Monday, April 15, 2024

FG must foster energy production, lower cost for everybody – Adebayo

Adewole Adebayo cannot be missed in a crowd. The immensity of his numerous aptitudes and the effervescence of his charm stand him out at every gathering. One can hardly meet a more confident man, an individual who cherishes the life of the mind, invests in its cultivation and continually stands out for his brain, lucidity and logic. He easily ranks among the most educated and able Nigerians in any field, and certainly one of the very best yet to hold a public office, and one of the most committed to the public good through his philanthropy gestures in Africa and beyond. Adebayo’s talents are strengthened by a tough character built on the old values that are anchored on hard work, honesty and resilience. He began his legal career as a litigation lawyer at Tunji Abayomi and Co in Lagos, Nigeria. After two years of legal practice, he founded his own law firm, Adewole Adebayo & Co., House of Law, in 2002. He was the Social Democratic Party presidential candidate in the 2023 presidential election. In this interview, Adebayo takes a swipe at the All Progressives Congress-led Federal Government of President Bola Tinubu for the removal of fuel subsidy. He also takes a look at the rumoured increase in electricity tariff, what the government should do to reduce the people’s suffering and the government’s move to give palliatives to Nigerians, among others. Excerpts:

Given the biting effects of the increase in fuel pump price due to the subsidy removal, would you still label those criticizing the removal of subsidy as hypocrites?

There are two types of people who criticize the subsidy removal. Some of them are hypocrites and some are consistent. Those who criticized the subsidy removal like me and other people, have grounds to criticize the programme.

But, those who supported anyone or any platform that said they would remove subsidies from day one are hypocritical.

Once you agreed to throw a five year old child from 10 floor of a building, you cannot say I am surprised the child broke his limbs. There is no way you will implement the policy they are implementing now, and you will not have the same consequences. Economics does not admit cheating. You can cheat in politics. You can inflate your numbers in politics but when it comes to economics, you can’t.

You have to take the right policies. If you don’t take the right policies, the consequences of wrong policies will follow.

When we are talking about hypocrisy, it didn’t start with the labour unions. Hypocrisy started with President Tinubu himself who opposed former President Goodluck Jonathan when he had a smaller amount of subsidy adjustment and all of them went on the streets against it.

And when they came to power, they went in the opposite direction; finished everything once and for all. It is not a political statement when you say people are hypocritical.

We predicted all this. We were discussing it then. Nobody can pretend that he/she is not aware that it will affect factor cost. And if it affects factor cost, it will affect cost of living. If it affects the cost of living, more people will go into poverty.

Just look at the position they took before and look at the position they are taking now. There is nothing new in what has happened; it is just the natural consequence of the action. And that was why during the presidential debate, we were pushing for an alternative view that they should not do it, but they have done it now; nothing has surprised me at all. In fact, it appears this might just be the beginning except drastic steps are taken to go off that line.

Talking about drastic steps being taken, the government is also taking steps to provide palliatives; what other steps would you recommend?

First, we should stop misusing the word palliative. The N8000 is a carryover from the existing 2023 budget; it is the byproduct of the plan that the Muhammadu Buhari administration left behind as to how they would manage the subsidy removal.

Even this $800 million from the World Bank was negotiated by the past government. Policy watchers shouldn’t behave as if they didn’t know that it was in the offing. It appears the government is not aware of what we call monetary neutrality. When you have no food, no means of transportation, and no medicare, throwing money at you is not going to increase the number of service providers.

It is not going to increase the value of real goods in the market. What it is going to do is that there would be wastage because the money will not be well used. When the money gets to the end users, it becomes useless to them in the real terms because they don’t have the goods to chase with the money. In the end, it may cause a little bit of inflation.

There is a consensus among the Nigerian elite that there is no alternative to subsidy removal; that subsidy has gone. I don’t agree with that though, but it is a policy of the government, and it appears every mainstream political party and analysts agree with that bad policy.

And if you want to continue along that line, what you do is to de-link the people from the value chain of petrol. And the way to do that is, for example, from the transportation and logistics point of view, you make sure that the price of petrol does not impact on the ability of people to commute. That is why you see that in many cities, whether it is in Singapore or London, the common people don’t see the effect when the price of petroleum goes up or comes down because the government has provided public transportation that has been de-linked from that.
The common people are the easiest to take off that line.

“We should stop misusing the word palliative. The N8, 000 is a carryover from the existing 2023 budget; it is the byproduct of the plan that the Muhammadu Buhari administration left behind as to how they would manage the subsidy removal”

Did you say there could be further dislocation in the prices if there is further dislocation in crude oil price and further depreciation of the Naira?

There are three factors affecting it and none of them is accidental. It is the byproduct of our politics. We are either importing as we are importing now, or we are preparing the market in continuation of importation, meaning that even if you are producing petroleum in Lagos, or Port-Harcourt or Akwa Ibom or Kaduna, the intention of the policy makers is just that we don’t regulate the price of telephone, shoes or clothing or anything you buy in the market; you just follow what goes on in the international market.

That is the policy position taken by the All Progressives Congress, the People’s Democratic Party, and the Labour Party, the mainstream right wing parties in Nigeria.

They are leaving the Naira to what they call market forces, and the market is regulated by foreign currency. So, even the Nigerian government has lost control over its own currency, and has no control over the petrol it is traded.

The inputs you use for petrol, whether it is the crude oil or refinery engineering cost, administration or manpower; they are all regulated by the US dollars.

Unfortunately, most of the things people need in their lives are controlled by the government policy, but politics controls those who go into the government.

So, you need to identify your interests very well, articulate them and decide which of your life’s activities is going to be dependent on the government’s decision. Those that are dependent on the government’s decision should be involved in your politics.

If your well-being, sustainability, cost of living, employment, purchasing power, and ability to preserve the fruit of your labour to live in peace, among others are implicated by the government’s decision, then they should be the one to dictate your politics. These are the things you should consider when you are in politics.

Are you saying that the Tinubu administration’s policies of fuel subsidy removal and the unification of the foreign exchange market are to help the friends of the government?

Is that not obvious? I am not saying it pejoratively. In economics, everything is about choice. There are many alternative routes to development. Nigeria is a resource rich country.

I am not saying that because of the number; I am saying it because of the quality of people we have. Nigeria is rich in manpower. I think it is not too late for the government, starting with President Tinubu and co, to rethink and have a backup plan because I have a feeling, and I am saying it with every sense of responsibility, that if they go the way they are going, they will fail woefully.

Not because they hate the people but because they are adopting models that never worked. It will surprise the APC chieftains, including president Tinubu that in the past two months, more people have entered into poverty, and the government is yet to succeed in lifting five people out of poverty.

The measures they are taking now will not help the economy. Subsidy is one out of about 2000 of the government programmes that require spending government’s money.

I studied them when I was running for president in order to cut costs. If you are looking at the top 100 money wasters, subsidy for petrol is not one of them.

One of them is establishment costs – running the National Assembly and the Presidency. Another is military spending; it is a major waste of government’s money. We need the military but not the waste that is there.

The third is the management and funding of the JV (Joint Venture) and production sharing contract. The fiscal management of taxation, the waivers they give, which is a government programme and the way we subsidize foreign exchange among others are all avenues through which the government wastes money.

Why don’t we have the N500 billion palliatives to get one solid refinery working? And would the prices have been different if the refineries were working?

We have a duty to refine locally because it is an industrial policy decision, except when the production is toxic and problematic.
It is always better to produce locally. However, it doesn’t automatically guarantee lower prices. It guarantees employment and reliability in case of distortion in the market, and you have a marginal decrease in cost. Look at other things being produced in Nigeria; their prices are not down.

Most of the cassava we consume comes from Nigeria. Why is the price of cassava not falling? We have been producing cement in Nigeria for one decade. When former President Olusegun Obasanjo was everywhere supporting a few people who wanted to create a monopoly market or geo-monopoly market in cement, he said once we start producing it, everybody would have cement cheaply. Cement has never been cheaper at all, rather, it is even worse than before.

When the government wants to commit your resources to their favourite, they will tell you that putting our money in the hands of rich private people will get us good prices along the way. You will see that the Nigerian banks don’t charge you less than the foreign banks even though the banks are in Nigeria.

The law of economics doesn’t have a brother or sister. Once the person is in the capitalist world and he is trying to maximise his profit, he will sell anything to his own mother at any price. So, the price mechanism is just a small part of developmental economics.

The Nigeria Electricity Regulatory Commission is considering 40 percent electric tariff as being demanded by the Distribution Companies. What effect would it have if it takes effect?

It’s like the government driving a trailer load of cement on top of somebody’s leg and you are saying you want to reduce the pain, yet you refuse to move away from his leg, and you don’t want the person to cry; this cannot work.

How can we pretend that we don’t know everybody in that value chain would continue to adjust his price to cope with it? If you throw dirt upstream, everybody in the downstream waterway will have to deal with the debris.

The product you are fighting over is in itself dependent on other factor costs. If you go down to adjust the factor cost, they will raise theirs too.

In view of the increment in the fuel pump price, some people are now suggesting the use of compressed gas as an alternative, what do you think?

Those are micro economic decisions with individual firms to make a decision about because a government that cannot guarantee a price of petrol and take a policy decision and say it is not my responsibility to guarantee petroleum prices, such a government cannot guarantee CNG or LNG. I think what the government needs to do is to foster energy production by lowering the cost for everybody, including finance cost, infrastructure cost, freight cost and regulatory cost.

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