FAAC: The road not taken

By IAfrica
In Nigeria
May 26th, 2014
0 Comments
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To state that the 36 states in the federation plus Abuja have fallen on bad times in the last one year is to state the obvious. The truth is that most, perhaps with one or two exceptions, are already tottering precariously towards insolvency – the result of the industrial scale theft said to have taken out nearly one-fifth of the domestic output of the nation’s crude. All across the 36 states capitals, the story of massive cutback in capital spend has since become the rule rather than exception. With shrunk monthly allocations, most states have barely enough to take care of recurrent expenditures let alone take on development projects. And with paltry Internally Generated Revenues, many have had to resort to borrowing to augment their finances. In the circumstance, it should be easy to understand the renewed clamour by states under the aegis of the Federation Accounts Allocation Committee (FAAC) to hive off petrol subsidy; it smacks of attempt to shore up the distributive pool and hence boost their share.

Now, this is something that would have been unthinkable a few months ago. Indeed, the nationwide protests which greeted the January 2012 attempt would have rendered such contemplations a death wish. That the nation is back – or nearly so – where it left off in 2012 is a measure of how much the issue will simply not go away.

To be sure, we have heard of the denial by President Jonathan during his last media chat that any such plan to hike petrol price was in the offing. However, I don’t think Nigerians can be fooled by such tepid assurances in the background of the rather insistent and strident pressure by the commissioners on the federal government to take the issue on. Moreover, it is hard to miss the import of recent findings by the controversial pollster – NOI polls – which suggest that more than 90 percent Nigerians are already buying their fuel above the official prices. Nigerians understand the game well enough to appreciate the theme as part of an elaborate, choreographed plot by the Jonathan administration to force the bitter pill.

Of course, knowing how emotive Nigerians are when it comes to any discussions on the subject, one can only infer that the reason citizens have not bothered to denounce the still unfolding “satanic agenda” is because they have more serious issues to worry about in Boko Haram at the moment! Even at that, I do not see them yielding any grounds now or in the near future in any further discussions on the issue given the apparent lack of sincerity and bad faith on the part of government since that last time out in 2012. The indications are that the citizens would in fact be more resolute next time around.

And why not?

The reason(s) is at the heart of the story underlying the clamour which seeks to draw more of our blood. The single official line of course is that the FAAC hasn’t enough to share. In other words, the nation could not meet up the daily crude production target of 2.5 million barrels per day as set out in the 2013 budget. We have been told that for nearly the whole of that year, Nigerian National Petroleum Corporation (NNPC) and its principal, the federal government, could only deliver, on average, four-fifths of the projected budget output. And that the situation seems unlikely to change in the current fiscal year. In other words, our federal government, under President Goodluck Jonathan, is unable to tame the black market economy of oil theft.

You think it’s hard to imagine the scale of industrial theft and associated production shut-ins in which a nation would be bled by nearly 400,000 barrels of daily crude output? You guessed right: Only in Jonathan’s impunity republic would such quantum of losses be conceivable. Like their Boko Haram counterparts, the oil-thieves are evidently ghosts!

But then, think about the fact that no hard questions are asked nor explanations given as to how the army and navy would sit idly by while watching the nation loose a fifth of its projected earnings. And now imagine that state governments, co-beneficiaries from the federation account that couldn’t take the lead to demand that the federal government rise up to its responsibility and NNPC to give proper renditions of its accounts beyond the monthly show of walkouts to protest revenue shortfalls now assuming the leadership of the remove-the-subsidy orchestra! We are talking of an industry in which the overseeing minister is on record to have shelled out N10 billion for the love of the luxury toys.

By the way, what does our body of finance commissioners know about the nation’s transparently opaque oil industry? How much of its rentier value chain that feeds fat on the citizens’ misery do they know? What do they know of the bungling Department of Petroleum Resources (DPR), the so-called oil industry police that looks on while all manners of economic saboteurs carry on with their rape and plunder? How much of the activities of the department do they know? Or their kith, the club of fuel importers and their allies in the bureaucracy who between them are known to have fleeced the treasury of trillions of naira in illicit earnings in the last few years?

And then you ask: of what value is the monthly conclave FAAC beyond the monthly ritual of sharing unearned money?

I haven’t exactly said that the states could not do with more money. As a matter of fact, they do. I would even go as far as to argue that they deserve far more than the paltry 24 percent they are getting under the existing revenue sharing formula. Even here, my understanding is that states are not even seriously considering pushing this route. Or even the more enduring route of tapping into their latent potentials, preferring, as it were, the usual route of easy money without breaking a sweat. This is where the problem lies.

For the purposes of clarity, I need to make the point: the case for the states needing more money can also be made for the need to enhance citizens’ disposable incomes. Whereas the states need funds to execute their programmes, the larger economy needs citizens’ enhanced disposable incomes to run. It is called cash at hand –economists call it effective demand. As it is, the Nigerian citizen is overburdened enough with governmental inefficiencies without the need for the cyclic rod of affliction.

Does that amount to a foreclosure on the subsidy debate? Far from it. Yours truly has never denied that the argument for the subsidy removal is anything but compelling. It is a matter of cold, rational economics. The point of departure is whether to treat the subsidy as cause or effect. For me, only when citizens and the government come to a common understanding on this point can we begin to make headway. For now, the states will do well to consider thinking out of the box to boost their revenues. It is the smart thing to do.

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