that EU immigration is leading to UK citizens losing their jobs, one is neutral saying jobs are not being lost due to immigration while a third says that jobs are being lost but from immigrants coming from non EU countries.  The last report from the Migration Advisory committee could be said to carry the higher wait since it is the UK government’s official adviser on immigration.

The implication of this report is clear. Immigration rules will continue to be tightened in the UK while more efforts will be made to deport illegal immigrants living in the UK. Also those seeking permanent stays may face slower acceptance rate from the UK government.

The expectation is that this report will strengthen the current government policy of capping the number of people coming into the UK from outside the EU. Expect stricter visa rules as well as increase in the number of people being refused visa to come into the UK from outside the EU since the UK cannot do much about people coming from EU countries.

The report reflects the general mood of a country that is facing a slower economic growth and increased uncertainty over its economic future. Generally, in difficult economic period, countries are known to be less tolerant of foreigners in their midst. 

The rich are getting richer despite the recession

Picture from: bentleymotors.com

It is interesting that as the world economy falls into growing recession and apprehension, the rich are getting richer and splashing their money on the most expensive toys in town.  The signs of the rich getting richer were revealed in the release of the luxury car sales figures from two of the world’s most expensive car brands, Rolls Royce and Bentley.

Rolls Royce just announced last week that it recorded the highest sales last year in its 107 years of making cars for the super-rich. The company sold 3,538 cars in 2011, 31% higher the number of cars it sold in 2010.

The growth rate was although slightly lower that a growth rate of 150% recorded in 2010. The Rolls Royce model driving its sales is the Ghost model, according to the company, which cost a pocket bursting £165,000 or N44.6 million.  The more expensive Phantom model will set your pocket back by £235,000 or N63.45 million.

The company’s chief operating officer is quoted by the BBC as saying that 2011 had been an "outstanding year".

The BMW group which now owns the Rolls Royce brand also announced that it has recorded increased sales of its BMW Mini and Rolls-Royce marques which are cars at the expensive end of the scale.

However, it was not just Rolls Royce that was having a good time with the super –rich. Its rival ultra-luxury car maker and competitor Bentley also had a good time in 2011. The company also announced that it sold 7,003 cars in 2011, 37 per cent higher than its car sales in 2010.

The average Bentley car is priced at £133,000 or N35.91 million. The company’s flagship brand is the Bentley Mulssane which is priced at £226,000 or N61 million. The rich dishing out the mind burgling amounts to buy Bentleys and Rolls Royce are mainly from the US and China, the world’s biggest economy and the world’s fastest growing economy.

The figures show that the US was Bentley's biggest market in 2011 with 2,021 cars sold, an increase of 32% while China ranked second with sales hitting 1,839 twice the company’s sales in China in 2010 and surpassing the previous year's record before the end of July. Bentley however says its car sales are still below the 2007 levels, when it sold 10,000 cars. This was also the year when the financial market reached its peak before it crashed.

Mercedes-Benz, another car in the luxury car segment also announced increased sales in 2011. Mercedes-Benz says it sold a total of 1,260,912 cars in 2011 up 8% on 2010 sales. The company says it hit new sales record in China, Russia and India, all emerging economies witnessing high pace economic growth. The company notes that the demand for its large SUV models broke sales records in each of the 12 months of last year.

The increasing sales in luxury cars are coming despite the fact the world economy is in a bad patch. There are forecasts of economy recession in Europe this year, unemployment is rising on a daily basis with a country like Spain said to losing about a 1000 jobs a day and the unemployed touching a high of five million. In the UK, youth unemployment is at its highest ever with most young men now going about without jobs or prospects of jobs. The US economy outlook is still largely bearish though unemployment figures have been falling in the last few weeks while China is expected to grow at its lowest in 2012 in the last ten years of high pace growth.

Bud despite this gloomy outlook, the Society of Automotive Analysts (SAA) based in New York is very optimistic about the luxury car market. Their forecast is that the luxury car market will be the fastest growing car segment in the US in 2012.

Several reasons have been advanced for why the rich get richer in a recession. One is that the rich have information advantage over the poor. In a period of market downturn, the rich are most likely to be able to protect them themselves faster than the poor because they have access to superior information and the network and expert advice to move their capital and wealth into save heavens.  

Also when there is a market upturn, or the economy starts picking after a recession, the rich also get the information earlier than the poor. Besides having access to superior information, the rich also are able to take advantage of it faster since they have easier access to capital or money than the poor.  The poor may have the same information but no access to capital or money to take advantage of the information at their disposal.

For example, a report prepared by Merrill Lynch, the investment bank in 2010 shows that the worlds rank of millionaires climbed 17% to 10 million in 2010 while their collective wealth jumped 19% to $39 trillion, almost recovering all their losses during the 2007/2008 financial market collapse.

This shows that while the rich may have recovered a good portion of their wealth lost during the financial market collapse of 2007 and 2008, the middle class and poor who lost their jobs and wealth during the period are still struggling to recover. This is evidenced by the fact that foreclosures in places like America are still very high while employment in all developed economies is still yet to recover.

But for the rich, the groove goes on after a temporary inconvenience to their wealth. A Rolls Royce in the garage and a Bentley in the drive way and a vacation in the Caribbean are all back on the cards. Now, how I wish I was writing this in the back of Bentley. 

The ABC of the fuel subsidy debate

This is just an attempt to put the fuel debate into perspective as the NLC shuts down the country over a highly emotional and controversial issue.

The Issues in subsidy removal

1.       Nigeria is a major exporter of crude oil but also imports refined crude into the country

2.       Nigeria imports refined crude because the four refineries built by the government to refine fuel that would be used in Nigeria has not operated at more than 30% of its installed capacity in the last ten years or more.  The four refineries are in Kaduna(1), Port Harcourt (2) and Warri (1)

3.       The Government sells crude oil for domestic consumption (about 445,000 barrels per day) to the Nigeria National Petroleum Corporation (NNPC) at the international spot price.

4.       The government however imports into the country the refined petroleum for local use.

5.       The government has over time allowed Nigerians not to pay the full market price of the imported refined fuel. For example, while the current cost of imported refined fuel is estimated by the government to be about N131, Nigerians pay only N65 at the pump for the product.

6.       Initially the government used to import all the fuel requirements for Nigerian consumption through NNPC but over time inefficiencies in NNPC importation schedule which led to several fuel shortages in the country forced the government to invite private individuals to also import fuel for local consumption.

7.       However, since private individuals will only import fuel if they can sell at a profit, the government has had to guarantee that though they sell the imported fuel at N65 per litre, it will pay them N135 per litre being the actual cost of the imported fuel. The difference of about N70 per litre is the subsidy that the government bears.

8.       The government claims that between 2006 and 2011, it has paid about N3.7 trillion to individuals (about 77 companies) who bring in refined fuel into the country in the name of these subsidies.

9.       The cost of these subsidies has been rising mainly because the price of crude oil has also been rising in the international markets. The government claims that in 2011, it paid about N1.3 trillion to about 77 companies that brought in refined fuel into the country.

10.   The government now says that it can no longer afford to bear this burden basically because it is no longer earning enough revenues to support this level of subsidy.

11.   The government claims it had to borrow about N835 billion of its total expenditure last year to support this subsidy payments. It claims that it cannot afford to borrow at this level again this year as it will add to Nigeria’s already US$47 billion current debt pile.

12.   Besides, the government also argues that removing the subsidy will allow private individuals to build refineries and in the process create jobs for Nigerians. It has also promised to use the money saved from the fuel subsidy to revitalize the railways and build roads.

The People’s argument against the government

1.       The people’s arguments against subsidy removal are mainly on two poles. Trust and corruption.

2.       Most Nigerians say the government cannot be trusted to deliver on its promises.

3.       Many times in the past, the government has promised that the removal of subsidy will lead to investment in infrastructure without the promised infrastructure appearing after the subsidy is removed.

4.       The government should have shown a sense of sacrifice before demanding sacrifice from Nigerians. A government that is asking for sacrifices should not been seen spending lavishly on itself as seen in the Presidency’s and National Assembly’s 2012 budget, Nigerians argue.

5.       The government should first have punished those who corrupted the fuel importation regime before asking Nigerians to pay more for fuel. If the government cannot punish corrupt officials and businessmen, why should it punish Nigerians

6.       The only benefit the people get from the government is fuel subsidy and nothing else. So the government should not touch it.

7.       Prices of goods and services will rise astronomically with the removal of fuel subsidy making life even harder for already struggling Nigerians

8.       Electricity supply is still unstable and the roads are still very bad, the government should fix some of these things before raising fuel prices

9.       There are also those who argue that there is nothing like fuel subsidy. That since Nigeria produces crude oil in the first place; it should sell the crude oil for local consumption at the international price. Based on this argument, Nigerians are already paying more than they should for locally consumed fuel.

10.   Finally, there are those who say the government, from the local government to the Federal government should cut down all their wasteful expenses like security votes and luxury cars and travels before they talk about subsidy removal.

There are some Nigerians who also support fuel subsidy. Their arguments are;

1.       Subsidy payment benefits just a few companies at the expense of the nation and it is building up a debt burden that future Nigerians will have to pay perhaps when crude oil production must have run out

2.       Subsidy payments are obviously unsustainable in the long run. Even if this fight is won, whatever government that comes after Jonathan will still move to remove the subsidy because it is unsustainable

3.       Instead of fighting against subsidy removal, Labour should use its strong organisation ability to pressurize government to deliver on the projects that the subsidy savings will be spent on

4.       Labour is part and parcel of the corruption in the subsidy regime and the nation. If only, labour will ask its members to stop facilitating corruption for themselves and politicians, corruption will be history in Nigeria.

5.       Nigerians should not expect development when they have a government which runs almost 100 per cent on oil revenues. If we want development in Nigeria, we have to meet up with our responsibility as citizens, pay our taxes and demand for accountability and transparency in governance

6.       The states and local governments are more corrupt than the Federal Government and Nigerians will achieve more success in pursuing economic development if they are able enforce accountability at the local government and State government level which collect billions of Naira monthly but never tell Nigerians what it is spent on.

7.       Labour does not need to go on strike to stop subsidy removal. They consume the largest chunk of government expenditure, all they need do is agree to say 10% cuts in labour cost and overheads across the board from local government through the states to the federal government level, and it save the nation over a trillion Naira to invest in infrastructure.

8.       Only the Niger Delta people have a right to subsidy, they contribute 90 per cent of government revenues and bear the cost of oil exploration. Other parts of Nigeria just consume the oil without any associated cost and contribute less than 10% of government revenues.

This is the battle line as the NLC calls out workers on strike today to protest the removal of subsidy by the government.