The former deputy governor of Central Bank of Nigeria, Obadiah Mailafia, shortly before his demise on September 19, 2021, in an emailed interview with KENNETH EZE, shed light on many issues bedevilling the Nigerian economy. He fingered overdependence on importation; overconcentration of power, which breeds secrecy and irrational decision-making; public robbery and rapine, among other things. Excerpts:
Against the background of the Nigeria Governors’ Forum recommending an increment to around N400 per litre and the Nigerian National Petroleum Corporation not contributing to the Federation Accounts Allocation Committee in April, it appears that the federal government has a ploy to compel public acceptance of astronomical increment of pump prices of petroleum products. What’s your take on the public engagement strategy of the federal government on this matter?
First, let me make it clear that the so-called “subsidy” in the oil sector, if it does truly exist, is an iniquitous situation. Spending a trillion naira annually in the name of subsidy is a serious matter.
Meanwhile, we are to all intents and purposes subsidising the whole of West Africa, as it were. I am therefore all in favour of a fair market price for the pump price of oil. I always suspected somebody somewhere was going to jerk-up the price of oil once Dangote Refinery is about to come on board. And the same government decided it would acquire shares in a company that is yet to become operational to the tune of billions of dollars.
The valuation, in my view, was jerked up for that sinister purpose, at a time when the wind of public policy is in favour of government not meddling with the private sector.
The economy of this country is being managed for the benefit of sharks, hyenas, jackals and other vested interests.
I am disappointed with the federal government. The public engagement strategy that you are referring to is non-existent. Most of such policies are being approached in terms of secrecy and sinister, backhanded secret agendas.
In a civilised government, one would have expected an independent enquiry by a public commission made up of industry experts and top economists.
Their task would be to look at the numbers objectively and fairly and to determine what is a fair market price for the pump price of oil and how to systematically phase out the subsidy without too much disruptions. But, sadly, they will not do such a thing.
Needless to remind you that the President himself is the Minister for Petroleum. Between him and the NNPC, decisions are made that do not carry all our stakeholders along. Bad policy.
“The economy of this country is being managed for the benefit of sharks, hyenas, jackals and other vested interests”
What does the unstable global oil and gas market portend for the domestic economy?
I do not think this is something we can do much about. There was a time when the Organization of the Petroleum Exporting Countries attained the virtual status of cartel power. That organisation was able to set maximum quotas for its members, thereby stabilising the price worldwide. The OPEC has fallen on hard times for several reasons. First, members do not always comply with the quotas. Secondly, competition for market shares between Saudi Arabia and Russia, at a time of recession, forced down prices to ridiculous levels.
Thirdly, there are many new producers in the neighbourhood who are not members of the OPEC.
Many countries now happen to be sitting on lakes of oil – Chad, Niger, Ghana, Equatorial Guinea and the lot.
The new technology of fracking has made the United States of America a rival to the Kingdom of Saudi Arabia as a producer and even exporter of petroleum products.
There is also the global business cycle of booms and busts. It is a reality of the capitalist world economy.
This also means that global prices of commodities such as petroleum will always be unstable. This is why, I suppose, we have to define benchmarks for the oil price when we are designing our annual national budget. And we must set such benchmarks at realistic levels.
Any earnings over and above the benchmark should go straight into savings or into our Sovereign Wealth Fund.
Ultimately, the only lasting, sustainable solution is diversification of the economy to reduce dependence on oil.
What would be your win-win approach to the problem?
I am a practical economist and a realist. Managing an economy is not a dog’s breakfast. Leaders often face daunting challenges. Ultimately, public finance is about being able to balance the books. This requires courage and guts.
It is a foolhardy government that tries to live above its means. Every administration must cut its coat according to its actual size.
Economic science has shown that markets remain the best mechanisms for running national economies on a rational basis. So, I am all in favour of a fair, market-based price for oil. The so-called “oil subsidy” has largely been a pernicious and unhealthy scam. We need to phase it out. But let it be done within a transparent framework.
The recent finalisation of the Petroleum Industry Bill is a welcome development. There are a few issues here and there, but we hope they can soon be sorted out to clear the way for the Executive to assent to the bill so that it becomes law.
I believe that a faithful implementation of the new law will open up new vistas of opportunities. We also need greater transparency in the system.
In Ghana, even a school child knows how much oil is produced daily, how much is earned and what the money is earmarked for. In Nigeria, I am not sure even the government knows how much oil leaves our shores on a daily basis. The robbery and rapine in our oil sector beggars belief. It takes boldness and courage to do the right thing.
-www.thepointng.com
