In an e mail sent to Street Journal by the Governor of the Central Bank, Sanusi Lamido Sanusi, the nation’s number one banker took time to explain his role and why he started the war against subsidies. He also explained the rot in the petroleum sector and the frauds perpetrated in order to benefit from fuel subsidy. Below are excerpts from the mail:
“If you will patiently read this mail to the end you will understand my position. I won’t be able to repeat everything I have said over the past few years on fuel subsidy, but in summary; Fraud like theft thrives not only because of the existence of greed and benefit but of opportunity. Place yourself in the shoes of the average Nigerian “businessman” or “entrepreneur”-polite euphemisms for rent seeking parasites. You establish an elcee for importing 20,000MT of PMS and the PPPRA says this is at a landed cost of N145 for example per litre. So you know that for every litre in that vessel you will get at least N85 as subsidy. Now you have a number of “possibilities”: 1. You can offload 5,000 MT and bribe customs and other officials to sign papers confirming you offloaded 20,000 MT. Then do the same across the chain with a paper trail showing you delivered 20,000 MT to a tank farm, and maybe even that you transported it to Maiduguri entitling you to a share of the price equalization fund. Maybe for N20-N30 per litre you bribe all those who sign the papers. The 15,000 MT you take to Benin or Ghana or Cameroun and sell at market price thus making an additional “profit” of N55/ltr on 15,000MT! 2 you can just forge documents and have them stamped without bringing in anything and collect the subsidy-PPPRA pays based on DOCUMENTS. 3 you can bring in the fuel, load on tankers, sell some at N65N some at 80 some at 100 some across the land borders. You can do all this and no one can catch it or prove it because somebody was paid to sign off on documents. And with a high enough margin, there is too much temptation to be resisted and firepower for bribing officials.
When I spoke to the House of Reps I told them why I was suspecting fraud. It starts from PPPRA “allocations” based on “capacity”. You will find a company like Mobil with capacity for say 60,000 MT and a relatively unknown name with a capacity of say 90,000 MT. Red alert number 1. Although PPPRA is supposed to give license only to marketers with a national distribution network you see names of companies where you have never seen a filling station in their name. I was a Chief Risk Officer in UBA and in FBN for many years approving loans so I know the name of every big player in every industry that Nigerian banks lend to as these are among the biggest banks in the country. I see names on the list I don’t recognise either from portfolios. I looked at or industry studies over the years. Red alert number 2. I studied the papers presented to PPPRA in a short period in 2010 (I won’t tell you how I got them!). And I was surprised that on some days over 10 vessels are said to have discharged cargo in Lagos on the same day-clearly the same officers stamping and “verifying” that the vessels were SEEN. Is it really realistic that on the same day 13-15 vessels can discharge in Lagos? Red alert number 3. Why was I interested in fuel marketing. Because the two sectors that led to the near collapse of the banking industry were capital markets and oil marketing.
I am not giving any confidential info out as AMCON MD has already disclosed publicly that two companies alone-Zenon and AP-owned by the same businessman owed the Nigerian banking industry N220b. And we all saw the amount of subsidy paid to those companies published by BusinessDay. So money had been taken, subsidy had been collected but loans were not repaid, and we couldn’t see the money either as product in tank farms or in fuel stations or credit sales. So I became obsessed with trying to understand how that industry operated and the more I saw the more I hated it and I started the war against subsidies. It is actually better So yes, I am willing to take all the criticism and labels and be unpopular but this has to stop and govt can find other ways of alleviating pain. Iran removed subsidies and started cash transfers directly to the poor. It is up to fiscal authorities to figure out safety nets but from where I sit and what I know this decision is not only correct but necessary and overdue. I also confirm that I have revealed nothing here I haven’t spoken about before in public and it is just that Nigerians never listen! I am not complaining about insults I am used to that. I just believe that an insult is not an argument and when people resort to personal abuse they have run out of logic. But to then go beyond me and extend it to my dead grandfather and his “descendants” ie my late father his siblings etc I think goes beyond the pale. As a Nigerian-and as an economist- I can take a position on economic matters and this position is one I have had for years even before coming in to the Central Bank. I have also explained the position on several occasions and criticised government for not doing this before. In 2010 at a public hearing in the House of Reps on the 25% saga I alerted the nation of what I considered a potential big scam around subsidies and urged for its removal. No one paid attention. The economics is very clear to me. That it is unpopular is also understandable.
The British public is unhappy with Tory budget cuts. The Greeks went on riot over austerity. Italian parliamentarians came to blows before Berlusconi was thrown out of office. The US congress is yet to approve Obama’s tax increases. Economic decisions-by definition-ALWAYS must involve a cost or an opportunity cost since for them to qualify as economic they must involve a choice in resource allocation among competing uses. An enlightened debate is one that weighs the pros and cons of removing subsidy and continuing with it. So I became obsessed with trying to understand how that industry operated and the more I saw the more I hated it and I started the war against subsidies. I started the war against subsidies. It is actually better to do a direct cash payout or add a line item to salaries called petroleum support or transport allowance capped at say N300b p/a than to keep paying it. It goes to pay middle men, rent-seekers and corrupt officers and there is no amount of preaching that will stop this fraud so long as the policy is so badly defined. Every time oil price goes up and every time the naira is devalued and every time the quantity of imports increases the “subsidy” and thus the “rent” increases and there is more gravy to go round. So every year we “import” more and more and deplete our reserves, and the government borrows more and more to pay for subsidy and the beneficiaries are a small group of marketers, govt officials and neighbouring countries which get fuel without losing forex! Obasanjo who first subverted the process by allowing NNPC to make the deductions before paying into Federation Account. Because once money goes into that account it is to be shared among 3 tiers of government so strictly speaking the deductions have always been unconstitutional as the FG was paying subsidy on behalf of itself and state and LGs without their approval. So yes, I am willing to take all the criticism and labels and be unpopular but this has to stop and government can find other ways of alleviating These are all valid issues that are to be taken IN ADDITION to and not in place of subsidy removal. Since someone has decided to make insinuations about my grandfather I owe it to him to defend his record.
It was my grandfather as emir that repealed an obnoxious rule started from the days of Emir Usman that disenfranchised women from inheriting property. It was Sanusi that built the groundnut pyramids to the point where Kano NA was contributing 40pct of the revenues of the northern region. It was Emir Sanusi who built the Bompai Industrial Estate, and turned Kano into the industrial nerve centre of the north. He was Acting Governor of the Northern region, Minister for Pilgrim Affairs, Chief Imam of Friday mosque, judge and leader of the Tijjaniya order. As for his “descendants” my father was one of the very first batch of 12 Nigerians recruited by the British to set up the foreign service in 1957 and he remained in public service and rose to be Permanent Secretary before retirement. He set up in the 60s the Research Department of the Ministry- the present NIA so he was the first external intelligence officer in Nigeria. As Permanent Secretary, he was the architect of Murtala Mohammed’s policy on decolonisation of Africa and oversaw the independence of Mozambique and Angola and the final push to liberate Zimbabwe and South Africa. So yes Sanusi was not perfect. He was a feudal aristocrat. And my father was not perfect. He was also a prince and privileged to go to Oxford and LSE. But please if you want to abuse my grandfather and father kindly tell us what contributions your own grandfather and father made to the people.”
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