We will revisit our analysis of the security sector budget beginning with some clarifications and rebuttal of the Budget Office's right of reply to last week's column titled - "Where el-Rufai Got it Wrong". I commend the Budget Office for choosing to respond this way instead of asking the SSS to arrest me as the President did on July 1, 2011. The democratic space can only be expanded with more freedom to express opinions and disagree often, and it is not just about politics. It is about improving our nation, enlightening our citizens and raising the levels of accountability. And the world today is too open and citizens too aware for much secrecy in governance to be sustained.
The "right of reply" only served to confirm the points I made about lack of transparency in the revenue and expenditure details regarding cash calls, special funds and transfers to ECA/SWF, but avoided the issues by suggesting that the version of the Medium Term Fiscal Framework (MTFF) that I referred to is "the web version", which 'omitted' such important details. I asked friends in the National Assembly for their more detailed version and got the same document. Are we not as citizens entitled to this complete information as well?
Nigerians now know that our JV cash call budget for 2012 is some N832 billion (about $5.4 billion). But where is that detailed in the Appropriation Bill? Is it not a violation of the Constitution for this huge item of expenditure to be incurred without specific inclusion in a money bill passed by the National Assembly? Is the approval of MTFF required by the Fiscal Responsibility Act 2007 enough to override the requirements of the Constitution? I think not!
The same applies to the special funds for the federation. Last time I checked they added up to 7.5%, and no new revenue allocation law has been passed yet. And there is a world of difference between "fuel subsidy removal (FSR)" and deregulation. It is sacrilegious to some of us that deregulated some monopoly sectors to confuse the two. The attempt by the budget office to refer to the partial FSR which hiked the price of petrol to N97 per liter as 'partial deregulation' is simply untenable. This administration is not deregulating the petroleum sector today. It is desperately looking for easy money to fund its profligate habits and thought the FSR would be one source. When the Petroleum Industry Bill is enacted into law, we will concede that deregulation has been restarted. Until then, we should call a spade a spade!
The Budget Office may think that a country like Nigeria with 'a strong balance sheet' cannot be said to be broke. The balance sheet lists assets and liabilities, not the level of one's liquidity or solvency. The difference between the balance sheet and income statement is that one can have a strong balance sheet but be unable to meet day-to-day financial obligations. That is the situation with Nigeria with its trillion naira budget deficit but billions of barrels of oil reserves. As for the celebrated Fitch rating, we will leave that for another column, but suffice it to say that such rating agencies are being asked questions in other jurisdiction about their rosy ratings that evaporated overnight amidst the financial crisis of 2008. We live in Nigeria. These overnight Nigeria experts don't. We do not need them to validate or contradict what is evident to those of us that have lived here for more than 50 years - which is - today, the FG's cost of operations exceeds its sustainable income - and something needs to be done about it right away to avoid disaster in the short term! At least no one contested the 'expensive leaders' part of last week's column, so we hope the costs will come down!
I wish government officials will cease patronizing ordinary citizens by assuming that they are more patriotic than the rest of us. Saying the truth about one's country is not talking it down. We love this country too, unconditionally. We neither need huge feeding allowances, expensive planes and bullet-proof SUVs nor a coterie of aides to do so. So let us debate the issues and cut the patronizing crap!
On the non-inclusion of funding for SURE-P and size of the recurrent budget, the Budget Office agreed with the view expressed last week. It merely went on to say that the President's food budget include banquets (how many in a year?, once-a-month?), lunch on Wednesdays (50 in one year?) and so on. As a quantity surveyor, one can itemize each component of cost, describe and price it. When I did all that and adjusted for such 'extra-over' items, the villa's kitchen will still spend nearly N2 million daily. So what kind of food are they eating? And does that make sense when a large swathe of the population lives on less than $2 a day?
The response of the budget office to the observation on the huge levels of personnel cost (N1.6 trillion) is interesting - "You just can't throw civil servants out into the street overnight without careful assessment, knowing that each such person has six or more dependents they support in our population." This is nothing but pathetic populism from those preaching that our views are driven by politics.
The statement can be faulted on several grounds. (1) Assuming it is correct, does that mean the 7-8 million Nigerians that are civil servants and their dependents are a bigger priority than investing in infrastructure (N1.3 trillion in the 2012 Budget) for the 160 million that are not civil servants and their dependents? (2) Is it not a fact that between 2005 and 2007, a carefully thought-out severance exercise was carried out in which 45,312 civil servants and 50,054 parastatal personnel were severed at a cost of some N67.8 billion? (3) Is it also not a fact that an additional 38,732 parastatal staff were to be severed in 2008 at a cost of N29.1 billion?, (4) All those severed had received pre-retirement training, severance payments and had even begun collecting their pensions by mid-2007?, (5) Some 20,000 of such pensioners were then smuggled back into the public service by 2009 and restored to the payroll, after collecting their terminal benefits, (6) perhaps an equal number has been added in 2010 and 2011, and (7) these actions resulted in blocking bright, young entrants and injection of new blood into the service?
As chair of the public service reform team between 2005 and 2007, I know these to be facts and the Finance Ministry leadership knows that too. What is so difficult about getting rid of these already-severed staff, and completing the 2008 exercise now? Dr. Goke Adegoroye who was the DG of the Bureau of Public Service Reform, now retired, published these details in his book "Beyond Yours Faithfully" and available for the government to dig into, if the political will to do so exists. How personnel costs increased from about N600 billion (including the National Assembly) in 2007 to over N800 billion in 2010, and then N1.6 trillion in 2012 is partly attributable to some of the retired but smuggled public servants! We must do what is right to bring down that personnel cost budget because it does not make sense. Simple!
It is only on the details of security expenditure that the budget office got it right. On the headline items, everything written in last week's column is correct. When we got to the details, budgetary provisions in 2011 were mistakenly referred to instead of those of 2012. I apologize for the mix-up which arose because of having to refer to many documents and sources at the same time. However, the principle of questioning whether the president needs new planes now remains, as well as concerns about Iridium being used for secure communications. Even if some foreign government departments use Iridium, their intelligence services do not do so for secure communications, and certainly not for data communications. We deserve better. This week, we will look at the 2012 numbers and re-present with our analysis of last week related to security spending.
As stated last week, I will appeal again to Nigerian citizens to study the budget as much as, if not more than they read the Constitution. It is the only way we can see how policy decisions translate into resource allocations, and ask questions about how our resources are spent. Details of the budget are available online on http://budgetoffice.gov.ng/2012_budget_proposal.html or if for any reason unavailable, http://el-rufai.org/2012/01/full-access-to-2012-budget-proposal/
Last week, we pointed out that the amount headlined for the security sector excluded (1) Amnesty Programme (N74 billion), (2) Military Pensions N60 billion, (3) Army Internal Operations (N17 billion), (5) Police Service Commission (N2.5bn), (6) Customs, Immigration & Pensions (N8.6bn), (7) SSS/NIA Pensions (N11.2bn), (9) Death Benefits - Army & Police (N5.4bn), (10) Federal Road Safety Commission (N28.9bn), (11) Maritime Security (N4bn) and Police Reform Fund (N15bn). Adding all these up brings the total of our spending on the security sector to N1.145 trillion, not the N922bn highlighted. This means that in 2012, we will be spending about N3.1 billion every day, weekends included on defence and internal security, yet we sleep these days with both eyes open due to insecurity.
The detailed 2012 budget of the Intelligence Community - the office of the NSA, the SSS (Internal Security), the National Intelligence Agency (External Counter-Intelligence) and the Presidential Air Fleet (PAF) will now be commented upon. The budget of the Defence Intelligence Agency (N10.8 billion), Defence Intelligence School (N560 million) and Directorate of Military Intelligence are under the Ministry of Defence, and are therefore excluded for the time being.
It is worth noting that the NSA is one of the 20 special advisers approved by the National Assembly for the president, but he sits in the Federal Executive Council as a member. His office is advisory and his main job is coordinating the activities of the security agencies, with staff strength of about 100. Each agency is independent of the NSA and routinely reports directly to the president. It is therefore difficult to explain how the NSA has a capital budget nearly twice that of other 'operating agencies' within the intelligence community - higher than that of the SSS with about 15,000 staff and the smaller but far more effective, NIA. The NSA's budget consists of N285 million for personnel cost, N3.64 billion for overheads and a whopping N29 billion for capital projects! The respective proposals for the SSS are N23.5bn, N4.8bn and much-improved N18bn for capital spending! The NIA is slightly better with N23.6bn for staff costs, N3.1bn for overheads and N14.8bn for capital projects.
We will continue the in-depth analysis of the budget of the security sector next week because the proposed budget this year envisages direct spending of N130 million per hour on national defence and security, or about N3.1 billion every single day. In light of the escalation in levels of terrorist sophistication and violence in the North and other violent crimes in other parts of the country, we must insist that these daily billions will not buy us more insecurity. 
The attempt by President Jonathan to withdraw the 'fuel subsidy' largely to raise revenues for a wasteful government united Nigerians across ethnic, religious and social strata for over a week. One of the unintended consequences of the administration's unilateral action was bringing to the front-burner questions about the size of government, the excessive cost of governance, and the fraud and corruption in the oil sector. Nigerians now know that their president would rather impose an overnight tax on them than undertake an orderly deregulation of the petroleum sector. They also know the difference between an isolated fuel price hike (for immediate revenue) and the policy review-legislation-independent regulation-competitive markets path that was implemented in the telecoms sector deregulation between 2000 and 2001. Nigeria will be the better for it, as we are now unanimous on seeing that some of the spending items like the near N1 billion for food in the Villa are justified and put in context.
For this reason, over the ensuing weeks, this column will undertake a detailed sectoral analysis of the 2012 budget proposal submitted by the President to the National Assembly in December 2011. Our objective is to enlighten all stakeholders on the provisions contained in the budget and suggest areas to reduce waste, question spending priorities and cut out what appears dysfunctional. Our hope is that the National Assembly will in the end make the budget work for the people of Nigeria. Today, we will look at the revenues profile for 2012 and issues arising there-from, and then throw a searchlight on the much-headlined expenditure for the security sector. Details of the budget are available online here.
The federation expects to generate about N9.4 trillion in revenues in 2012, consisting of about N6.4 trillion from oil and gas, N2.7 trillion from personal income and company taxes, custom duties, and value-added tax. Another N250 billion is expected from special levies and taxes like the Education Tax. Out of this total, the Federal Government share amounts to about N3.6 trillion. This is because the FGN gets about 48.5% of the oil and non-oil revenues and taxes, about 14% of VAT and gets to keep all of its independent revenue. Omitted from the budget is an additional 7.5% of the total - special funds that include the ecological fund, the Federal Capital Territory and mineral resources fund. Also omitted is how much is deducted from the gross oil revenue as our contribution to the Joint Venture Cash Calls. All these need to be detailed out for the National Assembly to do its constitutional duty and ensure accountability, but they are missing from both the Budget and the Medium Term Expenditure Framework for 2012-2015.
Starting with projected revenue of about N3.6 trillion, the budget envisages a total spend of N4.7 trillion, meaning that we intend to spend about N1.1 trillion more than we expect to earn this year. Where is the extra cash coming from? It is not from 'fuel subsidy'. The 2012 budget already assumed that not a penny will be deducted to subsidize petrol. The FGN hopes to finance the deficit by borrowing some N794 billion this year, and get some windfall from privatization (N10 billion), signature bonus (N75 billion) and the now-depleted excess crude account (N225 billion). No provision has been made in the Budget to transfer any amounts to the Sovereign Wealth Fund. Once again, these are items that need to be detailed for us as citizens to know, and for the National Assembly to decide upon.
What are the implications of these pieces of information? How does the plan to borrow an additional N794 billion sit with the administration's desire to "reduce" our borrowing from the current levels nearing 20% of GDP? What does the projected medium term expenditure framework reveal about our revenue and spending patterns? Are these consistent with the desire of Nigerians to see a smaller, less expensive and more efficient federal government? We ask our readers to bear these in mind as they reflect on the numbers presented herein.
We should also note that with the 'fuel subsidy' not fully gone, the FGN's assumption of zero-subsidy-deduction is off the table, and the hole in the budget will increase by at least half of the 'expected N400+ billion' to N1.3 trillion, so further borrowing is necessary to fund this gap. And as I wrote last week, there is not a single kobo anywhere for the so-called SURE-P programme unless the National Assembly raises the benchmark price of crude oil by at least another $20 with the risks attendant to that.
Looking closely at the spending proposals, commendable efforts have been made to reduce the level of statutory transfers to INEC, UBEC, NDDC and the National Judicial Council. Sadly, the transfer to the National Assembly remains at the 2011 level of N150 billion. Unless this is reduced, we will spend an average of N320 million per legislator in 2012 at a time when Nigerians are clearly disgusted at the very high quarterly allowances they draw, over and above what the Revenue Mobilization Allocation and Fiscal Commission has approved for them. The National Assembly should listen to the voice of Nigerians and reduce this provision substantially. The provision for the salaries and allowances of public servants has risen by about N150 billion from the 2011 levels to N1.655 trillion. This increase cannot be due to the usual annual salary increment. There is something more and it contradicts the stated goal of the administration to reduce the cost of governance. The National Assembly should scrutinize this more closely with a very sharp knife!
Other items of expenditure that need closer review are the overheads - the N11 billion for international travel, more than N30 billion for "research and development", maintenance of vehicles, furniture, etc., over N20 billion, stationery, magazines and newspapers at over N5 billion, and nearly N17 billion (more than $110 million) to purchase yet another plane for the president, at a time when we are being asked to sacrifice and pay more for petrol, transportation, food and rent. There are other items we will highlight in each sector but these broad areas are indicative for the time being of the need for close scrutiny by the citizens and the National Assembly.
We will now briefly look at the provisions for the security sector. The president announced that the sector got allocated some N922 billion for 2011. This number is the sum of the budgetary allocations of the ministries of defence, police affairs, and Interior plus Police Commands and Formations and the Intelligence Community (NSA's office). The president forgot to add the following - (1) Amnesty Programme (N74 billion), (2) Military Pensions N60 billion, (3) Army Internal Operations (N17 billion), (5) Police Service Commission (N2.5bn), (6) Customs, Immigration & Pensions (N8.6bn), (7) SSS/NIA Pensions (N11.2bn), (9) Death Benefits - Army & Police (N5.4bn), (10) Federal Road Safety Commission (N28.9bn), (11) Maritime Security (N4bn) and Police Reform Fund (N15bn). Adding all these up brings the total of our spending on the security sector to N1.145 trillion, not the N922bn highlighted. The equivalent tally for 2011 was N1.174 trillion, about N30 billion higher than this year.
We will begin the analysis of the security sector with the budget of the Intelligence Community - the office of the NSA, the SSS (Internal Security), the National Intelligence Agency (External Counter-Intelligence) and the Presidential Air Fleet (PAF). The budget of the Defence Intelligence Agency and Directorate of Military Intelligence are under the Ministry of Defence, and are therefore excluded.
It is worth noting that the NSA is one of the 20 special advisers approved by the National Assembly for the president, but he sits in the Federal Executive Council as a member. His office is an advisory office and his main job is coordinating the activities of the security agencies, with staff strength of about 100. Each agency is independent of the NSA and routinely reports directly to the president. It is therefore difficult to explain how the NSA has the highest budget of all in the intelligence community- higher than that of the SSS with about 15,000 staff and the smaller but far more effective, NIA. The NSA's budget consists of N212 million for personnel cost, N3.64 billion for overheads and a whopping N33 billion for capital projects! The respective proposals for the SSS are N17bn, N5bn and a paltry N1.8bn! No wonder the SSS is handicapped in dealing with security threats within our borders! The NIA is not much better with N19.7bn for staff costs, N3.9bn for overheads and N2.6bn for cap[ital projects.
A cursory look at the NSA's capital projects is even more revealing. Over N1.1bn will be spent on satellite communications, over N3.5bn on something called "data signal centre/equipment" and N717 million for Iridium/Thuraya Communication platform. I thought that Iridium went out of business nearly a decade ago, and Thuraya is an insecure form of communication used mainly by global companies to connect far-flung personnel. Are our agencies using this for secure communications in the 21st century? I wondered about that until I saw the provision of N78 million for a presidential communications network and N27bn for the establishment of a "strategic operations centre". We all hope that the most advanced technologies will be adopted in deploying these - and certainly not low-earth orbit satellite systems like the defunct Iridium!
The Presidential Air Fleet is under the NSA's office. Apart from modest provisions of N15.6 million for personnel costs, N969 million for overheads (spares, checks, and aviation fuel can be expensive!), there is a provision of N16.8bn ($110 million) for a brand new plane for the presidency. This is quite an expensive plane because a fully-equipped high-end Gulfstream 5 can be acquired brand new for between $40-50 million. The plane type and specifications were not mentioned in the budget, and these should interest the citizens of Nigeria and the National Assembly.
Within the budget of the State House is a proposal to buy two brand new, bullet-proof Mercedes Benz 600E cars for the presidency at about $1 million each. I guess since our two topmen are getting new cars, it makes sense for them to have an additional new aircraft as well - but in a year in which we are living above our means, spending at least N1.1 trillion we do not have, and borrowing N794 billion to make ends meet? We are broke as a nation, we now know. We will collapse if the fuel subsidy is not withdrawn, according to our president. Are our leaders not too expensive? Are they sensitive to our cries for improved electricity, affordable transportation and jobs for our youths? The ball is in the court of the National Assembly to restructure this budget.` 
Any discerning reader that is familiar with this column will have by now been able to see a common thread that runs through this column in the past 30 weeks or so. This week’s column must of necessity be on a subject of popular will with respect to the political turmoil with which the country is currently bedeviled. Let me first commend and salute the people of Nigeria - young, old, middle aged, labour, civil society, employed, unemployed, market women, and youths for summoning the courage to do that which is perhaps unprecedented in the struggle to make Nigeria better and greater during our lifetime.
It was only a few weeks ago that President Jonathan dared Nigerians by publicly boasting that he was ready to confront mass revolt rather than defer the removal of subsidy on petrol. It is self evident that no well meaning government would affront us all that way when the foundation for the legitimacy for governance derives from the people. It was George Bernard Shaw that aptly stated that “Power corrupts and absolute power corrupts absolutely”. Most people only know this much about this popular quotation but for those who are able to dig deeper, the above represents, at best, only half of the full quotation which ends with “Except for those who learn from lessons of history” and is read in conjunction with the first part of the quotation.
Thus President Jonathan would not have allowed power to get to his head if he had learned anything from the lessons of history. Some have argued that Nigeria is different and as such the Arab Spring has no place in Nigeria. Do they still think so? To be sure, the ongoing struggle between the executive arm of President Jonathan’s administration and the people is, in the view of this column, for all intents and purposes the Nigerian equivalent of the Arab spring. It is the popular will which shall and must prevail at the end of the day.
So what really is at stake? Is this just about the removal of the fuel subsidy, when to remove it or is it about what a good government should be?
First, let us examine the economics as well as the politics of the fuel subsidy.
As stated in one of our previous articles on this column on the subject of the petroleum industry, there are 2 schools of thought: (1) That of 'Buhari and Tam David-West' that believes there is no subsidy if actual cost of exploration, local refining and transportation are the constituents of the pump price for refined petroleum products, and (2) The 'government' school that is based on the opportunity cost, i.e., the international quoted price for petroleum products.
Clearly, if domestic refineries are functional and producing enough to meet domestic demand, as the 7th largest exporter of crude oil should do, the difference between the two schools of thought would narrow as it is simply because the actual cost of delivering a litre of petrol to the pump head would have been about N40 that no one in the executive arm of government has yet been able to refute or disprove. Therefore the fact that the government has to resort to the opportunity cost basis as a rationale for justifying the existence of an "import-based" subsidy is indeed a self induced burden that the Nigerian people are being forced to bear.
This brings to mind a fundamental principle of common law that no one should profit from his or her wrong, which when applied should preclude the government from seeking to pass the inefficiency and incompetence on its part in failing to ensure that our domestic refineries work and jobs are created. Indeed the economic cost to the nation is not just a subsidy element that the Nigerian people are having to suffer but also foreign exchange, well paying jobs and skills that have gone down the drain with importation of refined petroleum products. We can therefore conclude that the economic justification for the withdrawal of the fuel subsidy is self induced and should not stand.
Secondly, even if the Nigerian people should decide that refined petroleum products should be sold at the opportunity cost which is the international benchmark price, the popular will remains that the cost and size of government today is unwieldy and unacceptable. In 2011 nearly 75% of the entire budget was spent on recurrent expenditure. The people have complained time and again that the salaries and allowances of the executive and legislative arms of government are neither affordable nor sustainable. Why has the government shied away from tackling 75% of the problem whilst devoting energy to the remaining 25%?
The bloated overheads are not only real but have been carried forward into the 2012 budget proposal such that only N1.3tr out of the total budget of N4.75tr is available for capital expenditure. Meanwhile the presidency is budgeting N1.8b to maintain ‘existing furniture, office and residential quarters’, N1.7b for travel (N724m domestic, N951m international), a ministry has budgeted N2.5b for ‘citizens call centers’ whilst the ministry of agriculture has budgeted N1.2b to incorporate commodity marketing companies. Stationery, refreshments and snacks in the presidency will consume about N2b, miscellaneous spending by the presidential villa alone totals about N1.7b for food, honorarium and something called welfare packages. The SGF and head of service will also receive over N2.5b for miscellaneous expenses including about N300m for welfare and N270m for security votes. These are nothing but misplaced spending priorities!
Moving on to the components of the so called N1.3tr fuel subsidy (by end of October 2011) the government is bent on removing, we can ignore the fact that no one in government has been able to analyze and substantiate how the amount of the subsidy ballooned or skyrocketed from the earmarked amount of N240b or between of N300-N500b in the last four years, to the N1.3tr now and focus on the fact that both the government and the people have agreed that the process and system of subsidy payments are corrupt and fraught with fraud. So the question is why this government is not as anxious to investigate and charge all those found to have abused the system as it is determined to remove the subsidy.
Meanwhile government has also budgeted about N1,147 billion (not N922 billion!) for the security sector. Ordinarily, given that security of lives and property is arguably the most important function of government, no one will quarrel with the magnitude of this provision for national security per se but for the fact that like everything handled by this administration, it is riddled with secrecy, lack of transparency and corruption. People are demanding for the so called security votes to be made more transparent and for competitive bidding to be the norm for all national procurements in accordance with the Public Procurement Act. So at a time when the entire country is under siege from attacks by insurgents, religious fanatics, armed robbers, kidnappers and militants alike, including the unfortunate and condemnable massacre of innocent citizens in sacred places of worship, the government chose to worsen the mood of the nation by unilaterally removing the fuel subsidy.
In response to the widespread anger, the government in yet another show of insensitivity and incompetence, announced a so called ‘SURE’ package to ostensibly alleviate the suffering of the citizens but if truth be told, the so called ‘SURE’ package is founded on unsure, unsound and uncertain grounds. But for the fact that it may not be politically correct to accuse the government of embarking on a grand 419 scheme, the SURE program is close to being a mirage if only because not a single naira provision has been made in the 2012 budget for the program in its entirety. So it is bad enough that the government blatantly violated our constitution by admittedly expending more than N1.3tr on fuel subsidy without legislative approval or appropriation, but it is taken to the point of absurdity that the government will now openly announce and publish an elaborate program of spending as detailed in the SURE program without any appropriation whatsoever.
This is why the people must see the Jonathan administration for what it is. The excuse that the government plans to submit a supplementary budget is clearly an afterthought that should be out rightly dismissed. In any case, the 2012 revenue projections already assume zero deductions for subsidy and still contains nearly N1 trillion as deficit, so where will SURE get the revenues to fund it? We should cross that bridge if and when we get there if only because a bird in hand is worth 10 in the bush.
For the government to offer a so called palliative that has not even been submitted as a budget proposal is as deceptive as it is a case of medicine after death given that the people’s suffering started as far back as the 1st of January when those that travelled for the holidays were and are probably still stranded. The unaffordable price increases that were occasioned by the removal of the subsidy with which necessities such as transport and food were immediately affected are present and continuing and no one knows how many will not be alive to benefit from the so-called palliatives.
The government needs to apologize to Nigerians and go back to the drawing board. Nigerians, including this writer, are not against deregulation per se and if any example of shoddy government is needed, it is to be found in this current impasse of subsidy removal. Deregulation is a package of transition from public monopoly to competitive market. Necessary ingredients for this transition include at the barest minimum; (1) Well articulated policy review (2) Enabling legislation to de-monopolize the sector (3) A regulatory agency that will supervise the sector and implement the program (4) Attracting and licensing of private sector providers in the sector. That is what we did in the BPE with the telecommunications sector, and now the electricity industry.
Clearly when the Jonathan administration’s approach to this issue is measured against the foregoing minimum 4 ingredients, it is glaringly obvious that what we have is, at best, a knee jerk approach rather than a well thought out deregulation program. If not, who is the regulatory agency for the deregulated downstream petroleum sector? If the answer is PPPRA, is the agency well equipped and ready for this task? And where are its program? And why was the petroleum industry bill not enacted prior to the subsidy removal? Who are the private sector competitors that will replace or augment the moribund publicly owned refineries? Are we to continue to depend on the imported refined products as a substitute for local value addition and job creation? These and more are the reasons why the people have embarked on the peaceful protest against subsidy removal.
As can be summarized from the foregoing points, there can be no rational economic justification for the subsidy removal until the wastages in government have been curtailed if not eliminated, those that abuse the system have been penalized or sanctioned; just as there can be no political or social justification until a consensus has been reached by the people that petroleum products should be priced at the opportunity cost. It only remains to also state that the legal issue of whether or not the ongoing protest is legal is an issue of semantics simply because the injunction that the government procured from the National Industrial Court is only to preclude organized labour from calling for or embarking on a national strike. It is submitted that this is not just a strike but a peaceful protest that goes beyond organized labour.
This in essence is the thesis of this submission that the right to protest in support of the popular will is an inalienable, fundamental human right that can never be abridged or abrogated by any court; such that were organized labour to recall their members from the national strike, this nationwide peaceful protest will continue unabated. The government is duty bound to protect its citizens and see that no protester is harmed, so a situation where thugs are attacking and vandalizing the NLC offices or attacking unarmed youths in Abuja should be looked into by the government. Overwhelming majority of Nigerians are not just protesting against the removal of the fuel subsidy but against bad governance that manifests itself in the pervasive insecurity of lives and property, widespread corruption and unacceptable huge cost of running the government.
In conclusion, both houses of the National Assembly have called on the executive arm of government to respect the popular will and not only reverse its position on removal of fuel subsidy but to also begin to address itself to the urgent pressing issues of corruption, insecurity and bloated cost of governance. This is the popular will that cannot be wished away. President Jonathan was wrong to have dared the people’s resolve. Now that he has been confronted with mass protests, it is in the collective best interest for him to begin to show that he is a democrat and a leader by respecting the popular will. The sooner the better. Worse still, the government sought to save about $7b from subsidy removal whilst the country is losing between $1 - $2b daily by way of lost GDP from the nationwide protests. Is this not a case of penny wise pound foolish? The answer is President Jonathan’s call and not that of his cabinet and advisers.
This week it was discovered that the Ministry of Finance and Budget Office had pulled the 2012 Budget Proposal from the internet, thereby restricting public access to these documents. In the interest of public accountability, we have created a full archive of these documents under our Primary Resources section. Please feel free to read through the library of these documents and help us track down waste and inflation.
In the year 2011, the 774 Local Governments and the 6 Area Councils (LGAs) in Nigeria received almost N1trillion (about $7billion) from the Federation Account, which is equivalent to the entire annual budgets of Burkina Faso, Rwanda, Burundi and Togo combined. These transfers were to enable them carry out their functions, which include the administration of primary education and primary health care, construction of markets and boreholes, and rural development in general. Most Nigerians would agree that is little or nothing to show for this huge transfer of free cash to the LGAs. It has not always been this bad.
Between 1955-1965, LGAs (or Native Authorities as they were then called) were responsible for about 12 per cent of the public expenditure in the country, equivalent to almost 10 per cent of the GDP. But today, they gulp about 21 per cent of our national revenue without commensurate results for the subventions that they collect from the federation. And worst still, with few exceptions, they now entirely depend on transfers from the centre for their own expenditures. They no longer generate revenues like in the first republic and believe they are created simply to collect monthly allocations to spend on politicians, thugs and families. It would be an understatement to say that the LGAs performance of their core functions has been disappointing, nearly criminal.
The primary responsibility of local governments as enshrined in the constitution is rural, urban and community development as outlined earlier. However, rather than working to reduce poverty by providing these services to their people, they end up just paying salaries of primary school teachers, and not much more. While our LGAs contribute a negligible percent of our GDP and employ less than 2 per cent of the employed population, in the United States, counties, which are the equivalent of our local governments contribute about 20 percent of the GDP and employ about 10 percent of the employed population. Everything from elementary schools to international airports are developed and under the control of counties, municipalities and city councils in the US!
In South Africa and Indonesia, local governments have the responsibility to provide an expansive range of services like those in Nigeria, but they are largely fiscally and political autonomous, as only about 14 percent of their revenue comes from central government transfers, compared to the almost 90 percent in Nigeria. Local governments and council elections are independently conducted without interference from the provinces. Unlike, Nigeria, countries, taxes constitute by far the largest source of revenues, comprising on average of 52 percent of total revenues. Council elections are not decided by the states/provinces, but by community arrangements that guarantee free and fair emergence of credible leadership. The instances above point to the direction of reform of our broken and dysfunctional LG system.
In preparing this piece, I conducted an informal straw poll of the perception of the respective LGAs performance on a scale of one to hundred among my circle of friends, relations and work colleagues. It is admittedly unscientific and the sample small, but quite insightful. First, local governments were scored about 10 per cent in the performance of their five core constitutional functions and the sample believed that they show no sign of improvement. Secondly, the overall performance of LGAs has slipped considerably from about 40 per cent in 2005 when the average LG got N60 million monthly from the centre, to less than 10 percent in 2011, when they got an average of N100 million monthly from the Federation Account!. What I learnt from the sample is that most LGAs only pay primary school teachers' salaries and nothing more out of their core functions. No respondent gave any LGAs more than 40 percent in any service delivery area - a failing grade in any exam anywhere in the world. It is therefore no surprise that our rural areas are so underdeveloped.
It was General Murtala Muhammad regime that inaugurated and subsequently accepted the recommendations of the Dasuki Local Government Reforms Committee in 1975. The administration promulgated the enabling law effective on October 1, in 1976 to entrench Local Governments as an independent and self-accounting tier of government. The reform's two most important priorities were to reduce development inequality (between urban and rural areas) and to increase political accountability across the country. We then had 360 LGAs in the 19 states of Nigeria.
To carry out these efforts, the 1979 constitution assigned to the LGAs some substantial resources, along with political and economic responsibilities. They were required to provide most public services with the exception of higher education and security. The essence was to create strong political accountability, democracy and a sustainable political culture.
What went wrong with the Local Government reforms? Why has the responsiveness of LGAs to the needs of their citizens been deteriorating as their revenue-dependency increasing? And how did Commissioners of Local Government become the best friends of State Governors, almost always, governors-in-waiting under this democratic experiment?
The reforms failed because the federal government itself and the states, in pursuit of political maneuverings and a share-the cake mentality changed all that. First, we allowed the number of LGAs to spiral to 450, then 78), while the number of states nearly doubled from 19 to 36 plus FCT. Resources had to be more thinly spread across a larger number of fiscally-weak, often incompetent administrative units. Then, more recently, in what looks like a reversal of our federalism and Constitution, the PDP-led central government for the past 10 years has implemented a policy, which rather than encourage LGAs to provide affordable services for their localities by strengthening their political and fiscal autonomies, has embraced the opposite: annexing them to the state governments and treating them like fiefdoms instead of independent third tier of government.
The two culprits that enabled this "annexation" of LGAs in the 1999 constitution are the creation of State-Local Joint Account and the State "independent" electoral commissions! These have undermined economic development and political accountability. Obviously, neither the states that have swallowed the LGAs by collecting their monthly subventions nor the local governments themselves are offering any core service to Nigerians. These sections of the constitution need to be revisited.
There also seem to be a lack of commitment from the federal government to make local governments truly functional. A wide range of complex constitutional and technical issues needs to be addressed. There are confusions about the roles and responsibilities entrusted to local governments, some of which they lack the technical and administrative capacity to execute. Limited legitimacy and legal obstacles hinder them from exercising many of their functions. Thus the impact of the whole process in terms of service delivery, local economic development, poverty alleviation and entrenchment of democracy is doubtful and probably not feasible at all under the current constitutional framework.
Effective LGA administration can strengthen democracy in Nigeria, improve the quality and cohesiveness of government, entrench democratic values, improve the effectiveness and efficiency of service delivery and create an enabling environment for local economic development. The main advantage of LGAs is that due to their relative proximity to people, scale and scope limitations, they can be more efficient (or at least as responsive) at providing certain public services compared to states and federal government if properly organized and resourced.
Local governments have a significant impact on population and employment growth of their areas of jurisdictions. How the grassroots are governed matters for local economic growth. They could also stimulate income growth for the people if they perform their core functions effectively, especially in the current economic crises marked by high unemployment. We need to economically empower more people in the rural areas, create an environment for good jobs (formal and informal) and enable decent wages, benefits, good living conditions and prosperity. Local governments must create job programs that take advantage of the competitive advantage and resource endowment of each community. A city, town or village (by community efforts) can create jobs in both the private and public sectors to put people to work to grow the local economy. The Town and Village Enterprises TVEs of China, floated by local governments are good models of rural industrialization and employment opportunities.
There is the need to constitutionally mandate LGAs to invest more on projects that actually create a large number of good jobs for their people while providing them with the crucial services. LGAs dish out billions of naira in incentives as part of their poverty eradication and empowerment efforts, but with few or no sustainable jobs to show for them. They need to prioritize direct public spending by local governments on programmes that stimulate economic activity and therefore create jobs. Some of these initiatives include building and rehabilitation of infrastructures, investments in access roads, and renovating/upgrading of schools facilities, health centres, motor parks and markets.
For LGAs to be effective, the overall governance system should essentially have the following features: a balanced set of political, administrative and fiscal powers. They must be able to play their role in an overall conducive structure of democratic governance and practices, e.g. with fair and free elections that give council members legitimacy. Intergovernmental linkages should be adequate, including redefined federal and state governments roles that will allow sustainable local development. Processes for elaborating development policies at local government levels must be well articulated. There should be strong upward, downward and horizontal accountability within the governance system of the local governments. This should not only ensure improved service delivery and transparency, but also offer protection against elite capture and corruption. There must be active citizenship and empowered communities so that all groups and individuals can be properly represented. People must have access to information and be able to express their views to achieve a good balance between federal, state and local governance processes. Better quality people - at political, technocratic and administrative levels need to be available to work in our LGAs, and more experienced, "retired-but-contented" public servants run for LGA positions.
Nigeria cannot develop if our LGAs are unwilling and unable to redistribute resources in favour of the poor and ensure that the poor have access to basic services. Federal agencies must be able to ensure that national poverty reduction strategies are reflected at grassroots by including and integrating them into the core function of LGAs. Monitoring mechanisms must be in place to monitor the process of governance at the grassroots, to reflect on results and make necessary adjustments in the process from time to time. In the meantime, our LGAs are best described as missing in action. And Nigeria is the worse for it. We must address this as a matter of utmost urgency.
By: Nasir Ahmad El-Rufai
In the year 2011, the 774 Local Governments and the 6 Area Councils (LGAs) in Nigeria received almost N1trillion (about $7billion) from the Federation Account, which is equivalent to the entire annual budgets of Burkina Faso, Rwanda, Burundi and Togo combined. These transfers were to enable them carry out their functions, which include the administration of primary education and primary health care, construction of markets and boreholes, and rural development in general. Most Nigerians would agree that is little or nothing to show for this huge transfer of free cash to the LGAs. It has not always been this bad.
Between 1955-1965, LGAs (or Native Authorities as they were then called) were responsible for about 12 per cent of the public expenditure in the country, equivalent to almost 10 per cent of the GDP. But today, they gulp about 21 per cent of our national revenue without commensurate results for the subventions that they collect from the federation. And worst still, with few exceptions, they now entirely depend on transfers from the centre for their own expenditures. They no longer generate revenues like in the first republic and believe they are created simply to collect monthly allocations to spend on politicians, thugs and families. It would be an understatement to say that the LGAs performance of their core functions has been disappointing, nearly criminal.
The primary responsibility of local governments as enshrined in the constitution is rural, urban and community development as outlined earlier. However, rather than working to reduce poverty by providing these services to their people, they end up just paying salaries of primary school teachers, and not much more. While our LGAs contribute a negligible percent of our GDP and employ less than 2 per cent of the employed population, in the United States, counties, which are the equivalent of our local governments contribute about 20 percent of the GDP and employ about 10 percent of the employed population. Everything from elementary schools to international airports are developed and under the control of counties, municipalities and city councils in the US!
In South Africa and Indonesia, local governments have the responsibility to provide an expansive range of services like those in Nigeria, but they are largely fiscally and political autonomous, as only about 14 percent of their revenue comes from central government transfers, compared to the almost 90 percent in Nigeria. Local governments and council elections are independently conducted without interference from the provinces. Unlike, Nigeria, countries, taxes constitute by far the largest source of revenues, comprising on average of 52 percent of total revenues. Council elections are not decided by the states/provinces, but by community arrangements that guarantee free and fair emergence of credible leadership. The instances above point to the direction of reform of our broken and dysfunctional LG system.
In preparing this piece, I conducted an informal straw poll of the perception of the respective LGAs performance on a scale of one to hundred among my circle of friends, relations and work colleagues. It is admittedly unscientific and the sample small, but quite insightful. First, local governments were scored about 10 per cent in the performance of their five core constitutional functions and the sample believed that they show no sign of improvement. Secondly, the overall performance of LGAs has slipped considerably from about 40 per cent in 2005 when the average LG got N60 million monthly from the centre, to less than 10 percent in 2011, when they got an average of N100 million monthly from the Federation Account!. What I learnt from the sample is that most LGAs only pay primary school teachers' salaries and nothing more out of their core functions. No respondent gave any LGAs more than 40 percent in any service delivery area - a failing grade in any exam anywhere in the world. It is therefore no surprise that our rural areas are so underdeveloped.
It was General Murtala Muhammad regime that inaugurated and subsequently accepted the recommendations of the Dasuki Local Government Reforms Committee in 1975. The administration promulgated the enabling law effective on October 1, in 1976 to entrench Local Governments as an independent and self-accounting tier of government. The reform's two most important priorities were to reduce development inequality (between urban and rural areas) and to increase political accountability across the country. We then had 360 LGAs in the 19 states of Nigeria.
To carry out these efforts, the 1979 constitution assigned to the LGAs some substantial resources, along with political and economic responsibilities. They were required to provide most public services with the exception of higher education and security. The essence was to create strong political accountability, democracy and a sustainable political culture.
What went wrong with the Local Government reforms? Why has the responsiveness of LGAs to the needs of their citizens been deteriorating as their revenue-dependency increasing? And how did Commissioners of Local Government become the best friends of State Governors, almost always, governors-in-waiting under this democratic experiment?
The reforms failed because the federal government itself and the states, in pursuit of political maneuverings and a share-the cake mentality changed all that. First, we allowed the number of LGAs to spiral to 450, then 78), while the number of states nearly doubled from 19 to 36 plus FCT. Resources had to be more thinly spread across a larger number of fiscally-weak, often incompetent administrative units. Then, more recently, in what looks like a reversal of our federalism and Constitution, the PDP-led central government for the past 10 years has implemented a policy, which rather than encourage LGAs to provide affordable services for their localities by strengthening their political and fiscal autonomies, has embraced the opposite: annexing them to the state governments and treating them like fiefdoms instead of independent third tier of government.
The two culprits that enabled this "annexation" of LGAs in the 1999 constitution are the creation of State-Local Joint Account and the State "independent" electoral commissions! These have undermined economic development and political accountability. Obviously, neither the states that have swallowed the LGAs by collecting their monthly subventions nor the local governments themselves are offering any core service to Nigerians. These sections of the constitution need to be revisited.
There also seem to be a lack of commitment from the federal government to make local governments truly functional. A wide range of complex constitutional and technical issues needs to be addressed. There are confusions about the roles and responsibilities entrusted to local governments, some of which they lack the technical and administrative capacity to execute. Limited legitimacy and legal obstacles hinder them from exercising many of their functions. Thus the impact of the whole process in terms of service delivery, local economic development, poverty alleviation and entrenchment of democracy is doubtful and probably not feasible at all under the current constitutional framework.
Effective LGA administration can strengthen democracy in Nigeria, improve the quality and cohesiveness of government, entrench democratic values, improve the effectiveness and efficiency of service delivery and create an enabling environment for local economic development. The main advantage of LGAs is that due to their relative proximity to people, scale and scope limitations, they can be more efficient (or at least as responsive) at providing certain public services compared to states and federal government if properly organized and resourced.
Local governments have a significant impact on population and employment growth of their areas of jurisdictions. How the grassroots are governed matters for local economic growth. They could also stimulate income growth for the people if they perform their core functions effectively, especially in the current economic crises marked by high unemployment. We need to economically empower more people in the rural areas, create an environment for good jobs (formal and informal) and enable decent wages, benefits, good living conditions and prosperity. Local governments must create job programs that take advantage of the competitive advantage and resource endowment of each community. A city, town or village (by community efforts) can create jobs in both the private and public sectors to put people to work to grow the local economy. The Town and Village Enterprises TVEs of China, floated by local governments are good models of rural industrialization and employment opportunities.
There is the need to constitutionally mandate LGAs to invest more on projects that actually create a large number of good jobs for their people while providing them with the crucial services. LGAs dish out billions of naira in incentives as part of their poverty eradication and empowerment efforts, but with few or no sustainable jobs to show for them. They need to prioritize direct public spending by local governments on programmes that stimulate economic activity and therefore create jobs. Some of these initiatives include building and rehabilitation of infrastructures, investments in access roads, and renovating/upgrading of schools facilities, health centres, motor parks and markets.
For LGAs to be effective, the overall governance system should essentially have the following features: a balanced set of political, administrative and fiscal powers. They must be able to play their role in an overall conducive structure of democratic governance and practices, e.g. with fair and free elections that give council members legitimacy. Intergovernmental linkages should be adequate, including redefined federal and state governments roles that will allow sustainable local development. Processes for elaborating development policies at local government levels must be well articulated. There should be strong upward, downward and horizontal accountability within the governance system of the local governments. This should not only ensure improved service delivery and transparency, but also offer protection against elite capture and corruption. There must be active citizenship and empowered communities so that all groups and individuals can be properly represented. People must have access to information and be able to express their views to achieve a good balance between federal, state and local governance processes. Better quality people - at political, technocratic and administrative levels need to be available to work in our LGAs, and more experienced, "retired-but-contented" public servants run for LGA positions.
Nigeria cannot develop if our LGAs are unwilling and unable to redistribute resources in favour of the poor and ensure that the poor have access to basic services. Federal agencies must be able to ensure that national poverty reduction strategies are reflected at grassroots by including and integrating them into the core function of LGAs. Monitoring mechanisms must be in place to monitor the process of governance at the grassroots, to reflect on results and make necessary adjustments in the process from time to time. In the meantime, our LGAs are best described as missing in action. And Nigeria is the worse for it. We must address this as a matter of utmost urgency.
Last week, one of my staff who travelled from Abuja to Lagos paid about N60, 000 naira (almost $400) for the round trip. The 100 minute flight both ways costs around $100 in other parts of the world and is usually efficient and on schedule. In this case, the flight was delayed for about 7 hours on the return leg with no explanation, apologies or compensation. This and similar unpleasant stories are what comes out from our airports daily. The Nigerian aviation industry is characterized by unaffordable, unavailable and mostly unsafe air transport services. If one were to describe the Nigerian aviation sector, the words would be poor standards of service and consumer rights; poor connectivity; reduced competitiveness and high costs.
Aviation started in Nigeria in 1920 as a military transportation service, when a British Royal Air force aircraft landed on a polo field in Maiduguri. Civil air transportation started in 1946 with the establishment of West Africa Airways Corporation, and KLM first flew into Kano on the first international flight shortly after. This was consolidated by the establishment of Nigeria Airways in 1958. The aviation sector grew steadily and by the early 1990s there were over 30 airlines in Nigeria. However today, there are only 16 airlines in Nigeria that operate scheduled domestic operations, and all of them are all swimming in troubled financial and operational waters.
Why has aviation in other countries flourished while ours has floundered?
Today, the global airline industry consists of more than 2,000 airlines operating more than 23,000 aircraft and providing flights to over 3,700 airports. The growth of air passengers globally has averaged over 5 per cent annually for the past 30 years. But the case of Nigeria seems atypical from the global trend – diminishing airlines, deteriorating airports with obsolete facilities and low or near-zero passenger growth.
An estimated N300 billion annually is currently remitted abroad by the aviation sector compared to the N15 billion reported revenue earned by our aeronautical authorities, domestic airlines and associated domestic service providers. This is principally because foreign airlines carry up to 98 per cent of our international passengers annually and that virtually everything needed for air transport operations including aviation fuel, are imported at very high costs.
More than one out of every forty human beings is Nigerian, but largely because of our immature aviation market, we remain relatively isolated from much of the rest of the world. There are only 74 services per week from all of Western Europe and about 5 per week from America to Nigeria. Even from Gulf region whose aggressive national airlines dominate markets in other parts of the world, there are only 21 weekly flights to Nigerian airports; roughly equal to the weekly offer by Emirate Airlines alone to Chennai in India!
Despite Nigeria’s relative wealth, we are ranked very low in terms of propensity to travel and just barely ahead of war-torn Afghanistan. Nigeria’s 24 airports are ranked 54th globally while Indonesia and South Africa that both have 230 and 147 airports are ranked 10th and 14th respectively. Last year, with our 11 airlines, 24 airports and over 10 international airlines flying into Nigeria, we recorded some few hundred of tons of cargo and about 9 million air transport passengers, just 0.4 percent of the 2.4 billion global air passengers in 2010.
With passenger to population ratio of about 6 percent compared to the USA’s almost 98 percent and Japan’s 89 percent, accessibility to air transport is still very low in Nigeria. About 95 percent of our cities remain unreachable by air, domestic fares are more than 200 per cent higher than those obtainable in other parts of the world and therefore unaffordable to the bulk of the population. In terms of airline and airport growth, as the largest country in Africa and the second biggest economy, we are lagging behind in virtually every measure of availability, affordability and access to air transportation.
Air transport can play a key role in the economic development of Nigeria and in supporting its plans for long-term economic growth if it is properly harnessed. It can help make Nigeria truly an integral part of the global economy (not just as a dependent part) by boosting the productivity and growth of the economy through better access to markets, enhancing links within businesses and providing greater access to our resources for foreign markets.
Aviation has improved the economies and international outlooks of some countries where the sector has been properly positioned. Examples are USA, UK, Germany, France, Dubai (UAE), Malaysia, Singapore and South Korea. Therefore, maintaining and improving our aviation system is essential for our economic growth, social cohesion and job creation. But it must be done in a prudent, planned and efficient manner in partnership with the private sector to yield the desired results.
The positive economic effects of airline industry start from its direct employment to the less direct but very significant impact on lowering the cost of logistics and doing business, which lead to more employment growth. In fact, it has been widely acknowledged that other players in the aviation chain are far more profitable than the airlines which collect and pass on fees and revenues to them from ticket sales. While airlines generally operate in thin-margin, high volume business as a whole, and earn just about 6 per cent return on capital employed, airports can earn up to 10 percent, catering companies 13 percent, handling companies 14 per cent, airplane lessors 15 per cent, airplane manufacturers 16 per cent and global distribution companies more than 30 per cent return.
Nigeria can gain enormous positive benefits by investment in aviation infrastructure and services, particularly in airport developments across the country to connect more of its cities to the global aviation network. By increasing a country’s connections to the global air transport network, investment in aviation can boost its long-term productivity and economic growth through creating more direct and ancillary jobs. But, like other airlines in many developing countries, Nigeria airlines are faced with the problems of high capital costs, especially for acquiring new aircraft. Paucity of funds and high interest rates have grounded many promising airlines. Only the CBN's lower-interest, aviation refinancing funds has kept the airlines alive! A more permanent solution is needed.
Operating costs are also high with multiplicity of charges, levies and taxes. There is also the problem of aircraft insurance that gulps tens of millions of dollars of carriers’ investment simply because only a few insurance companies underwrite aviation risks in Nigeria. That is not all. The airlines have their own internal operational issues, cash leakages, and poor quality of human resources to address for the industry to thrive.
Increased fuel costs arising from the fraudulent subsidy system for the JET fuel has also led to an artificial cost escalation - some 50 to 60 per cent higher than what obtains globally. Major refineries in the world no longer produce kerosine but Jet A1. Our fuel merchants import Jet A1 as DPK and sell to marketers at as subsidized kerosine at about N45 per liter, who in turn filter it and sell it to airlines as aviation fuel at about N190 per liter. This has escalated the cost of air travel in Nigeria, resulted in reduced passenger volumes, lower airline profitability, and overall aviation industry stagnation. The culprits are all well-known. And the authorities know what needs to be done. Government must do its part to improve policies, regulation and infrastructure.
The poor infrastructure capacity in terms of airports quality, technology and safety coupled with the growing costs of maintaining and expanding them are also part of the most critical problems of our aviation sector. The real bottlenecks of our air transportation system are lack of navigation facilities at existing airports and the cost of providing them for the new airports (if they are to be built). The resources and time to improve the infrastructural capacity of our airports are both scarce and both are on tight budget. And the prospects for substantial relief on this front are not good for now – at least for the next few years as the Federal Ministry of Aviation's capital budget of less than N50 billion for 2012 is unlikely to address much of these.
Government needs to take a number of measures to step up airport infrastructure in the country. It must devise a modernization plan with a view to modernize all the existing 24 airports. And it must work out a funding plan for building new airports to open up and liberalize the country’s aviation system – by creating accessibility in order to increase the market share for more airlines to compete. There needs to be an effort towards optimum utilization of the existing airports by addressing their problems of outdated infrastructure, inefficient ground handling systems and lack of night landing facilities in some airports, and poor passenger amenities. Private sector participation in the modernization program of the major airports must be sought and encouraged so that like the MM2 terminal in Lagos, more airports construction is undertaken through better structured public-private partnerships.
Improving air connectivity across the country with, at least, three major cities in each state connected by efficient direct flights should be the long term target. This can be achieved through new airport development and improvement projects, increasing passenger traffic and development of downstream jobs. An increase passenger volume will mean better profitability and sustainability of the operation of the airlines. Enhanced connectivity will improve the nation's labour productivity and logistic efficiency.
Nothing here is new or unknown to the Federal Ministry of Aviation. The Obasanjo administration's Presidential Task Force on Aviation Industry headed by AVM Paul Dike identified all the issues in March 2006, making 122 recommendations whose implementation would have put or aviation on a safe, viable and sustainable path. Under the leadership of my friend and brother, Femi Fani-Kayode, vigorous implementation actions began which improved efficiency and safety in our skies. Femi has been persecuted since 2008 for stepping on certain powerful toes to implement the Dike Report. What a country!
The authorities in Nigeria need to revisit the implementation of the Dike Report to ensure the healthy growth of our airlines, airports, and related services. There is need to initiate the building of our the avionics and equipment production capabilities, and the human resources for the industry. The government and the statutory authorities have critical roles to play in achieving this vision. The alternative is to be left with airports and facilities that are old, obsolete and irrelevant, airlines on the brink, and a hapless nation searching for jobs for millions of hopeless and restive youths. The ball is in the court of the authorities.
Let me start by apologizing for the inevitable absence of this column in the past two weeks; just as I would also like to express sincere gratitude to all those that visited, called or sent condolence messages to my family for our bereavement.
Moving on to the subject of this discourse, in the light of the passionate debate on the removal of fuel subsidy with which the country has been bedevilled in previous couple of months; the issue of whether the 2012 Appropriation Bill is a budget of fiscal consolidation or retrogression is as timely as it is topical. Transformation is a huge word that the Jonathan administration thoughtlessly use to describe its aspirations. Is there anything transformational about the 2012 Budget proposals?
In the course of presenting the Draft Budget, President Jonathan in paragraph 1 of 81 of his address states "this budget is a stepping stone to the transformation of our economy and country in our walk to economic freedom" and concludes in paragraph 76 thereof that "Mr. Senate President......the Proposal I lay before you this day seeks to sustain sound micro-economic growth that will translate to achieving socio-economic transformation, and gainful employment for our people".
Meanwhile, and perhaps by divine providence, in the afternoon of the same Tuesday, 13th of December; the News Agency of Nigeria (NAN) reported that Nigeria's biggest power generating plant, Egbin thermal station, with an available capacity of some 1,080MW out of the nation's meagre total of about 4000MW has been shut down on account of poor maintenance!
Thus, whilst the President was preaching a sermon of transformation in the National Assembly, Nigerians were simultaneously experiencing practical retrogression. Worse still, the raging debate on the removal of fuel subsidy to which the President was reported last weekend to have said he would "rather confront mass revolt than keep the subsidy" raised its ugly head by way of deaf silence with which the issue was foreclosed as not a single kobo was provided for subsidy in the so-called budget of transformation; just as not a single word on the subject was included in the 81-paragraph Proposal. Is this transformation or retrogression?
In order to fully answer the question, we shall focus for now on just four elements of the budget - Recurrent Expenditure, Power Supply, Security and Job Creation. This will enable us to have a meaningful dialogue on whether the country is making progress (let alone transformation) from the advent of the YarAdua/Jonathan administration in 2007 up to the 2012 Budget Proposal.
RECURRENT EXPENDITURE:
In the 2007 budget, spending on capital investments was dramatically increased from N567 billion in 2006 to N830billion, representing a year-on-year increase of 46%; whilst total recurrent expenditure accounted for 64% of the total budget. Since then, the annual budget has made a quantum leap of 107% from N2.3 trillion to N4.75 trillion. Concurrently, the capital element grew from by slightly less than 60 percent to N1.3 trillion, whilst recurrent expenditure has ballooned by over 133% from N1.47 trillion to N3.4 trillion, thereby outgrowing the pace of the total budget by over 25%.
Although President Jonathan understands the critical importance of putting a cap on government spending when he states in his 2012 Budget address that "this underscores the need to intensify our efforts to curtail recurrent expenditure, which we have already embarked upon under the policy of fiscal consolidation as evident from the Medium Term Fiscal Framework. The share of recurrent expenditure in the 2012 Budget proposal is 72% down from 74.4% in 2011, and we intend to continue in this downward trend"; the statement is at best a half-truth if only because recurrent expenditure nonetheless went up by a staggering sum of N91 billion between 2011 and 2012.
In the circumstance, Nigerians are still saddled with a bloated administration where over 70k out of every Naira of the near N5 trillion revenue is spent on running the government; consumed by about 1 million people that work for the Federal Government, whilst the same administration is imposing a punitive tax of N8,00 on every man, woman and child by unilaterally 'withdrawing fuel subsidy' The government has dared the people to put up or shut up. Would it not have been transformational for the size of the government and the waste and corruption of its officials to have been reduced as opposed to eliminating any subsidy?
POWER SUPPLY:
As alluded to previously, Egbin power plant has been shut down, meaning we now generate less than 3,000MW for a population in excess of 160 million. This means that power generation for each Nigerian is less than 20 watts of electricity whilst a Ghanaian enjoys about 4 times at 88 watts; a Brazilian enjoys almost 25 times at over 500 watts; a South African enjoys over 50 times at about 1,093 watts not to talk of an American at about 150 times at 3,252 watts of power generation!
In the "Road Map for Power Sector Reform" that was launched in August 2010 by President Jonathan, it was started that "the medium-term expectation is that 14,000MW of Power generation capacity would be available by December 2013". The additional 10,000MW Power that must be generated for this target to be accomplished would cost about $10 billion. Even if we assume that the Independent Power Plants (IPPs) and other power plants under construction would add about 5,000MW to the existing pool, there exist nonetheless a shortfall of 5,000MW that will cost $5 billion, whilst only N161billion - a little over $1 billion is the total earmarked for recurrent and capital spending of the power sector in the 2012 budget. Where is the transformation?
Clearly, in the unlikely event that we are able to appropriate $4billion in the 2013 budget for Power sector; we will still not be able to meet the said target if only on account of the gestation period of a couple of years that is required for power plants to be built. Here again, the concept of transformation is more of a wishful thinking rather than a realistic prospect.
SECURITY:
Security has become our primary challenge as a nation, and the budget proposal loudly earmarked N922 billion for the sector. Compared to infrastructure (N774 billion)and Human Capital (N714 billion), it looks sizeable. What is not apparent to many people is that the amount proposed is about N250 billion LOWER than the N1,174 billion budgeted to cater for the capital and recurrent needs of our for armed forces, police, the NSA, amnesty programme and the para-military agencies that make up our security sector. Today, our civil intelligence and security system has collapsed with the administration having to deploy the Nigerian Army in active, but totally inappropriate combat duties in 34 out of 36 states and the FCT. Our Army has never been so deployed in as many states even during the civil war!
And the spending of over N1.1 trillion on "security", about 26% of the 2011 budget has brought nothing but greater insecurity, needless deaths and destruction of property of Nigerians. What has happened to our internal security is certainly retrogression, not transformation, and proof of a totally inept and dysfunctional governance!
JOB CREATION:
The only tangible element of direct intervention by the Federal Government to create jobs was the N50billion that was set aside in the 2011 Appropriation Act for the Youth Enterprise With Innovation in Nigeria (YOUWIN) program. The program was to provide a one-time equity grant for 1,200 selected aspiring entrepreneurs to start or expand their business initiatives and generate about 100,000 new jobs over a 3 year cycle.
Although the program was launched with a lot of fanfare by the President in October of this year, every available information so far reveals that not a single job has been created even though the year 2011 is coming to an end. This issue of non-implementation typifies the majority of the new initiatives and capital projects that were contained in the 2011 Appropriation Act. Worse still, the YOUWin program, as designed, is flawed with many defects as it is in totality a drop in the ocean, given that in the most optimistic scenario, only 100,000 jobs will be generated in 3 years for the teeming unemployed Nigerian youths of at least 25 million.
One of the major flaws of YouWin is that the so-called 1,200 young entrepreneurs will receive "an equity grant" that is tantamount to a government largesse or gift without any pre-identified objective criteria for selecting the winners and sustaining the program without new capital contribution by the government. Thus, far from transforming the previous PDP government-led largesse known as National Poverty Eradication Programme (NAPEP); the Jonathan administration has simply replaced one dubious scheme with another; with some arguing that the YOUWin programme is worse than the NAPEP because some of the projects under NAPEP such as the Keke NAPEP are visible for all to see whereas beneficiaries of the YOUWin programme will have limited identity, with little or nothing to show for their jackpot.
In closing, the four areas of Recurrent Expenditure, Power Supply, Security and Job Creation elements of the 2012 Appropriation Bill analyzed above provide answer to the question as to whether the 2012 Budget is that of Transformation or Retrogression. You be the Judge!
FIXiNG THE 2011 BUDGET:
Can this retrogressive budget be fixed? Of course.
It is a proposal which only becomes law when enacted by the National Assembly. As suggested on Twitter by my brother Bashir Yusuf Ibrahim, we must all rise up and call our representatives and senators to transform the proposal into a sensible, fiscally-sustainable budget by effecting the following amendments: (1) reduce the oil production assumptions to a more achievable 2.35 million bpd, and transferring all excess earnings to the sovereign wealth fund (2) raise the benchmark oil price to $75 per barrel, and include the increased revenue as a line item to subsidize the selling prices of kerosine and petrol in 2012(3) reduce recurrent budget proposals of all MDAs including the Presidency, the National Assembly and INEC by at least 30% and transfer the savings to the capital components of infrastructure, civil security and human capital sectors, 4) raise import duties of agricultural commodities that we can produce domestically to levels that existed in 2007 to encourage our farmers, and (5) include a line item in the budget for a national price support system in lieu of fertilizer and other dodgy subsidies in agriculture.
The ball is now in the court of our legislators to be on the side of the ordinary Nigerian, and save President Jonathan from the anti-democratic path he has chosen to tread. He may be prepared to face a popular revolt, but only God knows how that will end. Avoiding it by doing what is fair, just and reasonable in the circumstances is what pragmatic leadership is about. We are waiting and watching. 
The gas component of the Nigerian Oil & Gas Sector is vast in quantity and potential - much more than oil, yet it remains sub-optimally developed. Compared with the estimated crude oil reserves of 40 billion barrels, our gas deposit is some 184 trillion cubic feet (tcf) - about the 7th largest gas reserves in the world. Our gas quality is high and particularly rich in liquids and low in sulphur. There are however other structural weaknesses in the sub-sector that are likely to constrain the extraction of our gas and conversion into real developmental benefits for the nation. A typical constraint of extracting the large gas reserves is that about 40% of it is stranded in gas caps and not accessible until much later in time, after the production of crude oil has been completed.
Though most of the gas being produced today is associated with crude oil production (associated gas), most of it is not utilized due to poor infrastructure, short-sightedness and is therefore flared. The monetary value of this wasted gas which can generate between 40,000 and 60,000MW of electricity, enough to power the whole West African sub-region. In monetary terms, it is estimated at between $0.5 billion to $2.5 billion per annum and the negative environmental impact, mainly carbon dioxide emissions, amount to roughly 35 million metric tons per annum, about 25% of the world's total. Not all the news from the gas sector is hot air!
With the approval of a National Gas Policy in 2005, and the completion of Gas Master Plan by the NNPC in 2007, the sub-sector is now poised for unprecedented growth if the relevant legal, regulatory and fiscal frameworks are put in place as a matter of urgency. If that is done, output is expected to grow from about 5bcf/d in the recent past to the projected 2011 figure of over 20bcf/d, one of the world most aggressive gas development programs in the world.
Why is gas in Nigeria which we have in greater abundance than oil, treated as crude oil's poor cousin? What are the challenges faced by investors in the sector? Has the dominance of IOCs and government agencies in the sub-sector's value chain negatively affected its growth? What do we need to do to remove the binding constraints in the sub-sector? We will look at these questions briefly today.
Despite the fact that gas is now of age globally, more importantly a more dominant natural resource than crude oil in Nigeria, gas is yet to be a recognized commodity in its own right. Licenses purely for gas exploration are few and far between, if any. A major international gas company found commercial quantities in the Gombe Basin in 2007, but further investment has stalled due to the confusing legal and fiscal framework. In reality, gas is subsumed within the 31 pieces of legislation ostensibly designed largely for crude oil exploitation. The legislations were enacted when gas was a side-show to crude oil. While there are several licenses issued for prospecting crude oil, there is no such framework for gas exploration.
The biggest gaps in the sub-sector have to do with the absence of legislation clarifying the role of government, its relationship with the private sector and its position on several issues of interest to prospective investors – including gas pricing, fiscal terms, access terms and purchase and supply agreements, etc.
Regulatory and political risks similar to the ones facing oil exploration pervade the gas sub-sector. Under the existing sectoral structure, The Minister of Petroleum Resources through the Department of Petroleum Resources (DPR) regulates the gas sub-sector. The DPR appears to lack financial or operational independence, as well as the technical capacity to adequately regulate the gas sub-sector; nor really designed and configured to regulate same.
At the operational level, the Nigerian Gas Company (NGC) a subsidiary of the NNPC set up take the lead in gas exploration, gathering, transmission and marketing is saddled with multiple and often conflicting roles which include: gas purchaser, gas transporter, system operator, concession granting agency/downstream enabler and handler of policy issues. The overwhelming government involvement through NNPC/NGC resulting in vertical integration of the gas sub-sector is antithetical to its effective development.
This situation is worsened by lack of clarity on upstream tax consolidation with downstream capital expenditure by integrated oil and gas incumbents. This mix-up has put new downstream gas entrants without affiliation to upstream entities in a competitive disadvantage, and discouraged development of the sub-sector. As it is with crude oil licensing, prospecting and exploration, the gas sub-sector lacks economy-wide or sector-specific antitrust legislation as the regulators (Minister/DPR/NGC) are not independent of key stakeholders in the industry.
The levity with which gas exploration is handled by successive government in Nigeria is a major reason why the problems of the country’s power sector have remained intractable to date. The country appears like the proverbial meat seller that continues to eat bones. Until ongoing research into alternative technologies for power generation produce cost-effective solutions, natural gas will remain, for Nigeria, compared to hydro, coal and fuel oil, the cheapest and most environmentally-friendly feedstock for electricity. Yet, in spite of the rich abundance of gas in our soils, the failure of successive administrations to harness it for electricity on a massive scale comparable, say, to South Africa’s use of coal (amounting today to almost 30,000 MW out of South Africa’s 40,000 MW), is a matter of great shame and regret.
Recently, the Oil and Gas Reform Implementation (OGIC) which was constituted and coordinated by the BPE, and which drafted the National Oil and Gas Policy, estimated that we imported about $1 billion worth of diesel for private or self-generation in 2006 - an avoidable loss in foreign exchange, apart from being a cost to Nigerian industry and private consumers. This is of course, quite apart from the losses, also estimated at about another $1 billion, lost by the national economy due to unreliable electricity supply.
New investment in gas-fired power stations will have a catalytic effect on the growth of a domestic gas market and vice versa. These two sectors will stand or fall together because, unlike in temperate countries, there are no domestic applications for gas outside electricity, LPG for cooking, and (maybe, one day) automotive consumption. LNG export, a business that provides modest employment opportunities and benefits that goes mainly to project sponsors, offer negligible socio-economic value added, compared to electricity and LPG. For now and into the foreseeable future, therefore, gas-to-electricity is the only viable application that has the capacity to bring about massive cross-sectoral social and economic benefits to Nigeria.
Another challenge, however, is to deliver gas to the power sector at a price which does not translate to unreasonably high electricity tariffs, while at the same time ensuring that investors in both power projects and the construction of gas pipeline infrastructure secure adequate returns on their investments. We all know that PHCN, which currently consumes 70% of Nigeria’s domestic natural gas supply from NGC, is unable and unwilling to pay cost-reflective prices for the gas that are supplied to it. PHCN pays =N=12 per mmscf of gas to NGC, while private sector customers such as WAPCO pay between =N=194 and=N=235 per mmscf. Yet, PHCN has managed to accumulate a debt of =N=6 billion over the years on gas feedstock supplied to it. Let me add, perhaps obviously, that NGC entertains little hope of this debt being liquidated very soon, and yet it must continue to supply to ensure that power outages are not worse than they currently are.
The irony, which graphically demonstrates the current impossibility of PHCN and NGC’s effective contribution to real socio-economic development, is that NGC, in spite of being systemically unable to collect revenues from the single state-owned customer that takes 70% of its output, is expected to finance, build, operate and maintain a national gas grid all by itself. PHCN, on the hand, has many plans and feasibility studies drawn up for gas-fired plants to be built in various parts of Nigeria, without clear intentions to pay. Apart from this, IPP developers, including Nigerian oil Exploration and Production companies focused on gas-to-electricity utilization projects and core IPP developers, have also drawn up plans for similar projects.
Who will bell the cat? None of these projects will see the light of day for as long as a technically insolvent and financially moribund PHCN (or its successor organization) remains the single buyer of electricity in Nigeria.
Apart from the power sector, a diagnostic review of the gas sub-sector creates other opportunities and challenges. For example, energy from gas is a major requirement (about 40% of direct cost) for cement manufacturing, and feedstock for LNG, methanol, fertilizer, aluminum smelting and power generation. The most critical challenge is the varying capacities of each of the sectors to afford gas.
There are other draw-backs that are commercial in nature - such as absence of transparent gas sales and purchase agreements, unpaid debts by domestic gas buyers - mainly government owned parastatals and entities such as PHCN, ALSCON, Delta Steel Company (DSC) etc; and the unwillingness of the IOCs, operating in Nigeria, to invest heavily in gas gathering, transmission and supply infrastructure unless adequate interventions on revenue security are provided. The current domestic market does not have the capability to earn the confidence of investors. The half-hearted restructuring of the power sector has created lack of clarity on who the relevant parties to gas supply agreements in the sector are.
A major impediment to the full growth of the gas sub-sector is the inexcusable delay in enacting laws that could have transformed it. Bills submitted to the National Assembly (NASS) towards the enactment of Downstream Gas Act and the Natural Gas (Fiscal Reforms) Act since 2005, on which both houses of the NASS have had public hearings, are yet to be passed into law. Potential revenue loss to government as a result of delays by NASS to take necessary legislative steps to protect the sub-sector is put at $4 to $5 billion annually by industry experts.
For the country’s 167 million people, the big question is how fast government can ensure gas improves their lot. We are all waiting for the overpaid National Assembly, the President and his oil minister to give us some hope. Is it too much to ask?
The following document contains the transcript of an extensive 2009 interview with Nasir El-Rufai conducted by researchers for Princeton University's program studying Innovations for Successful Societies. You can also listen to an audio recording and see more information here.
Nasir El-Rufai Interview with Princeton University's Innovations for Successful Societies
In 1962, according to Alhaji Adamu Wazirin Fika, the Government of the Northern Region faced a shortfall in revenues from falling world commodity prices. At a crisis meeting of the regional ministers, the first decision agreed on was that the salaries of the ministers should be cut by 50 per cent.
Today, even as the polity is becoming more heated due to worsening economic conditions and plans by government to remove the subsidy on petroleum products, President Goodluck Jonathan in his wisdom led a retinue of three executive jets and a contingent of some 120 people to Australia for the Commonwealth Heads of Government Meeting (CHOGM); the Head of the Commonwealth of Nations, the Queen of England, went by British Airways (BA).
This scene should set the tone as to whether the fuel subsidy exists at all and if government is justified in its plans to remove it. Does the Federal Government truly provide a subsidy on petroleum products consumed? If there is, should it be removed at this point? Why not? These are just a few of the myriad of questions bothering the minds of most Nigerians on this issue. What then is subsidy? Does it exist? If so, is it justified? In what ways can the interest of the ordinary Nigerian be best protected as far as the subsidy conundrum is concerned?
Broadly speaking, any mechanism that is designed to reduce the cost of an activity (input and/or output) below market prices can be referred to as subsidy. The policy of subsidy by government may be to keep prices low, to maintain incomes, or to preserve employment and to influence investments and consumption patterns in an economy. There are two approaches to this fuel subsidy debate – one saying subsidy exists (Opportunity Cost - the government's view), while the other (Resource Endowment or Aluko- Buhari view) denies its existence.
According to the Aluko-Buhari Approach, there should be no reason why Nigerians should pay import-parity prices for petroleum products since we currently pay more than the actual cost of producing and refining the product. The position nor subsidy in whatever form.
But as local demand grew, there was some justification for government intervention in the process especially after the civil war when local consumption continued to grow and demand outstripped supply leading to shortages.
The Oputa Panel of Inquiry which examined the root causes of the nationwide shortages of petroleum products made wide-ranging recommendations which laid the foundation for the present involvement of government in the importation, refining and management of local consumption of petroleum products.
Though government intervention sorted out the problems in the short term, inefficiencies in the system began to manifest. At the time, the issues that were to later change the management of the local consumption of petroleum products thus bringing forth subsidy were not envisaged. For instance, there was no conception that Nigeria would be unable to meet domestic consumption.
And even if we had to rely on importation, as it later turned out, the devaluation of the naira was not considered. The naira was at par with the dollar. But today, the naira seems to be on a permanent slide, and at the last count exchanged at N160 to one US dollar With the continual rise in the price of crude oil at the international market, the fixing of pump price of petroleum products became difficult to manage because the prices of imported products were at a bench-mark determined internationally – and in dollar terms.
So in real terms, it would be right to state that subsidy exists on the petroleum products consumed locally in Nigeria. As at year 2000, it was about N1.5 billion annually but has risen to a whooping N1.2 trillion in the first nine months of 2011 - nearly the size of the capital budget for 2011!.
Beneath the surface of these facts lies the complication on the issue of subsidy. Given the fact that we are an oil-producing country and the level of corruption in the refining, importation and distribution process, is it justified to give away so much money to a few? Is the interest of the ordinary citizen better served with a subsidy regime, or are we better off without one? Although it is ascertainable that there is a subsidy – the point remains that it would not have arisen if not for cumulative inefficiency and corruption within the petroleum sector over the years.
Facing the reality of impending subsidy removal, the question that comes up is: “why now?” Since government is a social contract between the government and citizens, it makes sense to demand to know if removal of subsidy on petroleum products was part of the campaign manifestoes of President Jonathan in the run-up to the 2011 presidential elections.
On one hand, can Nigeria afford to spend so much on subsidising fuel importation? On the other, if government proceeds with plans to remove subsidy, there would be inevitable consequences for most Nigerians. This would have been a simple issue had government made adequate provision of effective intermodal transportation system - in form of metro, bus or urban taxi system. But this is not the case. And since most Nigerians rely on petroleum products to power their individual generator sets, and kerosene for cooking, the effects of the subsidy removal would be far reaching. That points to the fact of already existing poverty and the result is better imagined.
A government seeking for belt-tightening among her citizens should be seen to be prudent. What we have instead is a regime that keeps an avalanche of presidential aides – with more appointed just two days ago. Why should ordinary Nigerians bear the burden of government insensitivity? Where is the legitimacy for a government that keeps its recurrent spending at least 70 per cent seeking to pass the burden of 360 new cars for legislators to the ordinary citizen? Where are the specific projects to which the proposed savings would be committed? What sustainable implementation plan exists for such projects? Where is the blueprint to increase capacity to refine what is consumed locally? Who knows how much petrol we really import? Who can tell us how much of it is smuggled while the cost is added to “subsidy”?
How many Nigerians know that the country now owes more than we did at the time before our exit from the debt trap in 2005? Does a government that has shown no sense of sacrifice deserve to further burden the impoverished populace with a large number of unemployed people? Can we trust this government to use whatever savings it may get from the removal of oil subsidy to develop critical infrastructure, stimulate the economy and create jobs? Your answer to these questions should be your answer to whether government is justified to remove petroleum subsidy.
Under an administration that exhibits some prudence and sacrifice, that is disciplined and fiscally- responsible, and led by people of integrity, I would bear the initial pain of subsidy withdrawal while our domestic refining capacity is revamped and expanded. Under the current leadership addicted to spending all its earnings on recurrent expenses, any more sacrifice from us for them will only encourage Australia-like junkets and tenure elongation! More partying for them, more pain for us. 