NNPC presents a big challenge to us
THIS interview with Dr. MansurÂ Muhtar, the Minister of Finance, only held because of his tenacity.
Monday, December 14, when it was first scheduled, was in the thick of preparations for the annual gathering of the Nigerian Economic Summit Group, NESG. Several meetings in-between, including negotiations with the labour unions on de-regulation and consultations on the budget, Dr. Muhtar re-scheduled, but personally apologised to our team that had been waiting.
The next day, the interview was again threatened. The NESG was in full swing, more budget meetings, but Dr. Mansur in this first major interview skipped through calls, promptings that he was awaited at other meetings, to speak on the challenges of implementing the budget, de-regulations and the economy.
He spoke with uncommon candour to the Vanguard team of Ikeddy ISIGUZO, Chairman, Editorial Board, Omoh GABRIEL, Group Business Editor, Emma UJAH, Abuja Bureau Chief and Oscarline CHIMAOBI, Business Correspondent…
What factors are responsible for partial or non-full implementation of the budget? Why do the funds released annually not reflect on the economy and are public expectations different from the purpose of the budget?
It is true that there have been challenges in relation to the implementation of the budget. These are on-going challenges and they are not peculiar to this year alone.
Historically, budget execution has always lagged behind and, invariably, at the end of each year, we have to mop up a sizeable amount of money, which we return to the treasury.
Of course, it is a major source of concern, and it is not accept-able because the budget represents the policy instru-ment of government.
Its execution is very critical to the realisation of governmentâ€™s objectives. This year, we had some challenges, obviously.
During the first quarter, in relation to performance, we had recorded just a little over 21 per cent. One could say that maybe at the beginning of the year, we had challenges associated with the procurement process, especially in relation to new projects.
We have to go through the procurement process, and that takes a long time.
There were also issues relating to implementa-tion capacity at the MDAs (Ministries, Departments, Agencies). In some instances, the cabinet reshuffle brought in new ministers who needed some time to settle down. But we should expect to see greater progress next year.
I think that for the mid-year, we doubled our performance in terms of having about 45 per cent, but still it was a source of concern for all of us. We have intensified efforts to improve the performance of the budget.
WhenÂ you talk about the key factors, I have alluded to some of them already and theyÂ include delays in project execution. When you talk about project implementation, there has to be a project plan, and I think it has not been in the culture of the ministries to do a procurement plan or a timetable that states time for tender, presentation of proposals to Council and when the process starts.
We now have to focus on how best to address those issues by organising workshops to help build capacity. We also looked at the procurement tools and tried to see how they could be streamlined. In that context, the threshold was raised to mini-mise the need to go to Council for every small project. All these have helped â€“ it is a process issue.
The capacity building looks at rules and procedures but, really, it sensitises those involved and raises the stakes by having the President himself taking direct control of the process in the sense that every Ministry or Agency should have plans that are submitted to Council.
On an on-going basis, the last week of the month was devoted to a consideration of project performance. There are many other meetings that were deployed to really assist in pushing things forward, and Mr. President chairs the special committee involving key ministers that have critical projects, to continue to monitor and track performance.
So, we have made some progress in the sense that the aggregated numbers that were given in the third quarter showed over 50 per cent, thus mask the differentiated performance across government agencies. There were MDAs that recorded 70 to 80 per cent performance during this period.
What happened was that some of the big spenders like the Ministry of Works, which had started well in the beginning of the year, recording well over 70 per cent performance.
By the third quarter, it had dropped considerably to about 30 to 40 per cent. It was so largely because of the onset of the rainy season and, this year, we had an exceptionally lengthy rainy season, which impacted on the pace of execution for the Ministry and reduced the aggregate level of performance.
Power also is associated with some peculiarities. We have decentralised and had these distribution companies at the state level responsible now for procurement contracts.
They have never handled large procurement contracts involv-ing open of letters of credit.
There was a lot of confusion and debate, but we have made progress to resolve that. With resolution of some of these, things have picked up considerably and power that, in the second half of the year (around July, August, September), was recording 15 to 20 per cent performance has now nearly 70 per cent performance. We need to really look at these in assessing the implementation of the budget. Even as we think we should do much better, the performance is not as bad.
If you look at the historical context, you see a situation where, over the years (the last four years for example), the entire capital budget was probably not more than what we are expend-ing in one quarter of the year.
There has not been any commensurate increase in the capacity of the Civil Service for executing the projects. On the contrary, what we have been hearing is that there have been major challenges because there has been no succession plans in the Service. There has been no new recruitment in the Service.
I also think the other issue to point out in assessing budget performance is that for many of the key government Ministries, you also have to look at the recurrent expenditure. For Health and Education, a lot of their spending is recurrent not capital. On the recurrent side, we have made great efforts.
Of course, people might be skeptical and say, well, it is easy to spend on these things, but yet, in many of these instances, the recurrent spending is also being used to drive the process of development and we have 70 to 80 per cent performance in that area.
I started by accepting that we would have liked to do much better. At the same time, I think that the perspective should be more accommodating to appreciate the complexity of the issue and the differentiated performance across the Agencies so as to begin to unravel the challenges. We have learnt many lessons from these, and we are taking them in going forward.
We are also happy that the virement will allow us to move resources to some areas. There are some specific projects in the budget where there had not been any design, so you could not even spend money in those areas. They have not been carefully conceptualised.
There were projects in the budget where there was no site for the project. For some of these, with the understanding of the National Assembly, we have pooled the resources together and redeployed them to other areas where we could move faster.
Again, the fact that they have extended the implementation period to the end of the first quarter of next year allows us stability to continue to improve on performance.
In all, I think that we are on top of things and would continue to improve certainly. For me, the key thing is even as we criticise government for the implementation challenges, government should be commended also for really demon-strating this level of transparency and candour by putting these issues on the table.
We debated the performance rate when the report was prepared and many felt that we should not release it but we went ahead and released it. We had to be accountable to Nigerians, and we need to provide information to the public to be able to hold us to greater standards of accountability. I expected that people would have been talking in terms of the process itself.
Accountability is a word we keep hearing. The National Assembly, for example, is either saying it has been able to uncover money built into budgets, which was not for any specific project or asking MDAs to refund some money. How is NNPC, for instance, unable to pay in some funds due the Federation Account?
In relation to some of the money that was in the budget for which it appeared that the projects had been completed, I have enquired about this.
In many instances, what happens is that the project execution, especially in the construction of roads and other construction projects where you have a long-term commitment of government, say a two, three-year project, there are times when execution is ahead of payment and there are many outstanding certificates.
Sometimes, contractors have already mobilised to site, they could have achieved some milestones and they still have additional work to complete but the budget has been exhausted.
They continue to work on the understanding that they would be paid in next yearâ€™s budget. So many times, when you budget, you use some of it to pay outstanding certificates and there are specific instances where these jobs have actually been completed by the end of the year.
When you have the budget and anybody sees it and says, ah, but this road has already been completed and drivers are plying the road, so why is this road in the budget. You have to look at all the details.
The other thing, also, that people forget is that many contracts have built-in provision for what is called the retention fee.
It means, like this building (Ministry of Finance), we have a provision that even after we finish building and the contractor completely hands over, there is a six-month period or so during which we would not pay the outstanding money of a certain amount until we certify that we are satisfied with the quality of work. It is amongÂ the items that reflect on the budget.
It is also possible that there may have been some mistakes in the budget process itself. We are not infallible. You are talking about numbers – thousands and hundreds of thousands of entries.
Certainly, we cannot rule out the possibility that, in the budget exercise, someone may try to smuggle in some numbers. For us, we always make sure that the budget submissions are defended line by line.
Still on accountability, what about NNPCâ€™s outstanding debt?
NNPC presents a big challenge to us and I think there are some issues to be considered here. NNPC has outstanding claims against the government in relation to petroleum subsidy, which have not been paid over the years. In addition, as an organisation, it had to take some money to repair pipelines militants vandalised which, over the years, have risen considerably.
What the Corporation has been telling the Federation Account is that it is unable to remit the money because government has not settled obligations nor the outstanding liabilities due it. This is a big challenge.
It is not just about NNPC, really, but how we manage the entire downstream petroleum sector because of the inefficiencies which has led to the hemorrhage, not leakage, we currently are experiencing in that sector. Few days ago, I got an invoice from NNPC.
As we transit with the reforms, we are expecting we have to set everything straight. I got this invoice with the amount of N1.15 trillion in relation to money owed NNPC, and about N880bn of that amount represents outstanding subsidy payments.
We have, of course, some additional. Even if we net out the N450 billion, NNPC will, in the circumstance, still have a claim against the states and Federal Govern-ment. That is why we keep saying that we really have to frontally address and resolve this issue.
There are concerns about the genuinenessÂ of the claims. Do you verify these claims and does government have the capacity to do the verification?
Absolutely. These claims are submitted to the Petroleum Products Pricing Regulatory Agency for verification. They verify and forward them to the Federal Ministry of Finance, particularly the Budget Office. The Budget Office reviews the claims and sends them to an external auditor and we basically do not make any payments until such claims are verified.
Will this invoice go through the same process?
Of course, it will. These are actually old claims dating back to 2007. This year, there are no outstanding claims.
The recurrent expenditure is always more than the capital expenditure in the budget. We understand the recurrent budget is always fully spent while the capital budget records meagre performance. Why is this the case?
The recurrent budget is made up of salaries, allowances and other overheads, which are costs of running government. These are usually fixed costs like rent, fuelling of vehicles, stationery and so on. Obviously, a bulk of it is in salaries and overheads.
Pension and some other liabilities are included in the recurrent budget. Basically, these have to be paid automatically, and there is some kind of regularity to them. There are fixed costs you cannot ignore or run away from.
At the end of the day, one could make a case that compared to the big capital spending, like building new railway that involves extensive procurement processes and complex technical engineering works, the procurement process for recurrent budgets is highly simplified and it is also at the level of MDAs. Notwithstanding, anywhere you have it, it is easier to spend recurrent budget, but I am not defending that.
The fundamental issue here is the fact that the balance between recurrent and capital budgets needs to be progressively redressed in favour of capital spending, given the huge infrastructure gap in the economy.
I have no quarrel with that. This is not something that can be achieved over a short period because there are underlying structural issues like a Civil Service that is strained, and there are existing government liabilitiesÂ that we will have to manage.
However, progressively, it is hoped that as the economy grows, we will begin to alter that balance.
Secondly, we must do everything possible until we find a way of improving capital budget execution, and that is a challenge for the government and for civil servants. It is also the responsibility for the National Assembly and the civil society to continue to put pressure on us by asking these questions.
For us in the Ministry of Finance, we do our best by going the extra mile. Even with the revenue shortfall we recorded this year, we made sure that releases of fund were promptly effected and as much as possible, made sure that we were able to bridge other shortfalls through accessing other sources of financing the budget.
How feasible is it to achieve the 2010 budget because there are concerns about waivers and concessions. The Ministry did not release list of prohibited items and how does the government intend to address tax evasion in 2010 and beyond? The National Assembly has also expressed fears about Nigeria borrowing again?
When you talk about the feasibility of the 2010 budget, I guess you are talking about the fact that it seems overtly ambitious in relation to the revenue forecast assumption. You are wondering how we are going to finance the budget.
There is about 30 to 32 per cent increase on the 2009 budget and the objective is to be able to stimulate the economy; it is a stimulus budget.
The context is that we are just emerging from the global economic crisis and we have managed to weather this a bit, but we need to do a lot more to make our economy more resilient as well as harness it for prospects of recovery. Of course, we have a huge infrastructure deficit that needs to be bridged in our efforts to grow and diversify our economy. It is in this context that we decided to accommodate an unusually high level of deficit. We have to, again, put things in context.
When we look at what other countries are doing, they are also running high levels of deficit: the US has 15 per cent, UK has 12 per cent, and Germany has about 5 per cent.
Therefore, it is really a question of trying to invest money upfront so as to grow the economy. In terms of the revenue forecast, it is not as ambitious as it appears because the circumstances have changed a bit.
We do know we continue to face challenges as we have not been able to raise what we anticipated. We had nearly 25 per cent shortfall in revenue between January and September. The future is looking brighter now with efforts that have been made in securing peace in the Niger Delta and that have already manifested in increase in oil production (now 2.4 million bpd) whereas, at some point, we were down to very low levels.
To our surprise, the price of oil has remained up hovering around $70 to $75 per barrel. In terms of the forecast underpinning this budget, we still have the Excess Crude Account to tap from and other finance sources including signature bonus, privatisation expected to make some progress this year. I think that on the revenue side, we are intensifying efforts to enhance internally generated revenue. We have been doing audits of revenue generating agencies and strengthening the processes of collecting and remitting of revenue to government.
We have embarked on major reforms of the Nigerian Customs Service and we believe all these should pay off in ensuring more buoyant revenues to government. We do not have a problem on the revenue side.
We are reasonably optimistic that the National Assembly will move quickly to pass the budget early enough in the year, so that it will allow us to move fast. I think the issue now is about implementation. We have drawn lessons from last year and we are moving forward. Luckily, a number of the projects are ongoing projects that are in this yearâ€™s budget, so we will not expect procurement debates. We have made efforts to build capacity, and in execution, we are putting together stronger monitoring and tracking mechanisms of performance which will be put in place from the very beginning of the year.
The President is holding Ministers and Permanent Secretaries accountable for the execution of capital budgets in their MDAs. We all know that there is a compelling need to move quickly. We are in an election year; this is the last budget, really, that would be fully implemented before the elections, and the adminis-tration is fully conscious of the promises it made to Nigerians and it is committed to deploy all the efforts to realise and fulfill these promises.
Therefore, on the feasibility of the budget, I am very optimistic that we can deliver on that one.
On the issue of borrowing to finance the budget, we have domestic borrowing as a financing item. I know that this has been an issue to some, looking particularly at the likely risk of crowding out the private sector. We are working closely with the Central Bank of Nigeria in drawing up our borrowing programme and we know that they have liquidity management tools that will help.
We are looking at close coordination between fiscal, monetary and debt policy to ensure that risk is mitigated. Beyond that, also, the key issue, to me, is what are the loans for? If it is going to be used to finance infrastructure and 93 per cent of the capital budget is going into critical infrastructure spending, it is not a problem.
I think that really there are no two ways about it, if we want to finance infrastructure and we do not have enough resources, we either delay the financing of that for a long time or we raise money upfront if we feel that the returns are higher than the costs.
This should also apply in our assessment of external borrowing. We have learnt our lessons from the experience of the Paris Club debt, the debt trap that we found ourselves in, which really took a great effort to get settle. We have to appreciate that the types of external loans that the Federal Government is contracting are different from the ones that put us in that debt trap.
We are talking about concessional loans that have long maturity period. They have grace periods of 10, 30, 40 years repayment period, and zero interest rates and, basically, very small charge. When you look at the size of debt stock also, we are talking about $3.8bn or $3.9bn of outstanding stock. If you contrast it, there is no way you can compare it to the $36bn that we had, and much of this carries no interest and we are paying very little amount compared to the other one that was of much high interest rate and which was accumulating over a period of time.
Really, if you look at the size of the debt level, we have done all the analysis and it is very low in relation to the size of the economy, our export earnings, and within our carrying capacity. I think there are legitimate questions that we should be asking, especially about the process of contracting the debt.
Certainly, in the past, there had been some lapses in terms of not following the procedure involving the National Assembly as part of the process but we are addressing those lapses. This year, the budget contains the borrowing plans of government in relation to this, and part of the problem, of course, is that some of these loans and credits, you do not have the details until when they are going to be finalised.
Notwithstanding, we are in close contact with the National Assembly to ensure that we follow proper rules and procedures.
Secondly, I think it is legitimate to ask questions about what the loan is being used for. The National Assembly had raised issues that sometimes they only get to know about this from the press. It is true that we need to keep them briefed, and there are provisions in the Fiscal Responsibility Act that require that we now do all the cost benefit analyses and that we reduce borrowing to capital spending or critical infrastructure in the area of human development.
We are certainly going forward to conform to these. We are going to the National Assembly for a public hearing to review the Debt Management Office Act, to strengthen its oversight functions in relation to these loans.
I am concerned about the level of our external debt and the risks we might encounter in another debt overhang. I know the pains, the difficulties and the challenges that were involved in getting debt relief. I know the constraints that the debt burden posed on our economy, and I certainly will be the last person to want to go back to that situation, or even have our children or grandchildren have to go through that experience.
There have been issues about the way the waivers and incentives were being granted and they were as suspended. They are now limited specifically to areas where there have been an existing government policy, for example, the oil, health and education sectors where government or donor agencies are involved, and such other areas of priority.
In the past, the problem was that this was being used in a discretionary manner, and we want to lay down rules, procedures and guidelines. Already,Â they are extremely limited and to these specific strategic sectors that have been identified, and that require very stringent control.
There have been proposals in relation to following the report of the Udo-Udoma led Committee and this has been finalised. It would have been submitted to the Federal Executive Council for its endorsement, but Mr. President recently set up a Presidential Committee on Tariffs and Incentives under the chairmanship of Governor Bukola Saraki of Kwara State, which includes six other members, three other governors as well as some top level government officials.
The whole idea is to try to see how one dovetails into each other. Nonetheless, we are going ahead with all these initiatives.
The Tariff and Incentives Committee, again, stems from the concern to really ensure that we give adequate incentives and that the tariffs applied are not done in a manner that impinges on the ability of our manufacturing sector to thrive.
In that context, of course, we have to balance trades with the existing commitments we have under the trade treaties, which we have. We are looking for the leeway within this framework to really stimulate or spur growth of Nigeriaâ€™s manufacturing sector.
What the committee is doing is still work in progress but, basically, it is in the process of identifying key sectors with growth potentials that could be promoted and supported. We hope that by the beginning of the year, as part of the 2010 budget, the fiscal policy measures that go along with that will include these policy measures.
The prohibited list relates to the fiscal policy issues. There were some delays in getting the committee to finalise its work or to even get started.
Ideally, this should have been packaged in the presentation, but to the extent that what we are looking at in the budget itself, the numbers, in terms of the spending plans, we feel that in this scope, going on with the work of the fiscal side in terms of the fiscal policy is what we just needed to drive the economy forward.
There have been major efforts to strengthen administration and improve efficiency in tax collection. There is a lot of automation going on in the Federal Inland Revenue Service.
Also associated with that is simplification, which is a combination of simplification of the tax system and broadening of the tax base, and ensuring that we put in place measures that will secure a greater level of compliance.
The TIN, Tax Identification Number, that has been introduced and the universal tax identity number are some of such efforts. There is a lot of automation that allows the FIRS to be on top of these things and to be able to monitor and track returns, and all these are part of the plans.
By early January, we are going to unveil the tax policy that we have been working on. There are a number of tax reform bills that are also going to the National Assembly. We looking at the legal framework itself, and lots of improvements are expected, and we have the outstanding tax reform bills that have been concluded and submitted to the National Assembly expeditiously.
Then, we will expect the adoption of the tax policy by early next year, it has been finalised and I think it has been submitted to the Federal Executive Council, but we would not be able to consider it until sometime in January.
Nigerians are wondering how this de-regulation would be different from past deregulations. When will it start and can you give us an idea of what the price of petroleum products, especially PMS, will be?
How will this be different? We are taking a holistic view of the changes that need to be effected. I really hesitate to use the word â€˜deregulation,â€™ but largely because that has been the word in use. We are looking at the reforms of the downstream of the petroleum sector.
We are also linking this to the Petroleum Industry Bill, PIB. More importantly, we are looking at a holistic overhaul of the sector. It is not really about government handing-off from the sector, it is about creating conducive conditions for ensuring adequate, reliable domestic supply and refining of crude locally.
Indeed, the major essence is to ensure that Nigerians are able to get fuel supply on a timely basis and in a very efficient and effective manner. For me, the key issue is that Nigeria, as a major crude producer and exporter, relies almost wholly on imported refined products. We export this crude and then get it processed there at a premium and bring it back at a cost before it is distributed to the consumers. There are a lot of inefficiencies along these lines. If you have a slight problem, the whole system is disrupted leading to queues.
For several years, we have given out 13 licenses to construct refineries but nothing has happened after all these years. Refining is a very lucrative business. There are countries that do not have even a drop of crude oil, but rely on importation of crude, refining and selling, and even exporting the product! Yet, nobody has responded to our calls for construction of refineries.
We have refineries that have not been functioning, and over the years, if you consider that at best they operate at 40 per cent capacity, and for many years, they have remained shut down. Every other year, a new management team comes around, gives commitment and asks for huge sums of money to do turn-around maintenance, and nothing happens.
In fact, sometimes, after just a month of the so-called turn-around maintenance something goes wrong again.
I think there is a problem with that system and we have to acknowledge that. This has been going on for the past 20 years or more.
As Minister of Finance, I have a problem also justifying that every year we should earmark so much money, more than the amount we spend in providing social services and on critical infrastructure giving the challenges we face, ostensibly to provide subsidies. I have no problem with giving subsidies to poor, deserving Nigerians, the poor segments of the populace and vulnerable groups.
I have a problem when I know that the subsidy is not reaching the intended beneficiary. I find it difficult to justify a system that will allow us to earmark resources to subsidise petroleum products, even assuming there are no leakages or corruption in the system, even if Nigerians are able to drive into a station and get fuel at N65 per litre anywhere in the country.
It is not really the case, only in a few cities do you get fuel at that subsidised rate. Do you know we are experiencing shortages in Abuja because the fuel stations are being monitored and the operators are not finding it profitable to sell at N65, so they are moving out?
When you consider such a situation, on what grounds can you justify someone in the rural area who probably only takes public transportation along with several others once or twice in a week compared to someone who has two or three jeeps and just moves around a great deal being under the same burden?
When you also consider that in many places you do not get this subsidy, and yet we are paying this amount to someone, you ask where is this money going to. These are the questions I ask myself. We have an unsustainable situation; we have these huge amount of resources paid out as subsidy.
I have talked to you about the huge outstanding claims from NNPC. We have been paying so much on an ongoing basis, and we know that the money could be better spent to rebuild Nigeriaâ€™s infrastructure so as to reduce cost of living and doing business, diversify the economy, create more jobs so that the wealth can grow, and reduce cost of production.
So, we have to look at things in the medium-term, we have to break out of this vicious cycle. Another thing is that there is an opportunity cost to these resources, but we must point out that it is not a saving per se. We have been dipping our hands into the Excess Crude Account to pay for this subsidy, though the NNPC has not been remitting into the Federation Account, meaning reduced amount.
There is a pool of money for us to dip into to pay this subsidy. If we had to raise taxes to be able to finance this, assuming we are not an oil producer, I think Nigerians will revolt against the government. I think they will overthrow any government that tries to subsidise petroleum by taxing the people for a subsidy that is not reaching the people. I think Nigerians will argue that if you tax me, you should build more hospitals, more schools and more roads, and you should get the railway working.
These are the perspective from which an issue like this should be viewed. When people say we are a wealthy nation, an oil-rich nation and this is the only thing that the masses get to enjoy, again, I say that the masses are not getting to enjoy as much as the rich people, the elite. Even if you are to concede, I think we are missing the point. I think we should be demanding greater accountability from government in relation to the need to ensure that resources are used judiciously and not to say, look, let us wait or delay this because this is the only way I get to benefit.
The same thing should be said for public spending, the budget itself. Government should be asked the same issues and questions. Really, I think Nigerians have to appreciate that for this administration to even be taking this bold move at this time when we are getting close to the election year, it just reflects our courage of conviction that this is the right thing to do.
We know that this is a very emotive issue, and that it is something that could easily cost votes. In effect, what the government is doing by default is we are really saying, look, we are basically sticking out our necks and elections are coming you can vote us out if we do not deliver. I think that many leaders who would put their short-term interest ahead of a longer-term national interest would simply walk away from this policy decision.
We have been engaging with labour, that is why it is taking so long. We have made progress in terms of addressing some of the structural problems that would ensure structural bottlenecks, and we have been trying to build consensus. We have been talking with Nigerians. However, I think that it is now time to move on; and what we are hearing, nobody is now questioning the rationale, nobody is telling us no, you are not right, you should not reform.
I think it is more a question of what we should do first. Should we do it now or should we wait till we fix the refineries and ensure guaranteed supply? The fact is really there is no way you can rebuild the refineries now. Why are people not building refineries? The pricing structure has been distorted. There is no incentive for anybody to put money or raise capital to be able to build refineries in this kind of environment.
One way or the other, we have to face the reality. We cannot have the refineries and we are encouraging rent seeking. There is no way you can police all these things, no matter how committed government is, even if you double your police force, and I do not think our police should be involved in policing stations to ensure that fuel is sold at this price when there are more important things to do in relation to keeping law and order.
I do not think officials of the Department of Petroleum Resources or NNPC should spend their time running around filling stations to check that things are working. I think that we need to show appreciation to the complexity of the issue and the challenges we face.
The fact is that we have a situation that is unsustainable, untenable, unjustifiable and indefensible, and that what is needed is for leadership to take a decision now, as unpleasant, unpopular and difficult as it may be, because that is what leadership is about.
In terms of the pricing, when people say since we started talking about deregulation, prices have been going up, but it is a question of cost and effect. I think to say that it is because of deregulation that prices have been going up over the years is to miss the point. Internationally, what has happened to prices of crude products? Go back to 1999, what was the price of crude in the international market, I believe it was around $9 – $10. Then it went up to $100 and $125, now it is $75.
Frankly, how can anyone expect that in the foregoing circumstances, prices would remain stable? What has happened to the exchange rate over the same period of time, how much was Naira exchanging for the Dollar then and now? There are many things that were neither regulated nor deregulated but their prices have been going up. How much were we paying for a bottle of soft drink or a tin of milk 10 years back? Now you find out that prices of such products have gone up more than five to ten times, yet these products were not regulated.
Yes, prices will be determined by the prevailing international market, there are no two ways about it. That is the same for other essential commodities we consume everyday. Remember the era when government tried to control prices of what we called essential commodities then, what happened? The black market for such commodities thrived and a few people were just ripping off consumers.
Do we have a definite take-off date for this policy?
It has to be soon. It is a policy decision that government is committed to, so it has to be soon. I have no doubt that this situation cannot continue indefinitely. I am not sure what Nigerians would feel since we did not make provision for subsidy in the 2010 budget. I would be very interested in the reaction of Nigerians who have been really very vocal against deregulation and subsidy if we had to go to the National Assembly.
Let us take a hypothetical situation. Assuming by January or March next year, we have not yet put in place this policy measure (deregulation), and then if I want to be really transparent and accountable and follow the laws strictly, Mr. President now submits a supplementary appropriation bill to the National Assembly asking for, say, N600bn, with a one-line expenditure item, petroleum â€˜subsidyâ€™. Of course, we have to give the revenue framework and financing item.
Assuming we call the Director General of the Debt Management Office and the Chairman of the Federal Internal Revenue Service and charge them to raise N300bn each. These are the two financing items, and we submit that to the National Assembly as appropriation. I do not know how quickly they will get back to us with their endorsement and, of course, I do not know whether the President will sign that.
How does he intend to ensure the 5 per cent growth proposed in 2010 with the poor state of electricity? Would domestic debts get some attention next year?
These and more questions were still on the cards when his phone beeped again. The Minister had to go â€“ he was holding up another meeting on the budget.