Nigeria Fuel Subsidy - Yeah, 'tis the season again-the season of subsidy promises. We've been here before, haven't we? If fuel subsidy is removed, all the roads in Nigeria would be tarred; all school children would wear shoes; your light bulb will not blink till eternity; there would be no malaria again; and, oh dear, all barren women would have triplets. If all these things would be, how come Nigerians always resist every attempt to remove fuel subsidy? There is a feeling that government cannot be trusted. We have gone through the processes of fuel price hikes under different guises: Gen. Ibrahim Babangida called it "appropriate pricing"; Gen. Sani Abacha did not hide under any guise-he simply increased the prices; Gen. Abdulsalami Abubakar called it "liberalisation"; President Olusegun Obasanjo said it was "deregulation". We've seen it all!

Personally, I am tired of the fuel subsidy debate. My immediate response nowadays is "let them remove it if they want". At least, we would never have to discuss the issue of subsidy again. When next they want to increase fuel prices, nobody will be hiding under the guise of subsidy. It will just be a plain case of fuel price hike. President Goodluck Jonathan, no matter how good his intentions are, faces an almost impossible task persuading Nigerians that this is not just going to be another fuel price hike. I don't know any promise he wants to make that has not been made before. I don't know any strategy he wants to adopt that has not been exhausted. In fact, we have seen better managed, better executed enlightenment campaigns that did not yield any results. This is because, I repeat, Nigerians (including my not-so-humble self) find it impossible to believe government. And we have enough evidence to keep hardening our hearts.

Another reason why Jonathan is finding it nearly impossible to win Nigerians over is that it is very difficult to get people off a perk-anywhere in the world. The London riots were mainly in response to privileges withdrawn by the British governments. Look at the Greek unrest caused by austerity measures. "Ali Must Go" riots of the late 1970s were fuelled, in part, by the withdrawal of meal subsidy in the universities. The easiest way to popularise activists and union leaders is to withdraw subsidy. There is no better opportunity for them to grandstand, even if in their hearts they are fully persuaded that this is the best way forward. There is a lot of image capital that comes with being identified as a man of the masses.

As the debate rages, I want to paint two likely scenarios that could result from the deregulation of the downstream sector. My readers are free to decide what to make of the scenarios. One is good; the other is ugly. Nevertheless, both are possible.

The Good

Government deregulates pricing of petroleum products. Subsidy dies. Through that, we save at least N1.5 trillion in 2012. Instead of borrowing from the capital market to finance the budget, we redirect the subsidy fund into capital expenditure. On the one hand, public debt will not go up as borrowing drops. On the other hand, the stock exchange will bounce back to life as investors reduce their appetite for treasury bills, which currently yield a handsome 15 per cent, and redirect their funds to shares which have been falling. With more life in the stock market, the economy benefits tremendously. And with public borrowing dropping, there will be more funds for the private sector to access. Lending rates, partly pushed up by government's unyielding appetite for borrowing, will fall or stabilise.

Significantly, because of deregulation, investors swoop on the downstream sector. Dozens of petrochemical plants (particularly refineries) spring up everywhere, generating thousands upon thousands of direct and indirect employment. In a matter of 18 months, Nigeria moves from a net importer of petroleum products to an exporter, having attained local sufficiency in refining with capacity in excess of say 2 million barrels per day. There is a drastic fall in the demand for forex to import petroleum products. The naira stabilises. Nigeria begins to earn forex from export of petroleum products, in addition to crude oil. Because of competition, fuel prices begin to fall (within crude oil pricing parameters, of course) as oil marketers struggle to attract motorists to their stations.

That is not the end of the story. With savings from subsidy, government rings Nigeria round with ultramodern rail system. It now takes six hours to transport yam and pepper from far North to down South by rail. The water ways are opened up. Second Niger Bridge is built. With massive improvement in transportation, power and agricultural production and processing, we begin to export rice. Agro-allied industries are set up everywhere. Factories processing mango, orange, pineapple, groundnuts etc are established all over. Jobs spring up in every nook and cranny of the country. Urbanisation dwindles. Lagos and Abuja are decongested. Non-oil sector keeps ballooning. Crude oil now contributes a mere 20 per cent to our national revenue; the rest comes from agriculture, industry and services, with unprecedented increases in revenue from personal income and corporate taxes. In place of oil parasites, we now have industrial giants all over the country, celebrated all over Africa and beyond. Government is happy. Nigerians are happy.

Jonathan then steps down gloriously in 2015. We all look back to take stock. We proclaim that in a matter of four years, the deregulation policy has unleashed Nigeria's potentials and catapulted the country into the developed world. Some say: we were so unfair to oppose the deregulation policy-look at how it has transformed us. Others declare: "Jonathan is the best president ever"; "We have finally produced a Lee Kuan Yew"; "Jonathan the Transformer"; etc etc.

The Ugly

Government deregulates pricing of petroleum products. Subsidy dies. Fuel prices hit the skies. Poverty reaches unprecedented levels. Members of the National Assembly decide to double their weekly, monthly and quarterly allowances. Jonathan increases the number of aides and creates new ministries. Recurrent expenditure gulps the entire budget and eats into capital budget. We spend the subsidy savings on supplementing recurrent expenditure. Government officials buy more fashionable cars for official work and fly more girls to Dubai on holiday. We return to the bond market to borrow as deficit grows and grows and grows.

Meanwhile, licensees refuse to build refineries after calculating that it is more profitable to import fuel than to refine at home. You spend billions building a refinery and you will not recover your cost in 20 years. So it is cheaper and easier to get import products. We therefore continue to rely on imported products. The old refineries are down as usual. Nobody wants to buy them. Demand for forex skyrockets as we keep importing fuel. The naira caves in under intense pressure from public spending and unbridled importation. It is now N190 to $1.

And then, the roads are still as bad as they were before deregulation. Concessionaires fail to deliver on projects, claiming that it is impossible to access funding for products in Nigeria because of the country's falling ratings. Second River Niger Bridge? No way. New roads? Nothing. Rail? No. Power? Forget it. We continue with business as usual. Power generation hits all-time lows as gas shortages continue to hit plants. More Nigerians take to armed robbery and kidnapping while militia groups continue to swell in ranks.

And while we were at it, crude oil price hits $140 per barrel. PMS begins to sell for N200 per litre because of deregulation. Diesel hits N300. Factories begin to sack workers. Unemployment is on the rampage. And then, governors gather in Abuja to share excess crude oil revenue to implement "people-oriented" projects as they prepare for 2015 elections. And you know what? Recurrent expenditure is now 120 per cent of the budget. Lest I forget, the latest Human Development Index released by the UNDP says the poverty rate in Nigeria is now 90 per cent.

And fuel prices go up again...

And Four Other Things...

Sanusi's 'Mansion'

I know that the seat of the governor of the Central Bank of Nigeria (CBN) is one of the hottest in the land, but Malam Sanusi Lamido Sanusi may soon need a coolant. Recently, a message was being circulated about him in the social media that he bought and paid N1 billion for a property beside his official residence in Abuja "to use for a garden". He had started pulling down the house, it was alleged, even though the tenants still had their rents running. I was touched by the plight of the luckless tenants and angered by Sanusi's "greed" when I read the message. Alas, it turned out that the owner put his two houses for sale; former CBN governor, Professor Chukwuma Soludo, approved that the apex bank should buy and develop them as part of the official residence of the governor; and CBN paid N700 million for both. The former owner promised that one house would be vacant in September and the other in December. And, guess what, CBN was not pulling down any house or ejecting any tenant. This thing called social media needs reform!Blocking the Road

Lokoja-Abuja highway, once notorious for fatal accidents (a colleague, Peter Umar-Omale, died there some years ago), is fast acquiring a new reputation-a highway for protesters. Two weeks ago, thousands of ex-militants blocked the road after they were refused entry into Abuja to protest their exclusion from the amnesty programme. They were turned back. But they managed to issue an ultimatum to President Goodluck Jonathan. Last Friday, female supporters of Prince Abubakar Audu invaded the road again, demanding that the governorship candidate of the Action Congress of Nigeria in Kogi should be declared governor. Peoples Democratic Party (PDP) cheated, they alleged. What next? Gay pride parade on the road?

Sportsmanship, Yes

When the Minister of Youth Development, Malam Bolaji Abdullahi, informed me last week that he had been appointed acting Minister of Sport pending the appointment of a substantive one, I didn't know whether to say congratulations or condolences. It is a ministry that consumes and destroys people. The sports sector is full of buccaneers. There are too many bloodthirsty people there. So for ever and ever, it seems, we keep jumping from failure to failure. The ministry is made up of cabals who profit and profiteer from our sporting misfortune. The federations? Please, don't get me started on that. Some of the biggest cabals are in sports writing. The moment he refuses to engage any of them as consultants, he would be demonised day and night. Nevertheless, I would offer Abdullahi just one piece of advice: stay above board; don't align with any cabal. That would be a good starting point.

On Marriage Act

My attention has been drawn to my claim last week that the Marriage Act defines marriage as between a man and a woman, thereby rendering the new same-sex bill superfluous. It is not 100 per cent correct. In fact, the Act does not define the sexes of partners in marriage. However, it was decided in a case, Hide vs Hide, that marriage is between a man and a woman-what lawyers call "locus classicus", which is a law on its own. The Interpretation Act No.1 of 1964 section 18 defines "monogamous marriage". The interpretation defines marriage as relationship between a man and a woman. The "locus classicus" states that marriage is a relationship between man and woman, "excluding all others". Thanks to "my lawyer", Oreka Alao.

Simon Kolawole

This Day/19/11/2011