Emir of Kano, Sanusi Lamido Sanusi II

Emir of Kano, Sanusi Lamido Sanusi II

 

Sanusi didn’t deny saying ‘Nigeria will go bankrupt’ if profligacy persists

Although the Office of the Accountant-General of the Federation (Nigeria) has come forth to give possible interpretation to the stinging speech of Emir Kano, Sanusi Lamido Sanusi, saying the Emir was merely giving an advise, Sanusi himself  has not denied saying that “Nigeria will go bankrupt” if Nigerian government continues spending profligately on petroleum and electricity subsidies.

The Emir has been on the spotlight following his dissenting opinion majorly on the economy with the government of president Muhammadu Buhari and that of his state governor, Umar Ganduje.

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On Tuesday at the 3rd National Treasury Workshop organized by office of the Accountant General of the Federation Kano, North-West Nigeria, Sanusi upbraided the government of Nigeria for spending so much on petroleum and electricity subsidy, places where he had described as meaning of siphoning money from the economy.  

What happened is that the federal government do pay petroleum subsidy, pay electricity tariff subsidy, and if there is a rise in interest rates, Federal Government pays.’

Emir’s Full Speech at the event

 Let me begin first by welcoming you to the city of Kano and as I did yesterday when the delegation visited me. I urge you to take the opportunity of being here to go round the city. For those who are here for the first time, observe some of the culture and the people, but most importantly, as I said yesterday, since you’re all officials of the ministry of finance, I believe you have come with pockets full of estacode.

 Please extend the money kindly before you leave. And secondly, since we’re having the FAAC meeting in Kano, and all the states and local governments are taking billions of naira away, I think the Kano state government is entitled to one percent commission from everyone’s allocation, as a token thank you for the hospitality of the people of Kano.

 ‘I didn’t want to attend this event’ On a more fundamental note, let me begin by congratulating the honourable accountant general of the federation for having been nominated for a second term by the president and to wish him once more, great success and to hope that he will continue to conduct himself in a manner that would make Kano and the country proud of his work. But I will be honest and say my initial inclination was not to attend this event.

 I did because of common interest and I’ll tell you why. A few years ago in Kano, we had a meeting of the National Planning Commission similar to your treasury workshop and I was invited to address commissioners, permanent secretaries, directors of planning, on the Nigerian economy but I declined even though I received a written invitation from the secretary to the state government. But after I received a phone call from the minister of planning, I agreed to attend. And then, I had the meeting and talked about the economy.

 I talked about the things that were being done well and the things that were not being done well and what we needed to do. And for saying that we were not doing some things well, I got into a lot of trouble. So, I decided that we have a problem. If government invites you to a function and does not want to hear the truth, the person is not to go. So, this year when I was invited to address the newly-elected governors by the Nigeria Governors Forum, I refused to go.

The DG called me and I said I would not go. Because if I tell them these are things that you have not done, these are things you should do, it is interpreted as an attack and criticism. ‘If you do not want to hear the truth, never invite me’ But since I have decided to come, you have to accept what I say to you. And please, if you do not want to hear the truth, never invite me. So, let’s talk about the state of public finance in Nigeria. We have a number of very difficult decisions that we must make and we have to face reality. His excellency, the president, said in his inaugural speech that his government would like to lift people out of poverty. It was a speech that was well received not just in this country, but all over the world because the concentration of the extreme poverty in Africa… and the numbers are frightening.  

 Last year at the United Nations General Assembly, Bill Gates presented the Goalkeeper’s report and we all know the numbers and the forecast which is that if we do not change the way things are done across the world, by 2050, 85 percent of all those living in extreme poverty in the world would be on the African continent and half of them would be in two countries — Nigeria and the Democratic Republic of Congo.

 ‘I’m happy Buhari wants to lead the fight against poverty’ So, we’re all happy that the president has announced that he is going to lead this fight against poverty. So where do you come in as treasurers? To fight poverty, we need to invest in education, we need to invest in healthcare, we need to invest in infrastructure. Where is the money going to come from? In the last few years, we have talked about VAT. We have talked about increasing taxes.

Now, as an economist, I can tell you if you have an economic slowdown and you choose to increase taxes, what happens? Your economy becomes even slower. Now your job — and this is why you are treasurers not just accountants — your job is to tell your principal that there are certain things that need to be done, and they are difficult but they need to be done. Two days ago, I read that the percentage of government revenue going into debt service has risen to 70 percent. These numbers are not mine. They’re public numbers. I read them in newspapers. I’m no longer at the central bank, I don’t have access to confidential data. ‘Nigeria’s balance sheet doesn’t benefit from oil price rise’

And in spending 70 percent of your revenue on debt service, you guys can be transparent and accountable but you are managing 30 percent. And then we continue subsidising petroleum products and spending N1.5 trillion per annum on petroleum subsidy. The other 30 percent is gone. And then we subsidise electricity tariffs and maybe we have to borrow from the capital market or from the central bank to fund the shortfall in the electricity sector.

Where is the money to pay salaries? Where is the money for education? Where is the money for healthcare? For 30 years, we have had this project called petroleum subsidy, which is not a subsidy. In economics, it is a hedge. We don’t call it hedge because we know the implications. The first thing we must do is stop this hedge and at least make it a subsidy.

 And let me try to explain. When you subsidise something, let us say it costs a hundred naira, you say to somebody this costs a hundred naira, I am subsidising to the tune of 20 percent or 30 percent. So, I pay twenty naira, you pay eighty naira or I pay thirty naira, you pay seventy naira. If the price goes up, I pay a little more, you pay a little more.

If the price goes down, I pay a little less, you pay a little less. When you tell somebody that I have fixed the price of this product, it is not a subsidy, it is hedge. You have told 160 million Nigerians that you have fixed the price of petrol at N85 per litre. It does not matter what the exchange rate is, the dollar can move from N160 to N500, the federal government will fund the difference. It does not matter what the interest rate is, and when you look at the components of petroleum price, the foreign exchange rate, the price interest rate, demurrage, petroleum equalisation, you know what happens? Nigeria is the only country whose balance sheet does not benefit from an increase in the price of oil. And this did not start from this government it has been on for 20, 30 years. Today, you have tensions between America and Iran, the price of oil will go up. Every oil-producing country will be happy because it is going to earn more but you know what will happen in Nigeria? We will earn more and we will turn round and spend what we have earned importing petroleum products, because petroleum products also go up. And the federal government is going to fund 100 percent of the increase.

‘N1.5tr on petroleum subsidy is N1.5tr out of education’ I’m not speaking theoretically. I was the governor of central bank. In 2011, the federal government earned $16 billion from the oil sector. The country spent $8 billion importing petroleum products and $8.2 billion subsidising the products. One hundred percent of what we earned in the oil sector went out to import petrol. You are treasurers, is this sustainable? The country will be bankrupted, and we are heading to bankruptcy.

So, let us begin, and I know politicians, it is very difficult for you to say, I have removed petroleum subsidy. Let the government say we are going to pay 30 percent of the cost of petrol. Let us begin from there and maybe next year, we will break it down to 20 percent Maybe next year 10 percent by 2022, we are down to zero. But for the federal government to place itself in a position where in finance, you all know that this is called naked hedge.

Price of crude oil goes up, the federal government pays, exchange rate moves, the federal government pays. Interest rate moves, the federal government pays. Demurrage, the federal government pays. What is so crucial, what is so life-threatening about petroleum price that we have to sacrifice education, sacrifice health, sacrifice infrastructure, so that we can have cheap petrol and risk the financial health of the country?

 It is a difficult decision, but if the president really wants to deal with poverty, he has to deal with this and you have to tell Nigerians that they have to be ready. If the international price of oil goes up, people must be ready to pay more. If it goes down, people will benefit. We have to be responsible, this is what happens everywhere. Now, we have this situation where people need to be talked to because people need to understand that N1.5 trillion on petroleum subsidy is N1.5 trillion out of education, it’s N1.5 trillion out of healthcare, and therefore, we don’t understand why we have so many out-of-school children?

Why we have so much malnutrition? Where are you going to address out-of-school children, malnutrition and mortality rates, if all the money is going into petroleum subsidy? ‘How did we suddenly start to consume 60m litres of petrol?’ Secondly, you are treasures, not-accountants, and there are questions that you should be asking. In 2016, we were told publicly by the government that we were consuming 28 million litres of petroleum products a day. You can Google it; it’s a story; a public story. A few weeks ago, we were told that we are consuming 60 million litres a day.

 How did we suddenly start consuming double? People need to ask… And the only way to avoid this is to move to proper subsidy routine and eliminate it. And then, you don’t have to worry whether there is scarcity, whether there is corruption, whether there are inflated invoices, you take away the incentive. A second example is electricity. You go to Abidjan, Cote d’Ivoire, they have electricity 24/7. Why? They did cost reflective charge.

They are not richer than Nigerians. They don’t have a higher per capita income. If you ask NERC some of the companies they have given permission to do mini grids are charging very high tariffs in rural areas and people are paying. If you meet someone who is a poor man and you tell him you are subsidising electricity and the power is not available, he remains poor. If you offer him at cost for electric price, but he has that power 24/7, he does not need to buy generator, he does not need to buy diesel, he can take that power, be a mechanic, open a kiosk, have a small grinding machine, open a cookery shop, earn enough income to pay for electricity and lift himself out of poverty. The idea that the way to lift people out of poverty is to provide them with cheap power is not available, it is wrong.

 You give them power at the right price 24/7. So, these two policies do not make economic sense but they also impact directly on your work. Because if somebody is generating electricity and somebody is transmitting and somebody is distributing and you are receiving tariffs below the cost, you have to find the money to fund it. Banks to be recapitalised – Emefiele(Opens in a new browser tab) ‘Petroleum consumption is a private decision’ If we are importing petroleum products and selling them to 160 million people and the price goes up and there is a gap, you have to find that money to fund the gap.

And where do you find the money, you go and borrow in the capital market and then your interest rate goes up and then your debt service ratio moves from 60 percent to 70 percent to 80 percent… if you are in a private company and you spend 70 percent of your turnover on interest, you are already bankrupt. True or false? Now, this is simple common sense to me. Now, if you don’t borrow from the capital market and you don’t have the tax revenue, what do you do?

CBN to limit banks’ appetite for govt securities(Opens in a new browser tab) You go to your central bank and when your central bank lends you the money, what does it do? It creates high powered money and what happens, inflation goes up, interest rate goes up, debt service goes up. And it is a vicious circle. So, let us go to the root of the problem. FG begins clampdown on illegal cooking gas dealers(Opens in a new browser tab) Petroleum consumption is a private decision. If you can’t afford fuel, take public transport. Electricity consumption is a private decision.

 If you cannot pay, set up your solar panel in your house. By simply addressing these two sources of drain on the balance sheet of the government, you as treasurers will have more money available to fund development and the president can achieve his goal of lifting people out of poverty. You will not lift people out of poverty by paying interest on debts. You do not lift people out of poverty by subsidising power. You don’t lift people out of poverty by subsidising the consumption of petroleum products that are produced abroad. ‘If we continue spending 1.5 trillion on petroleum subsidy… this country would go bankrupt’ Every time we spend a billion dollar importing petroleum products, it is a billion dollar to refineries operating in Europe, creating jobs in Europe, eliminating poverty in Europe.

That money is better spent on educating our children and on healthcare. And that is eliminating poverty. I speak to you because I am told that this is a treasury workshop, not an accounting workshop. I don’t like accounting; I’m not an accountant. But if you are treasurers, you are not just counting money, you are managing it. And your duty is to tell your principal; ‘Sir, look at these numbers, we cannot afford it.’ And if we continue spending 1.5 trillion on petroleum subsidy, spending how many hundred billion on electricity tariff subsidy, spending so much on interest… this country would go bankrupt. It is your job to say it. It is no longer my job; I’m no longer in the central bank, I’m no longer in the treasury. So, it is great to talk about accountability and transparency, but you will do much better if you have more money at your disposal. Then, the accountability will translate to development. And I am hoping that… again, what I have said is simply common sense, simple honest contribution to you on how you can begin to push through reforms.

 You know in your homes, if your salary goes down, you will have to tell your wives and the children to do away with some things, some vacations will have to be set aside, some things on the menu have to go down, maybe we have to switch off the generator during the day. You don’t just continue spending when your income is down.

Nigerians have to understand. We can’t continue taking money out of education, out of health, out of infrastructure, putting this money in petroleum subsidy and tariffs subsidy and expect to cure poverty. So, in case anybody is wondering why I’m saying this, the president himself is the one who said he wants to deal with poverty.

So, we have a duty to contribute ideas to him as to how he can deal with poverty. If you’re happy with what I’ve said, that is fine. If you’re not happy, that is fine. I just want you to know I have a duty to my conscience and to this country, when I speak, to say what I believe to be true and if you don’t want to hear this, don’t invite me. Culled from TheCable

Editorial Chief, Nigerian Bureau

Kings UBA is a Nigerian journalist and writer. I have reported for major local and international news organisations. I write satire. In 2017, I started contributing stories primarily to Discover Africa News Network. I can be reached on editorkingsuba@gmail.com. I currently manage Discover Africa News social media handles