The week ahead – Withdrawal syndrome

Petrol prices in Nigeria will hit their highest ever in naira terms this month, according to a memo from a state oil subsidiary. The Petroleum Products Marketing Company (PPMC) said the ex-depot price of petrol for September will be ₦151.56 per litre, up from ₦138.62 per litre and above the previous pump record of ₦145. The internal memo, dated 2 September and signed by D.O Abalaka said the new product price adjustment has been effected on the company’s payment platform. The PPMC had fixed the ex-depot price of petrol at ₦138.62 in August. The ex-depot price is the price at which the product is sold to marketers at the depots. The final pump price will be even higher to incorporate transportation and logistics costs; a senior official with the fuel marketers association told The Nation that they will “instruct marketers to sell it for between ₦158 to ₦160 per litre” in the absence of direction from the PPMC or the Petroleum Products Pricing Regulatory Agency (PPPRA).

Nigeria’s Senate will advise the finance ministry to remove up to 60 federal agencies from receiving allocations from the national budget starting from next year. The Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS), Security and Exchange Commission (SEC), National Broadcasting Commission (NBC), and Oil and Gas Free Trade Zone Commission are some of the names of federal agencies to be deprived of the allocation. The decision was premised on the conviction that the agencies generate enough revenue to fund their overheads and payment of salaries, and would therefore not need to be funded from the national budget. Two newspapers noted that the Joint Committee on Finance and National Planning had concluded plans to include the proposal in its report which would be submitted when the Senate resumes on 15 September. The panel is not happy with the poor revenue profiles, huge wage bills, and poor remittances to the Consolidated Revenue Fund account from these agencies. Chairman of the joint committee, Senator Solomon Adeola, told the heads of the agencies after the session that many of them had no business receiving allocations from the federation account. He said the Senate would update the Fiscal Responsibility Act to limit the agencies power to spend money as they choose to, and pointed out that some of the agencies, such as the Oil and Gas Free Trade Zone Commission, had willingly pulled out of being funded from the federal budget, meaning they would no longer collect allocation for salaries and overhead from the federation account.

The recent increase in the cost of poultry feed in the country has been forcing farmers to ration food for their birds. According to a Punch report, the cost of ingredients for the composition of poultry feeds, particularly maize, has increased by 100%. A 100kg bag of maize, which used to cost about ₦6,000 in April 2016, is now being sold for about ₦12,000. The cost of fish meal, another important ingredient in poultry feeds, has increased by 60%. A kilogramme of fish meal has risen from ₦500 to ₦800. Eggs, however, have not seen a similar increase. Before the hike in the cost of poultry feed ingredients, a crate of eggs used to sell for ₦600. It is now being sold for between ₦650 and ₦700, depending on egg size. The food rationing, which has caused some farmers to mix their feeds with less nutritious ingredients, has led to a drop in egg production as malnourished birds do not produce eggs maximally. The rising cost of maize is largely due to low cultivation as a result of the activities of Boko Haram insurgents in the north, recurring attacks by Fulani herdsmen and flooding.

South-West states have disagreed with Nigeria’s Presidency that the Western Nigerian Security Network, codenamed Operation Amotekun, will now be run by the structure defined by the Inspector-General of Police. According to the SW states through the Development Agenda for Western Nigeria (DAWN) Commission, Amotekun is guided by the states’ laws and setting up of community policing should not in any way disturb the operations of Amotekun. Garba Shehu, President Buhari’s spokesman, had said Tuesday on Sunrise Daily, a Channels Television programme, that the structure of the security network would be as prescribed by the IG. He said this while speaking on the approval of ₦13 billion by the FG for community policing across the 36 states of the federation. He added that the community policing structure would be the same across the 36 states and whatever would not conform with the national structure would not be “in the scheme of things.” When asked whether the new community policing being introduced by the FG would not conflict with Amotekun, which was created by Houses of Assembly of the six SW states, the President’s spokesman said the conflict would only be in terms of perception as governors were carried along in the process through the National Economic Council (NEC), which comprises the 36 governors and headed by Vice-President Yemi Osinbajo. However, the Director-General, DAWN, Seye Oyeleye, said the operations of Amotekun are guided by the laws duly passed by the houses of Assembly in the six states in the region and the bills were assented to by the governors. He added that Nigeria is not a unitary state, it runs a federal system, hence, the states are allowed in law to have their security outfits as long as they are backed by law. Similarly, the Special Adviser to Governor Rotimi Akeredolu of Ondo State on Security Matters, Jimoh Dojumo, said the structure of Amotekun was already contained in the law that set up the agency.

Commentary

• The confusion about which agency is meant to adjust petrol prices is telling, but that is beside the point. In brutal terms the price increases do not mean much, asides a bit more hardship for Nigerians; the kind of hardship that we have to go through if we want the markets to eventually self-correct. These are moves that should have happened years ago, and our only complaint here at SBM is that it would have been a lot easier for this government to have made these reforms at the very beginning when it had lots of goodwill. Now the risk of opposition and resistance is much higher. The subsidies have been a sad waste for almost five decades, so the time has come for Nigerians to start getting used to paying the appropriate prices for goods. With this in mind, we hope that the government retains the political will to stay the course. Somewhat ironically, we have the feeling that its current fiscal travails will force that will to remain.
• The move by the Senate to move agencies from budgetary allocations is an excellent one as it reduces the government’s recurrent spending for revenue-generating agencies, freeing up budgetary allocations for capital expenses. This will mean more money for the government to spend on critical social services and infrastructure. It will also mean that it will push the agencies to be more efficient in terms of revenue collection and expenses. However, on the downside, it could force these agencies to arbitrarily raise the levies, fees and licenses through which they raise revenue which will further increase the cost of doing business in Nigeria. Without strong oversight, it could make the agencies to be more discretionary in their spending without any recourse to supervising ministries or the National Assembly since, as they will claim, such monies are from internally generated revenue. This means that the agencies should have a limit of what percentage of their revenues they can keep for their overheads and salaries, while the rest should be remitted to the Consolidated Revenue Account. Added to this must be an emphasis on auditing annual accounts with such reports made publicly available. The framework exists via the Treasury Single Account to ensure that this can be done. What is needed is the will to do it.
• A direct impact of rising insecurity and low rainfalls in large parts of Nigeria is food inflation. This also impacts the prices of poultry feed. Firstly, the cost of producing crops in Nigeria has increased due to increased risks (from security and supply chain management) for farmers and traders (cost-push inflation). Secondly, available money is now chasing fewer goods available (demand-pull inflation). But beyond that, rather than address the root cause, the government’s rhetoric has been that smuggling of cheap produce from Asia has stifled local agricultural production, hence the decision to close the borders last year. There is also the ill-thought and ill-timed move by the CBN to add maize to the list of items for which importers cannot access forex at official rates. This means maize importers will have to access forex at the parallel markets, forcing them to pass increased costs to end consumers. Predictably, the CBN lists its reasons for this action as an intention to increase local production and stimulate rural livelihoods while increasing jobs. However, this policy thrust completely ignores two facts: that merely making it harder to import a commodity does not mean that local production will automatically increase if other (local) factors weigh on production and Nigeria is pretty much self-sufficient in maize production, except during special circumstances such as now. The dissonance in policymaking has now deepened to the point where the CBN is making fiscal policy using monetary tools and other parts of the government are not working in tandem to deliver stated objectives. In this case, there is a need to resolve the insecurity bedevilling the maize production areas, to improve production by way of inputs such as quality seeds, better farming practices and broaden access to finance – many of which aren’t the responsibility of the monetary regulator. It also brings into question the utopian pursuit of the FG to guarantee food self-sufficiency rather than food security – already, food comprises 56% of Nigerian consumer spending. Prevailing policy thinking is likely to end up pushing costs even higher in the short term ( the rising cost of eggs and poultry being a case in point). Perhaps like never before, this moment calls for bold and fresh policy thinking. The alternative to courageous policy design is a Nigeria that continues to sink deeper into poverty and extreme poverty too, with food security proving more elusive.
• Nigeria’s federal government as always is very active when it comes to defending its control of anything that will de facto move Nigeria towards restructuring. While it strives to retain control of security, it does not seem to apply the same level of diligence to providing said security to the people. Amotekun is a result of this dichotomy, this space between control and actual provision. The community policing initiative of the FG is not going to end the agitation for state/regional policing, and by extension, the debate on state rights. Although states in the South-west geopolitical zone have signed laws that bring Amotekun into existence, the Constitution is clear on policing being the exclusive preserve of the Federal Government. Thus, Amotekun and all other security agencies set up outside those by the FG are illegal, unconstitutional, null and void. However, these extra-judicial security agencies are being established because the federal policing structure and security architecture is insufficient for the country in terms of numbers, capacity and structure, which is evident in the number of internal security challenges bedevilling Nigeria. This community policing initiative is likely to further complicate matters by increasing the numbers of the force on a poorly formed structure, and what could likely be poor coordination between the community level and the established police force. To find a lasting solution to the impasse between states and the FG, there will be a need to design a framework for decentralised policing, how the police at the state and local levels will coordinate with federal agencies, the crimes that will be in the purview of each agency, and to amend the Constitution to reflect these changes. Until that happens, there will continue to be a conflict between the FG and states over the issue of policing. As we have always maintained, Nigeria will be restructured. What remains is whether the Federal Government will allow this to be a managed and orderly restructuring or one that chips away at the substructure until it collapses suddenly.