Three national newspapers published three reports which individually and collectively reveal why Nigeria will remain economically and socially under-developed for decades to come. The three stories are relevant for their demonstration of how the managers of important segments of the economy often for reasons best known to them mislead the Federal Government and the people of Nigeria. Two of the stories, not surprising, were about the Nigerian National Petroleum Corporation, NNPC. Both of them would have been regarded as good jokes if the announcements were made on April Fool's day.
The first story, concerning the commencement of the rehabilitation of the Port Harcourt refinery, must leave right thinking Nigerians wondering if the Federal Government of Nigeria really intends to fight corruption. With another round of work inevitably consuming scarce foreign exchange expected to go into the contract, it is clear that the waste of the nation's financial resources is deliberate. The history of the four refineries does not support spending any more money to rehabilitate any of them. The future of refineries, given digital technology, rebukes any such expenditure. Two reasons account for these conclusions.
One, on no single occasion in the past had any of the refineries functioned well after being overhauled or refurbished. Invariably, all efforts, including Turn-Around-Maintenance, TAM, had ended up as "money down the drain." There is nothing to suggest that the result will be different this time.
Two, a 1965 refinery is a museum piece and not a plant on which a nation which yearns for rapid economic growth can expect to build its future. A refinery 54 years "young" must defy the laws of technological obsolescence to still be cost effective today. Which other plant, installed anywhere in the world is still operating? Nigerians being slow-learners in everything, we cling to old materials long after the rest of the world has moved on and the repercussions are already well-known. All the refineries are generating massive losses which would have led to their closure long ago by any private company. But, unpatriotic Nigerians want to continue to waste "government money" as if there are no other more profitable claims on those funds. Why not give the money to ASUU for instance?
The same NNPC announced its readiness to produce 2.3 million barrels a day as if the Group Managing Director, Dr Maikanti Baru, is totally unaware of the quota established for Nigeria by the Organisation of Petroleum Exporting Countries, OPEC. The announcement was made a few days after the Minister of State had confirmed that Nigeria was cutting production by 400,000 barrels per day. Obviously, even if Nigeria can produce 2.3 mbpd, it would serve no purpose on account of the quota which is considerably less.
The GMD/NNPC cannot be said to be ignorant of the OPEC agreement on cuts; he cannot possibly be hinting that Nigeria will not abide by the quota because Nigeria needs OPEC more than the organisation needs us. So, what is the purpose of this obviously self-serving announcement? Is it a case of someone boasting about an achievement which it would not be called upon to deliver? The NNPC will not, until further notice be asked to export 2.3 mbpd. So, nobody will know if it can or not. The day might come; but not now. Waste of words; if you ask me; and the announcement is likely to be misinterpreted by the oil community.
Meanwhile, there is a great deal of anxiety that Nigeria is even having difficulties finding buyers for the quota-imposed exports which are considerably less than 2.3 mbpd. It will clearly amount to another colossal waste to produce more than we can sell.
The Organised Private Sector, OPS, is Nigeria's biggest foreign exchange parasite. It consumes a higher percentage of the dollars earned by others than its contributions to the Gross Domestic Product, GDP, and to foreign exchange inflow into Nigeria. It has also had better days.
Back in the 1980s, when industrial giants like Chief Ernest Shonekan, GCFR, former Chairman/Managing Director of UAC of Nigeria and Dr Michael Omolayole, OFR, Chairman/Managing Director of Lever Brothers, now Unilever Plc, strode the landscape, criticism of government policies by the OPS were taken seriously. But, the quality of leadership of the OPS had diminished.
Leaders of the OPS were well-known in the 1980s because collectively, they were the largest employers of labour. UACN alone had 38 Divisions.
The Value Added Tax, VAT, was proposed and passed into law in the 1980s mainly at the request of the OPS itself when companies were faced with multiple sales taxes imposed by the Federal Government as well as individual states. The situation was untidy. So, a centralised tax system was introduced to collect sales taxes, renamed Value Added Taxes, and the revenue derived would be shared by the Federal Government, States and Local Governments. Neither sales tax nor VAT is unique to Nigeria. Several nations operate them. In fact, Nigerian VAT, pegged at five per cent is one of the lowest in the world. Consumers in every country in Africa pay more than five per cent where it operates and revenue is generated for governments for development.
Since it is a consumption tax (if you don't consume items covered by it you don't pay), it is also a progressive tax. Mr A buys an Okada for N100,000; he pays N5,000 VAT. Chief Jobsite buys a bullet-proof limousine for N100 million; he pays N5 million VAT. In no country has VAT been accused of slowing down economic growth. China imposes higher VAT and has grown by over seven per cent per annum for more than ten years. Nigeria with five per cent has failed to achieve three per cent growth in six years. Clearly, it is fallacious for the OPS to try and discourage the Federal government from increasing VAT.
The national economic predicament is quite clear. We either generate more revenue internally to fund governments' budgets or we continue to borrow at shylock rates. Any way you look at it, Nigerians have to start paying more for the services governments provide. And, it is not only the VAT that is low by global standards, our tax collection is a disgrace. Most Nigerians still have not yet woken up to the fact that crude oil no longer sells at $100 per barrel and governments cannot continue to offer services for free or fail to collect sufficient revenue from users.
Nigeria is the only country in the world without a single toll gate on its highways. The Federal Government bears the cost of construction and maintenance and we all share in the repayment of the debt incurred. Under the present No Toll arrangement, millions of Nigerians without owning even a bicycle have equal share with DANGOTE GROUP of COMPANIES with thousands of trucks on those roads. Is that fair?
Yet, when the Federal Government proposes to restore toll gates half-baked OPS economists and "Know-Nothings" of Labour declare it will hurt the poor and the economy. They should tell us how India with higher VAT and toll gates is growing faster and reducing poverty than Nigeria with low VAT and no toll gates.