Nigeria Matters

The Nigerian Front: Subsidy Removal is not the Issue

Over six months ago with painstaking analysis and a heavy heart we issued a paper titled ‘An Affordable Government’ to alert the government and the Nigerian people to the dangers of the profligacy contained in the budget. Today we face a crisis of monumental proportions because of the government’s determination to remove petroleum subsidy, a decision they claim is borne out of economic necessity.

It is our considered view that the government ignores and fails to understand the fundamental problems facing the Nigerian economy. This is manifested by its failure to prioritise its actions, tackling the issue of subsidy without addressing the nature of the bloated machinery of government and the root causes of corruption in the oil and gas sector in particular and our nation in general. We suggest that the removal of subsidy without addressing these issues would cause any so called gains will be swallowed up by the same corrupt and profligate system.

We have stated before that we do not relish being harbingers of doom and gloom but surely it remains our duty to speak truth to power and challenge the government to avoid economic disaster. For emphasis we repeat the words of a great sage, Chief Awolowo:

“We now believe there is a frightful danger ahead visible for those who care and are patriotic enough to look beyond their narrow self-interest. The ship of state is fast approaching a huge rock, and unless the President as the chief helmsman quickly rises to the occasion and courageously steers the ship away from its present course, it shall hit the rock and the inescapable consequence will be an unspeakable disaster of monumental proportions.

We are sorry to note that nothing contained in the President’s last speech addresses the fundamental issues at stake. The issues we face is beyond the removal of subsidy, it is about the way we have run our so called democracy as a ‘legitimate’ front to siphon money from capital expenditure to recurrent expenditure and into the personal bank accounts of our leaders and it is about the way this subsidy business has been used to milk our economy and no one is held to account.

We return to the issue of the previous budget that was passed in 2011 to enumerate our concerns. In the budget was a total expenditure of N4.485 trillion ($29.2 billion) and a deficit of N1.136 trillion based on the benchmark oil price of $75/bbl.

The current 2012 budget proposals before the National Assembly continues the same trend, an increased budget of N4.749 trillion with a deficit of N1.105 trillion. We note that recurrent expenditure is due to fall by 2% with capital expenditure increase of 15%. We, however, remain concerned how Nigeria continues to run budgets with such huge deficits caused by the unsustainable recurrent expenditure.

We pointed to the fact that the 469 lawmakers would earn N338.6 billion in the next four years, adding almost N85 billion to the deficit every year. Further details revealed that only N18.245 billion of this expenditure is the actual budgeted salary for the legislature over their 4-year tenure. The rest of the jumbo pay came in the form of the quarterly allowances the two chambers of the legislature approved for themselves last year.

Our previous analysis of the allowance revealed a breakdown which came down to N42 million and N45 million each for a Representative and Senator respectively with the members of the House of Representatives earning an additional N168 million every year, a figure that translated to N672 million for the four years such a lawmaker would stay in office while for the Senate, it comes to N720 million per Senator.

We previously indicated that the budgeted recurrent expenditure of N2.425 trillion versus capital N1.147 trillion is simply unsustainable and a recipe for underdevelopment. How can we sanction the spending of more on salaries, pensions and allowances than on developing our nation with money we simply do not have?

The fundamental issue therefore is not the removal petroleum subsidy but that the structures and the system of governance are/is unaffordable, unsustainable and encourages and legitimises corruption on a grand scale.

The executive is not immune from the profligacy and economic insanity that has afflicted our governance. While in the United States the World’s richest economy the President covers his own catering needs as quoted below:

“President Obama may have his own executive chef now, but when his family and personal guests eat what’s coming out of the kitchen, he’ll have to foot the bill himself. Luckily for him, though, the government picks up the tab if he’s having a state function at the White House, which could get pricey since the White House’s website touts that its five chefs can crank out dinner for 140 or hors d’oeuvres for over a thousand people.

Does someone really keep track? Apparently, the White House functions like a luxury hotel in this regard. At the end of each month, the president receives a bill for his food and incidental expenses. Nancy Reagan was famously taken aback by this practice when an usher presented her first bill in 1981, saying, “Nobody ever told us the president and his wife are charged for every meal, as well as incidentals like dry cleaning, toothpaste, and other toiletries.” (President Reagan often joked that all the amenities made it like living in an eight star hotel.) See:
Another factor to note is that the President of the USA earns $400,000,00 per annum and his allowances total $169,000,00.

In Nigeria a report obtained by Premium Times indicates the Federal Government plans to spend approximately N1 billion in feeding its first and second citizens next year if the National Assembly approves President Goodluck Jonathan’s spending proposal as submitted to it last week. The President and his vice will enjoy N992.57 million worth of food and general catering services in 2012.

Whilst the President has indicated an immediate reduction in the salaries of all government officials by 25%, this is simply the tip of the iceberg. The government needs to go further and quicker, re-write the budget, line by line and cut its coat accordingly drastically reduce the cost of governance.

We cannot immediately amend the constitution to create a unicameral legislature but we can urge the current legislators to slash their allowances drastically and remove some. Furthermore we ask the government to revisit the questions below:

-What institutions need to be optimised and what budgetary expenditure needs to be curtailed or removed?
-What represents genuine investment as opposed to recurrent expenditure?
-The role of the Federal Executive Council (the cabinet) in expending its time and functions on adjudicating upon every detailed contract of government expenditure needs a review.
-How do we prioritise capital expenditure investment infrastructural maintenance over recurrent expenditure?
-How do we prioritise the governmental agencies from the customs to the immigrations in attracting inward foreign investments?
-How do we return to a balanced budget, where we only spend what we generate?
-A roadmap to return us to a sustainable policy, which allows us to save for the future when revenue diminishes.

We address the opposition parties, the ACN, CPC and plead with them to lead the way to call upon its own legislators to reject all the unaffordable amounts of money dressed up as allowances and specifying where such savings gained from their noble actions might be invested in.

We conclude that it is only when such actions are taken

can subsidy removal return to the agenda.

Dr. Olu Ojedokun writes on behalf of The Nigerian Front.
Signed by the following Representatives of The Nigerian Front:
Mr. Remi Jibowu, Dr. Onochie Okoye, Alh Ismaila Zakari, Prince Asuquo Ibok, Mr. Bashar Dankaro and Dr. Olu Ojedokun

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