Copy from Vanguard News: Pr ofessor Pat Utomi is a communication expert and political economist with profound insight into Nigeria’s political and economic landscape. The former presidential candidate of Social Democratic Mega Party is one Nigerian whose cerebral contributions to contemporary Nigerian situation compel attention. In this interview with Saturday Vanguard following government’s plans for austerity measures to save the country , Utomi offers insight into the mismanagement of the country’s economy and the huge cost of managing political actors and bureaucrats in the country. excerpts. This was before this week’s further crash of oil prices below the country’s budget bench mark We seem to have returned to another regime of austerity measures in spite of the huge gains we made in the years of high oil prices. What does this say of our management of the economy? First and foremost, I think it is a normal process when the country’s revenue begins to shrink and become more sensitive to our spending profile. As a matter of fact, there is nothing extraordinary about cost – effect measures becoming more sensitive economic realities. What seems to be more puzzling about the whole process is really twofold. First, the oil prices are not below the budget benchmark of $75bpd that was set for the budget so as to result in such panic measures in response to the dropping oil prices in the global market. Secondly, the budget does not reflect the reality of what goes on in the domestic and global economic environment. Put differently, our budget and budgeting process are just window- dressing. Our budgeting process reveals that government officials do as they please. The report of over spending by government ministries, departments and agencies has just been released and the current austerity announced by the government just confirms the fact that the budget has not really been the guide to spending and management of our revenues. If the budget is truly what it should be, what should be shrinking should be our savings, not what is required for running the government. The austerity measure is an opportunity to reflect on what I have talked about so many times in the past. We have no clear strategy that responds to the scenario that are evolving in respect of the volatility of global oil prices. The oil prices have always been volatile. The only reason why they have remained stable in recent years is because of the economic activities in China and India, otherwise it would have tumbled ten times over like it had done in the past. The issue is; how come that something like this seems to have taken us by surprise? And this is to the extent that we are back to introducing panic measures again? Many years ago, I had suggested that we should have three set of accounts to manage our revenue from the sale of crude oil. The first will be a distributable pool fund like we have in FAAC and this will be a pool fund that will be funded with certain benchmark that is so conservative that it reduces the appetite for over spending on the part of the government. In the 1960s, we had the sub-national governments that were generating their own revenues by growth of their respective economies. With the coming of military rule and the emphasis of government moving away from wealth creation, to distribution of revenue from oil sales, the concept of tight management of government revenues to achieve economic expansion was thrown overboard. What has happened now is that we have sub-national governments that have been doing very little to create an appropriate environment for wealth creation. Rather, they have limited themselves to the punitive measures being unleashed on the citizens in the name of generating IGR, because they re not doing enough in terms of economic expansion, whereas they are doing a great deal to spend recklessly the money they have not helped to create or generate. Let me state here that the cost of running government in Nigeria is horrendous. The egos of our political and bureaucratic actors is a crime against the people of Nigeria. And it seems that Nigerians have resigned to the lie that there is nothing that they can do about this. The reason why foreign airlines are making huge/profit on their Nigerian route is because of the excessive appetite of government officials who are permanently airborne. They fly first-class and business class compartments which depletes the treasuries of their ministries. Every time you see permanent secretaries, special assistants, personal assistants, jostling to travel abroad. They are permanently airborne, heading somewhere that are sometimes not relevant. They are aboard foreign airlines whereas their counterparts from Europe and America, patronise their national carriers. In the case of Nigeria, these bureaucrats are not adding anything tangible to grow the economy. Cutting the cost of official travels should be part of the austerity measures. These excesses stimulate the economy. These are the fundamental things we must talk about in this time of budget crisis. Every time that our president comes to Lagos, the economy shuts down, the economy loses about half of billions naira, because the president is coming to town. Movements are restricted in Abuja and in Lagos. Sometimes everywhere is blocked for almost the whole day. The Nigerian political class is a danger to Nigeria; until the Nigerian people stop them, this country will bear this weight that could kill. In Kenya you see ministers come into Cafes to have tea with the people, you won’t even know they are ministers. But in Nigeria, every head of parastatal now has a motorcade and armoured cars, with police and sirens. It was not like this in Nigeria before. What got us to this stage? How can we pull back from it? The Nigerian government can be run on 20% of its current cost, if serving Nigerian people is our motivation. Part of my hope is that the lesson of this austerity income crisis will make us to reconsider how our country is run. We have not started talking about corruption. We are suffering not just from a drop in the price of oil, but also from the fact that we are losing hundreds of thousands of barrels of crude oil per day to this amazing thing called oil theft. It is a very strange phenomenon to me in an era where, from satellite, you can find the name tag of somebody. A soldier in Iraq, if you want to pick up his name from space you can. So, we will be having refineries in the Niger Delta, you have crude oil loaded in barges and taken to these refineries and you say it is not possible to find those who are responsible for these activities? We must be kidding ourselves. If this is not a collusion, there must be extra-ordinary level of incompetence on the part of the security agencies and the government, not to be able to find those behind this so called crude oil theft. So the second issue about the dropping of crude oil prices and the availability of crude oil to sell, is the fact that oil exploration is declining because there is uncertainty in the fiscal regime for the oil companies because of the delay in the PIB, the oil companies are not re-investing in Nigeria. That is one industry that we have failed to diversify its operations since and today it is being starved to death. So, we have so many fundamental problems that have combined to create crisis of pricing of now. That is exactly where we are. Even with the Excess crude account (ECA) and the Sovereign Wealth Fund (SWF), are we supposed to be unleashing austerity measures at the slightest shock in the oil market? I did not finish my three revenue classifications. We have talked about the distributable pool fund. In my projections I will not allow more than $50 per barrel to go to that fund and that is what all tiers of governments will run to generate revenues. Anything from $50 to $80 per barrel, must go to the fund that is available when there is crisis in oil revenue; when the prices have dropped to $20 to $30 per barrel and then we can turn to that particular account and use it to augment. The third account will be funded by any income when the oil price is above $80 which is where we are right now. This should go to a future fund which actually is what the sovereign wealth fund is. The money in that account will be used only for investments that can bring revenues to supplement income in the future or to do very long term infrastructure that will be around for 200 to 300 years. For instance, huge dam, rail lines, ports, big bridges etc, which can add value to our economic well-being so that the future generations who have a right to this same oil wealth that we are wasting today, will benefit from. These are the three principal accounts that I proposed. Having cleared on those three accounts, I am saying that we really have not seriously tried to implement that idea even though the idea of SWF has eventually taken off. It is not exactly what it should be, but it is better than not doing it at all. But a lot of fund should be going into the SWF. I understand that for political reasons of the so called beneficiaries of these sharing party, they are protesting that the SWF should be shared. The SWF does not belong to the FG, it belongs to all Nigerians and the FG should give Nigerians equity holdings in the fund to the extent of the allocation they should have been receiving on continuing basis so their portion is there. But it has consequences for whether that money is being used now or being used later. When we find our selves faced with dropping oil prices it is the stabilisation account which is the second port that we can be drawing from. But we have not reached that level. Because we have not dropped below the budget bench mark. That is when we could be in crisis. If we planned well there would be no shouting austerity because the price of oil dropped. All we need to do is to draw from that to ensure that the budget operates normally. I really don’t see why there is a panic right now. If we were prudent in managing the budget we would not have problems. But even as it is now we are not anywhere below the so-called budget bench mark, so the I don’t understand the panic. Experience has shown that each time austerity measures are introduced the poor suffer more while government and its officials remain profligate, how reasonable is this? One of the problems of our country is the enormous disparity in income between people who have access to power and people who don’t. Those who are taking much out of Nigeria are those who are giving the least in terms of economic output. That distortion is the reason why our economy is not where it should be. A few business people have extra-ordinary amount of money, many of them are not making the money from their output. They are making the money because this is the new mercantilism, this narrow business class are in league with powerful people in government. They use their relationships with government to abuse Nigerian people because money goes from government into their pocket. This new mercantilism is deepening the genie index. So the new Nigerian economic mindset is a time bomb. At the time Nigeria has the opportunity to reap the youth burgs, by investing heavily in education, health, creation of wealth through creation of wealth the story is different. Enough jobs are not being created and the greater burden of this austerity is therefore left to fall on the majority of the poor. This is setting up the country for social pressures and this may blow out down the line because it is not possible to continue like this for a long time. Everywhere else in the world, it has blown. What is your take on 2015? As we move towards 2015, I look at the fact that a whole country is neither here nor there. I look at 2015 and the fact that we have failed to do the needful, to make democracy based on ideas, debate on the streets, town hall meetings etc. Until votes begin to count, I really don’t know how it plays out. We are dependent on godfathers to anoint us, we borrow, steal or cheat to buy form and after buying the form, there is money to bribe people to voter for you and then we call it democracy? I am frightened that Nigerians have not asked questions – whether what we are doing now is a democratic process. It worries me. We have not learnt to govern as statesmen. Everything is excessive partisanship. What has happened is that we have literally ceded a part of our country, because of selfish motives. I am not so sure of what the motives are but we shouldn’t be in this situation now. This insurgency should have been shut down years ago. What prospects does President Jonathan have? The entire political machinery in Nigeria has been disaster. For Nigeria, that political machine has to go if Nigeria must make progress. That machine is beyond the issue of Jonathan as the president. How it goes it another matter. If it continues our children will not have future at all.
Posted on: Mon, 01 Dec 2014 04:25:25 +0000
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