ALUKO TO JONATHAN: DON'T HIDE UNDER SUBSIDY
•Prof Sam Aluko
The National Economic Council (NEC) rose from its meeting on Monday this week to announce that it wholeheartedly supports the Federal Government's plan to remove subsidy on petroleum products. For months now, the debate has been going on. While most Nigerians are opposed to it, government, particularly, says there is no going back on it. Recently in his Akure residence, Professor Sam Aluko, former Chairman of National Economic and Intelligence Committee (NEIC) during Abacha era, told Saturday Sun that government's stance on the issues is wrong-headed. He believes that, in the first place, the whole idea of importing fuel and all the processes involved are dubious. He gave detailed breakdown, showing why the idea is fraudulent from the days of the military, up till now.
He added: 'All governments in the world who have oil always increase price of oil or gas to make additional money. If they say they want to increase price, tell Nigerians you want to increase price. Don't hide under subsidy. They need money.'
Prof. Aluko told the story of the attempted coup, involving Oladipo Diya, to emphasize how sensitive and political the issue of oil subsidy in Nigeria is. He is in a position to know because of the strategic position he occupied when he monitored and guided the performance of Nigeria's economy as chairman of NEIC during Abacha era.
He believes that some powerful forces that would gain from the removal of oil subsidy are behind the recent move by the government on subsidy. He alleged that the government, by choice, exports the best crude oil in the world and imports the worst refined products.
Aluko said it is not the business of government to tell Nigerians that it is removing subsidy because if it is a cartel that gains from the importation of fuel, government should find a way to deal with the cartel, instead of taking a decision that will have a far-reaching effect on the masses.
Excerpts:
What is oil subsidy?
I spoke to you about it before now. Subsidy means when you are selling a product below cost of production. The Nigerian government and the Nigerian National Petroleum Corporation (NNPC) have never told us the cost of producing a liter of oil in Warri, Port Harcourt or Kaduna refinery. Is it less than what we are selling for now? Is it higher? If the cost per liter is higher, they can say they are subsidizing. But if you are importing from other countries and you are selling crude oil, it is an alternative cost. You have the possibility to set up your refineries, refine your product, sell export refine product and make money. They decided to be selling crude oil. It means that it is cheaper for them to sell crude than to refine. So, you cannot be complaining that you are importing at a high price. It is your choice. You feel that it is easier for you to import than to produce. You cannot be telling us that you are subsidizing when it is your own choice to import.
You know the cost of yam in England. A piece of yam in England would be about one pound. How much would you sell five yams here? It is not up to N200. If Nigerian farmers should export their yam to England and we import yam back from England, we would be importing at about 15 times what we are buying in the market here. If the farmer sells his product and the oil producer cannot sell their product to us, that is their business. They have no business telling us that they are subsidizing us because they are facing the easiest option.
Secondly, if they say that a cartel is making a lot of money from importing oil, it is that cartel that you will fight and not the common man who is not the cartel. The common man has no part in it. Now, you want to increase the price for the common people instead of facing the cartel you say are making money.
The oil we are buying in Nigeria is the worst oil imaginable. It is the least quality oil. Our crude is the most qualitative in the world. If they refine it here, we will be getting the best quality oil. They are importing the worst quality oil for the country. So, we export the best quality crude oil and we import the worst quality refined product.
Why is this so?
It is because most of the people who import are crooked people. There are a lot of ships hovering around the oceans wanting to find where they can drop their low quality oil. Our men corner them, buy it from them on the high sea and bring it here. A little refining and he sells it to us. That is why when sometimes you buy petrol; it is two-quarter petrol, one-quarter kerosene and one-quarter diesel. Sometimes, when you buy diesel, one third of it is water. So, we are consuming the worst quality.
There was a time in Ore town; there were over 53 million liters of bad oil imported into this country. That was when I was in government. I said why? The Head of State then, General Sani Abacha was very angry and he said who are these people who imported the oil? He said we should find them out and jail them. Nobody could find them out and people were saying that it was Abacha who was importing the oil. He was very angry and that was why he removed the military governor in Ondo.
Abacha said 'how does Professor Aluko know that there was bad oil in Ore town and you, as the military governor in Ondo State, did not know? You must be part of the cartel.' He removed him.
The other thing is that the whole question about refinery started when Abdulsalami Abubakar came. During the Abacha reign, nobody was talking of subsidy.
Why?
I was Chairman of National Economic Intelligence Committee (NEIC) and we did a study for government that, for every ship load of petrol imported into Nigeria, the profit for that ship load at that time was at least $110,000 and that, with this type of profit, they will not allow our refinery to work and they will not set up new refineries.
They started around 1981 to say that private people should build refineries. They said OK; we give you two shiploads of crude. You export and the profit you made, you use it to set up a refinery. They will collect the two shiploads, export them, make profit and disappear into thin air.
That was during Shehu Shagari's era?
Yes, It started during Shagari era and throughout the military regime of Buhari and Ibrahim Babangida, they were doing that. I said these people will not only refuse to set up refineries, they will not allow our refineries to work. If you look at the table I am going to give to you, 99 per cent of refineries in all OPEC countries are owned and set up by government. Why is our own going to be different? Why are they saying here that government cannot set up refineries? Government set up Port Harcourt refineries, Warri refinery and Kaduna refinery. Olusegun Obasanjo set up two and half out of these three refineries when he was military Head of State. It was Shagari who completed the third one in Kaduna in 1981. Why is it that since 1981, we say government cannot build refineries when government built the three we have today and governments built all refineries in OPEC countries? When you look at the table, Venezuela has about 14 refineries, they are all owned by government. Government owns all Saudi Arabia refineries. It must be that the government itself is in collusion with these private rogues who keep importing oil.
When you get a permit to import refined product, it is a lot of money. So, they just get top men in the military, top men in the politics and get the contract and sell to oil companies and they import and they make the money. They don't even import. They sell the paper. So, something is wrong somewhere. Let our government set up refineries.
When I was in government, I told the military governors that there are so many refineries in the world. I have a list of about 650 refineries in the world. It is from the very smallest liters barrel per day to the very highest. You don't even have to set up big ones. Just set up a small one for your state. Lagos consumes about 30 per cent of the refined product of oil in Nigeria. Why can't Lagos State Government set up one? When I left government, I wrote to all governments in the south - Lagos, Ogun, Oyo, Osun, Delta, Bayelsa, Edo, Akwa Ibom and Cross Rivers. I said you are so well blessed along the coast, as a government, set up refineries, even for your state. None of them even replied me.
The same thing applies to bitumen. Our bitumen is the easiest to exploit in the whole world. We are the third depositor of bitumen in the whole world after Canada and USA. While others are making a lot of money from their own refined bitumen, we are importing bitumen. Nigeria spent about 12 billion to import bitumen. It is amazing that people are not interested in setting up industries. They want to set up something today and gain immediately. That is why they are setting up universities.
Why is it difficult to build other refineries? Even Obasanjo came back as president and he couldn't build new ones. Why?
I talked to him and said Segun, when you were military Head of State for 30 months, you completed two refineries and started the third. The refinery in Port Harcourt was built in 1956. But when he came, he expanded it to become a two-tier refinery. He completed Warri and started the Kaduna refinery. So, I said when you were military Head of State, you built two and half refineries in 30 months. Now, in eight years, you cannot even make one of those refineries to work. Something must be wrong.
What do you think is wrong?
As Chairman of National Economic Intelligence Committee (NEIC), I had a whole evening with him before he resumed as President. I said look, this is how this thing has been working. There is too much profit for those who are importing oil. That is why they are multi-millionaires now. They are some of the richest men in the world.
I said let us stop the importation and resume the establishment of industries. He said:
'Sir, from what you have said, I will never allow anybody to import fuel into Nigeria.' But, look at what has happened.
Did he tell you why he couldn't do much after he left government?
It is his party men. He became a prisoner of his party. He wanted to run a second term and then he wanted to run a third term. As a military leader, he didn't need to consult anybody. But as a politician, he became prisoner of PDP. It is an evil party.
Another thing you will note is that this removal of subsidy is like chasing your shadow. As long as our currency continues to devalue, it won't work. If you remove the subsidy today at N160 to the dollar, if tomorrow it is N155 to the dollar, there will be subsidy. That is why, for eight years, Obasanjo was chasing subsidy. The more he removed subsidy, the more our currency devalued, the greater it became what we know as subsidy. Unless your currency is stable, you cannot meet subsidy. It is like chasing your shadow. The faster you run, the faster your shadow runs after you.
Why was it that Abacha couldn't do something about it?
He did something about it. We were able to put Warri and Kaduna and Port Harcourt into use. He did a lot to put the three refineries back to work. They were working. He was not talking of subsidy at that time.
Abacha never talked of subsidy?
When he increased the price of petrol, he set up Petroleum Trust Fund (PTF). In other countries, when they need a little more money, it is petrol, kerosene and diesel that they put more money. In England for example, fuel is the easiest way to raise money. For putting ordinary penny or kobo on a liter of petrol, billions are sold. Government makes money and the people don't bother. So, all governments in the world who have oil always increase price of oil or gas to make additional money. If they say they want to increase price, tell Nigerians you want to increase price. Don't hide under subsidy. They need money.
Jonathan is saying that the money to be saved…
You cannot save that money. This is because government consumes about 40 per cent of fuel. They have air condition- ers in the office; they have government vehicles and presidential jets. So, government consumes about 40 per cent of fuel. When you reduce the price of fuel, you are also reducing the cost of governance. So, when they think that they will get one trillion, they will discover that they get only two third of the trillion because, if government consumes 40 per cent, they can only get 60 per cent of one trillion. They will then say it was because we did not remove subsidy alone, forgetting that the thing feeds on itself. That is why we say in economics that you don't really increase the price of a macro product. A macro product is a product whose price when you remove, comes to increase its own price.
Even the cost of refining petrol will increase because you have to use energy and energy has to use fuel and the price of fuel is increasing. It escalates.
If Abacha made the refineries to function, is it that it could not be maintained after him?
What really happened was that when the NNPC was maintaining the three refineries, they were working. They depended on those who helped them to build the refineries to maintain them. We ran into trouble when General Ibrahim Babangida came as military Head of State and he was talking of SAP, free enterprise, deregulation, privatization and so on and so forth. They took the turn-around maintenance of the refineries from the NNPC and started awarding contracts to private people. So, they will give to somebody who is a lay-about. He will give to number two who will give to number three and give to number four who will not do anything. That is how we started on the wrong foot. Even today, if you ask the NNPC to continue to build refineries, in five years they will build three or four and the other refineries will work. But because of this importation, many of the people who are importing are sabotaging maintenance of the refineries. When you take a small pin from a machine, it can disturb the whole machine. So, they have agents there, both officials and non-officials who they use as agents to disrupt it.
How did Abacha tackle them?
He asked them to recall those who built the refineries to maintain the refinery. He said they should stop awarding contracts to civilians. For example, let me tell you a small story: The then minister for works went to Abacha one day and said 'look, the shortage of bitumen in Nigeria was delaying the road network construction and repair. So, he said I want you to give me authority to import $500m worth of bitumen. So, Abacha gave him provisional approval.
Then he referred it to my committee to say we should advise him and he has given provisional approval. What we think about it? We raised two questions; if we devote $500m to bitumen, the ports won't be able to hold them and there would be congestion at the ports. Secondly, we were producing bitumen in Kaduna refinery before they started doing magomago. We decided to go and find out from them what they could do to resume the production of bitumen. So, I went to Kaduna with my team and the people there said if you gave them $100m instead of $500m, they would produce more than what they would import for $500m.
We then wrote to Abacha to say we have gone to Kaduna and they are asking for $100m to produce the same thing. Give them and let them produce bitumen. You know there was a row in the government that why should the Managing Director of Kaduna refinery tell us that they could produce bitumen? He was dismissed. Abacha cancelled the provisional approval of the bitumen and said Kaduna should be producing bitumen and be distributing to users in Nigeria.
The MD that was dismissed came to me and said well, he wanted to say goodbye to me. I asked why he was dismissed. I asked by whom and he said by the minister of petroleum. I was on the ninth floor and the minister was on the eighth floor. So, I said 'call me the minister of petroleum.' When he came, he said who could dismiss you? He got the letter from him and tore it. He said: 'go back to your work'. But it was they that sacked him. So, we reported to Abacha that this is what is happening. Abacha sacked the minister of works for deceiving him and asked me if I can recommend anybody who can be minister of works. I recommended Major General Garba from Kano who was my Secretary.
That was part of the thing that caused the attempted coup because some of them were angry that they could not make it. It was an attempted coup. So, when a lot of people in Nigeria said it was a phantom coup, it is a lie. It was an attempted coup because they could not make money, which they thought they would make through Abacha at that time.
But the people we heard were behind it were Oladipo Diya and others.
It wasn't only Diya. They brought in Diya later on. Diya was very loyal to Abacha. Every Sunday, they will meet. Another thing that made Diya to be disenchanted had to do with Ijebu State.
Abacha promised that he would create Ekiti State because of me. He will create Ijebu State because of Diya. I felt bad because Diya was so loyal to Abacha and they were so close and to let him down that way was to discredit him. He was an Ijebu man, loyal to government and he has assured them (Ijebu people) and to let him down like that… I didn't like it at all because he had promised he would create Ekiti and Ijebu states. He said we've served him very well. Now, he created Ekiti State and he didn't create Ijebu State.
Why didn't you intervene for Diya?
I intervened. I tried to intervene. But Abacha said from the Oba to the common people in Ijebu, they were NADECO and they were opposed to government. They wanted to bring government down. So, why should he create Ijebu State?