SUBSIDY MADE SIMPLE- PASTOR 'TUNDE BAKARE, SUNDAY, JANUARY 15, 2012

Being Text of Speech delivered live at the Latterrain Assembly, Lagos, Nigeria – Sunday, January 15th, 2012.
1. Definiton
To subsidise is to sell a product below the cost of production. Since the federal government has been secretive about the state of our refineries and their production capacity, we will focus on importation rather than production. So, in essence, within the Nigerian Fuel Subsidy context, to subsidise is to sell petrol below the cost of importation.

2. The Unsubstantiated Claims of the Federal Government

The Nigerian government claims that Nigerians consume 34 million litres of petrol per day. The government has also said publicly that N141 per litre is the unsubsidised pump price of petrol imported into Nigeria. (N131.70 kobo being the landing price and N9.30 kobo being
profit.)

3. Annual Cost of Importation
* Daily Fuel Consumption: 34 million litres
* Cost at Pump: N141.00
* No. of days in a regular year: 365 days
Total cost of all petrol imported yearly into Nigeria:
Litres Naira Days
34m x 141 x 365 = N1.75 trillion

4. Cost borne by the Consumer Nigerians have been paying N65 per litre for fuel, haven’t we? Therefore, cost borne by the consumers =
Litres Naira Days
34m x 65 x 365 = N807 billion

5. Cost of Subsidy borne by the Consumer
In 2011 alone, government claimed to have spent N1.3 trillion by October – the bill for the full year, assuming a constant rate of consumption is N1.56 trillion.
Consequently, the true cost of subsidy borne by the government is:
Total cost of importation minus total borne by consumers, i.e. N1.75 trillion minus N807 billion = N943 billion.
Unexplainable difference: N617 billion
The federal government of Nigeria cannot explain the difference between the amount actually disbursed for subsidy and the cost borne by Nigerians (N1.56 trillion minus N943 billion = N617 billion).

6. Bogus Claim by the Government
A government official has claimed that the shortfall of N617 billion is what goes to subsidising our neighbours through smuggling. This is pathetic. But let us assume (assumption being the lowest level of knowledge) that the government is unable to protect our borders and checkmate the brisk smuggling going on. Even then, the figures still don’t add up. This is because even if 50% of the petrol consumed in each of our neighbouring countries is illegally exported from Nigeria, the figures are still inaccurate. Why?
World Bank’s Figures : Populations of West African Countries
* Nigeria 158.4 million
* Benin 8.8 million
* Togo 6 million
* Cameroun 19.2 million
* Niger 15.5 million
* Chad 11.2 million
* Ghana 24.4 million
The total population of all our six (6) neighbours is 85.5 million.
Let’s do some more arithmetic:
* a.Rate of Petrol Consumption in Nigeria: Total consumed divided by total population:
34 million litres divided by 158.8 million people = 0.21 litres per person per day.
* b. Rate of Petrol Consumption in all our 6 neighbouring countries, assumed to be the same as Nigeria: 0.2 litres x 85.5 million people = 18.35 million litres per day.
Now, if we assume that 50% of the petrol consumed in all the six neighbouring countries comes from Nigeria, this value come to 9.18 million litres per day.

7. Pathetic Absurdity
There are two illogicalities flowing from this smuggling saga.
* a. If 9.18 million litres of petrol is truly smuggled out of our borders per day, then ours is the most porous nation in the word. This is why: The biggest fuel tankers in Nigeria have a capacity of about 36,000 litres. To smuggle 9.18 million litres of fuel, you need 254 trucks. What our government is telling us is that 254 huge tankers pass through our borders every day and they cannot do anything about it. This is not just acute incompetence, but also a serious security challenge.
For if the government cannot stop 254 tanker trailers from crossing the
border daily, how can they stop importation of weapons or even invasion by a foreign country?
* b. Even if we believe the government and assume that about 9.18 million litres is actually taken to our neighbours by way of smuggling every day, and all this is subsidised by the Nigerian government, the figures being touted as subsidy still don’t add up. This is why: Difference between pump price before and after subsidy removal =
N141.00 – N65.00 = N76.00

Total spent on subsidizing petrol to our neighbours annually = N76.00 x 9.18 million litres x 365 days = N255 billion.
If you take the N255 billion away from the N617 billion shortfall that the government cannot explain, there is still a shortfall of N362 billion. The government still needs to tell us what/who is eating up this N362 billion ($2.26 billion USD).
* List item goes here

8. Illogical Assumptions
* i. We have assumed that there are no working refineries in Nigeria and so no local petrol production whatsoever – yet, there is, even if the refineries are working below capacity.
* ii. Nigeria actually consumes 34 million litres of petrol per day.
Most experts disagree and give a figure between 20 and 25 million litres per day. Yet there is still an unexplainable shortfall even if we use the exaggerated figure of the government.
* iii. Ghana, Togo, Benin, Cameroun, Niger, and Chad all consume the same rate as Nigeria and get 50% of their petrol illegally from Nigeria through smuggling. These figures simply show the incompetence and insincerity of our government officials. This is pure banditry.

9. Fact 9
The simplest part of the fuel subsidy arithmetic will reveal one startling fact: That the government does not need to subsidise our petrol at all if we reject corruption and sleaze as a way of life. Check this out:
* a. NNPC crude oil allocation for local consumption = 400,000 barrels per day (from a total of 2.450 million barrels per day).
* b. If our refineries work at just 30%, 280,000 barrels can be sold on the international market, leaving the rest for local production.
* c. Money accruing to the federal government through NNPC on the sale, using $80/bbl – a conservative figure as against the current price of $100/bbl – would be $22.4m per day. Annually this translates to $8.176bn or N1.3 trillion.
* d. The government does not need to subsidise our petrol imports – at least not from the Federation Account. The same crude that should have been refined by NNPC is simply sold on the international market (since our refineries barely work) and the money is used to buy petrol. The 400,000 barrels per day given to NNPC for local consumption can either be refined by NNPC or sold to pay for imports. This absurdity called subsidy should be funded with this money, not the regular FGN budget.
If the FGN uses it regular budget for subsidising petrol, then what happens to the crude oil given to NNPC for local refining that gets sold on the international market?

10. Tactical Blunder
The federal government is making the deregulation issue a revenue problem. Nigerians are not against deregulation. We have seen deregulation in the telecom sector and Nigerians are better for it, as even the poor have access to telephones now right before the eyes of those who think it is not for them. What is happening presently is not deregulation but an all-time high fuel pump increase, unprecedented in the history of our nation by a government that has gone broke due to excessive and reckless spending largely on themselves. If the excesses of all the three tiers of government are seriously curbed, that would free enough money for infrastructural development without unduly punishing the poor citizens of this country.
Let me just cite, in closing, the example of National Assembly excesses and misplaced spending as contained in the 2012 budget
proposal:
* 1. Number of Senators: 109
* 2. Number of Members of the House of Representatives: 360
* 3. Total number of Legislators 469
* 4. 2012 Budget Proposal for the National Assembly N150 billion
* 5. Average Cost of Maintaining Each Member N320 million
* 6. Average Cost of Maintaining Each Member in USD $2.1 million/year

Time has come for the citizens of this country to hold the governmen accountable and demand the prosecution of those bleeding our nation to death. Until this government downsizes, cuts down its profligacy and leads by example in modesty and moderation, the poor people of this country will not and must not subsidise the excesses of the oil sector fat cats and the immorality cum fiscal scandal of the self-centred and indulgent lifestyles of those in government.
Here is a hidden treasure of wisdom for those in power while there is still time to make amends:
PROVERBS 21:6&7
* “Getting treasures by a lying tongue is the fleeting fantasy of those who seek death. The violence of the wicked will destroy them because they refuse to do just”
A word of counsel for those who voted for such soulishly indulgent leadership:
* “trust a man who once had no shoes, or you may end up losing your legs”
This is the conclusion of the matter on subsidy removal:
* i. “If a ruler pays attention to lies, all his servants become wicked.” (Proverbs 29:12)
* ii “The Righteous God wisely considers the house of the wicked, overthrowing the wicked for their wickedness. Whoever shuts his ears to the cry of the poor will also cry himself and will not be heard.” (Proverbs 21:12&13)Thanks for your attention. God bless you all.
Pastor ‘Tunde Bakare
Sunday, January 15, 2012

President Jonathan’s Address to The Nation on Occupy Nigeria and NLC's reply.

Dear Compatriots: 1. A week ago, I had cause to address Nigerians on the security challenges we are facing in parts of the country, which necessitated the declaration of a state of emergency in 15 Local Government Areas in four states of the Federation. That course of action attracted widespread support and a demonstration of understanding. With that declaration, government had again signaled its intention to combat terrorism with renewed vigour and to assure every Nigerian of safety.

2. The support that we have received in the fight against terrorism from concerned Nigerians at home and abroad has been remarkable. We believe that it is with such continued support that progress can be made on national issues. Let me express my heartfelt appreciation to everyone who has expressed a commitment to support us as we strive to improve on the country’s security situation, and build a stronger foundation for the future. The recent mindless acts of violence in Gombe, Potiskum, Jimeta-Yola and Mubi are unfortunate. I urge all Nigerians to eschew bitterness and acrimony and live together in harmony and peace. Wherever there is any threat to public peace, our security agencies will enforce the law, without fear or favour.

3. This evening, I address you, again, with much concern over an issue that borders on the national economy, the oil industry and national progress. As part of our efforts to transform the economy and guarantee prosperity for all Nigerians, Government, a few days ago, announced further deregulation of the downstream petroleum sector. The immediate effect of this has been the removal of the subsidy on petrol.

4. Since the announcement, there have been mixed reactions to the policy. Let me seize this opportunity to assure all Nigerians that I feel the pain that you all feel. I personally feel pained to see the sharp increase in transport fares and the prices of goods and services. I share the anguish of all persons who had travelled out of their stations, who had to pay more on the return leg of their journeys.

5. If I were not here to lead the process of national renewal, if I were in your shoes at this moment, I probably would have reacted in the same manner as some of our compatriots, or hold the same critical views about government. But I need to use this opportunity as your President to address Nigerians on the realities on the ground, and why we chose to act as we did. I know that these are not easy times. But tough choices have to be made to safeguard the economy and our collective survival as a nation.

6. My fellow Nigerians, the truth is that we are all faced with two basic choices with regard to the management of the downstream petroleum sector: either we deregulate and survive economically, or we continue with a subsidy regime that will continue to undermine our economy and potential for growth, and face serious consequences.
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7. As you all know, the subject of deregulation is not new, we have been grappling with it for more than two decades. Previous administrations tinkered with the pump price of petroleum products, and were unable to effect complete deregulation of the downstream sector. This approach has not worked. If it did, we would not be here talking about deregulation today. I understand fully well that deregulation is not a magic formula that will address every economic challenge, but it provides a good entry point for transforming the economy, and for ensuring transparency and competitiveness in the oil industry, which is the mainstay of our economy.

8. As a President, elected and supported by ordinary Nigerians, and the vast majority of our people, I have a duty to bring up policies and programmes that will grow the economy and bring about greater benefits for the people. Let me assure you that as your President, I have no intention to inflict pain on Nigerians.

9. The deregulation of the petroleum sector is a necessary step that we had to take. Should we continue to do things the same way, and face more serious economic challenges? Or deregulate, endure the initial discomfort and reap better benefits later? I want to assure every Nigerian that whatever pain you may feel at the moment, will be temporary.

10. The interest of the ordinary people of this country will always remain topmost in my priorities as a leader. I remain passionately committed to achieving significant and enduring improvements in our economy that will lead to sustained improvement in the lives of our people.

11. I am determined to leave behind a better Nigeria, which we all can be proud of. To do so, I must make sure that we have the resources and the means to grow our economy to be resilient, and to sustain improved livelihood for our people. We must act in the public interest, no matter how tough, for the pains of today cannot be compared to the benefits of tomorrow. On assumption of office as President, I swore to an oath to always act in the best interest of the people. I remain faithful to that undertaking.

12. To save Nigeria, we must all be prepared to make sacrifices. On the part of Government, we are taking several measures aimed at cutting the size and cost of governance, including on-going and continuous effort to reduce the size of our recurrent expenditure and increase capital spending. In this regard, I have directed that overseas travels by all political office holders, including the President, should be reduced to the barest minimum. The size of delegations on foreign trips will also be drastically reduced; only trips that are absolutely necessary will be approved.

13. For the year 2012, the basic salaries ofo all political office holders in the Executive arm of government will be reduced by 25%. Government is also currently reviewing the number of committees, commissions and parastatals with overlapping responsibilities. The Report on this will be submitted shortly and the recommendations will be promptly implemented. In the meantime, all Ministries, Departments and Agencies must reduce their overhead expenses.

14. We are all greatly concerned about the issue of corruption. The deregulation policy is the strongest measure to tackle this challenge in the downstream sector. In addition, government is taking other steps to further sanitize the oil industry.

15. To ensure that the funds from petroleum subsidy removal are spent prudently on projects that will build a greater Nigeria, I have established a committee to oversee the implementation of the Subsidy Reinvestment and Empowerment Programme. I sincerely believe that the reinvestment of the petroleum subsidy funds, to ensure improvement in national infrastructure, power supply, transportation, irrigation and agriculture, education, healthcare, and other social services, is in the best interest of our people.

16. Fellow Nigerians, I know that the removal of the petroleum subsidy imposes an initial burden on our people, especially the rising cost of transportation. Government will be vigilant and act decisively to curb the excesses of those that want to exploit the current situation for selfish gains. I plead for the understanding of all Nigerians. I appeal to our youth not to allow mischief-makers to exploit present circumstances to mislead or incite them to disturb public peace.

17. To address the immediate challenges that have been identified, I have directed all Ministries, Departments and Agencies of government to embark immediately on all projects, which have been designed to cushion the impact of the subsidy removal in the short, medium and long-term, as outlined in the Subsidy Reinvestment and Empowerment Programme Document.

18. Tomorrow, 8th January, I will formally launch a robust mass transit intervention programme to bring down the cost of transportation across the country. The programme will be implemented in partnership with state and local governments, labour unions, transport owners, and banking institutions, and supported with the provision of funding at zero interest rate as well as import duty waiver on all needed parts for locally-made mass transit vehicles, which will create additional jobs in the economy.

19. We will keep these incentives in place for as long as it takes. I want to assure you that Government will not rest until we bring down the cost of transportation for our people. Let me thank the transporters’ associations that have agreed to reduce transport fares. I have directed the Minister of Labour and Productivity to work with these associations to come up with a sustainable plan to guarantee this within the shortest possible time.

20. In addition, I have ordered the mobilization of contractors for the full rehabilitation of the Port Harcourt –Maiduguri Railway Line and the completion of the Lagos-Kano Railway Line. I have also directed the immediate commencement of a Public Works programme that will engage the services of about 10, 000 youths in every state of the Federation and the Federal Capital Territory. This will create an additional 370, 000 jobs.

21. Government has taken these decisions in the best interest of our economy, so that we not only have benefits today, but to ensure that we bequeath even greater benefits to our children and grandchildren.

22. Let me assure Nigerians that every possible effort will be made to ensure that we march forward, with a collective resolve to build a Nigeria that can generate greater economic growth, create and sustain new jobs, and secure the future of our children.

23. This Administration will aggressively implement its programme to reposition and strengthen our economy, while paying adequate attention to the immediate needs of our citizens.

24. I assure you all that we will work towards achieving full domestic refining of petroleum products with the attendant benefits.

25. As I ask for the full understanding of all Nigerians, I also promise that I will keep my word.

26. Thank you. May God bless you; and may God bless the Federal Republic of Nigeria.

Goodluck Ebele Jonathan, GCFR
President
Federal Republic of Nigeria
January 7, 2012




The Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) listened to President Goodluck Jonathan’s broadcast to the nation tonight.

The speech is undoubtedly due to the resistance of Nigerians to the unreasonable increase in PMS (petrol) prices and the planned national strikes scheduled to begin on Monday January 9, 2012. So the Presiden having to address Nigerians, is the first gain of the planned protests.

But the President’s address follows the pattern of other documents( like the SURE Programme) by his administration; long in rhetorics and short on basic issues. For instance, the major anchor of the broadcast is that salaries of political office holders are to be cut by 25 per cent. But he failed to tell us how much this will amount to. Is this a mere symbolic gesture or a fundamental contribution to economic recovery?

He also talked about his administration holding meetings with transporters to reduce fares.

We see this as a populist statement that has no foundation in reality. If a transporter who used to buy petrol at N65 per litre now buys it between N141 and N220, what appeal can be made to him not to increase his fares by a high percentage?

How do you “deregulate” the economy and hope to regulate transport fares by private operators?

In any case, transport fare is just one of the items that shot up. Prices of basic commodities like food have also increased, and there is a fuel price hike-engineered hyper inflation in the country.

The President should have reversed the price of PMS to N65 which would have automatically reduced rising tension in the country.

The President also promised the completion of rail lines and infusion of buses in to the transport system. It is like putting the chart before the horse; these measures should have been put in place before the astronomical increase in petrol price.

We reiterate that Nigerians cannot afford the high fuel prices and will not accept the hyper inflation this misguided policy has created.

President Jonathan lost a great opportunity in his broadcast by sticking to his guns; that the unreasonable increase in fuel prices will remain.

The Labour Movement and its allies on behalf of the Nigerian populace reiterate that the broadcast has changed nothing and that the indefinite strikes, rallies and mass protests scheduled to commence nationwide on Monday 9th January, 2012 will go on.

The will of the Nigerian people must prevail over that of any government in power.

Owei Lakemfa
John Kolawole
NLC Acting General Secretary. TUC Secretary
General