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Budget 2012 - Broke Country, Expensive Leaders

20 Jan 2012

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Nasir. [email protected]

The attempt by President Goodluck Jonathan to withdraw the 'fuel subsidy' largely to raiserevenues for a wasteful government united Nigerians across ethnic, religious and social strata forover a week. One of the unintended consequences of the administration's unilateral action wasbringing to the front-burner questions about the size of government, the excessive cost ofgovernance, and the fraud and corruption in the oil sector.

Nigerians now know that their president would rather impose an overnight tax on them thanundertake an orderly deregulation of the petroleum sector. They also know the differencebetween an isolated fuel price hike (for immediate revenue) and the policy review-legislation-independent regulation-competitive markets path that was implemented in the telecoms sectorderegulation 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 arejustified and put in context.

For this reason, over the ensuing weeks, this column will undertake a detailed sectoral analysisof the 2012 budget proposal submitted by the president to the National Assembly in December2011. Our objective is to enlighten all stakeholders on the provisions contained in the budget andsuggest areas to reduce waste, question spending priorities and cut out what appearsdysfunctional. Our hope is that the National Assembly will in the end make the budget work forthe people of Nigeria. Today, we will look at the revenue profile for 2012 and issues arisingthere from, and then throw a searchlight on the much-headlined expenditure for the securitysector. 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/

The federation expects to generate about N9.4 trillion in revenues in 2012, consisting of aboutN6.4 trillion from oil and gas, N2.7 trillion from personal income and company taxes, customduties, and value-added tax (VAT). Another N250 billion is expected from special levies andtaxes like the Education Tax. Out of this total, the Federal Government share amounts to aboutN3.6 trillion. This is because the Federal Government gets about 48.5 per cent of the oil and non-
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oil revenues and taxes, about 14 per cent of VAT and gets to keep all of its independent revenue.Omitted from the budget is an additional 7.5 per cent of the total - special funds that include theecological fund, the Federal Capital Territory (FCT) and mineral resources fund. Also omitted ishow much is deducted from the gross oil revenue as our contribution to the Joint Venture CashCalls. 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 TermExpenditure Framework for 2012-2015.

Starting with projected revenue of about N3.6 trillion, the budget envisages a total spend of N4.7trillion, meaning that we intend to spend about N1.1 trillion more than we expect to earn thisyear. Where is the extra cash coming from? It is not from 'fuel subsidy'. The 2012 budget alreadyassumed that not a penny will be deducted to subsidise petrol. The Federal Government hopes tofinance the deficit by borrowing some N794 billion this year, and get some windfall fromprivatisation (N10 billion), signature bonus (N75 billion) and the now-depleted excess crudeaccount (N225 billion). No provision has been made in the budget to transfer any amounts to theSovereign Wealth Fund (SWF). 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 anadditional N794 billion sit with the administration's desire to reduce our borrowing from the

current levels nearing 20 per cent of GDP? What does the projected medium term expenditureframework reveal about our revenue and spending patterns? Are these consistent with the desireof Nigerians to see a smaller, less expensive and more efficient Federal Government? We ask ourreaders 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 Federal Government'sassumption 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 tofund this gap. And as I wrote last week, there is not a single kobo anywhere for the so-calledSURE-P programme unless the National Assembly raises the benchmark price of crude oil by atleast another $20 with the risks attendant to that.

Looking closely at the spending proposals, commendable efforts have been made to reduce thelevel of statutory transfers to INEC, UBEC, NDDC and the National Judicial Council (NJC).Sadly, the transfer to the National Assembly remains at the 2011 level of N150 billion. Unlessthis is reduced, we will spend an average of N320 million per legislator in 2012 at a time whenNigerians are clearly disgusted at the very high quarterly allowances they draw, over and abovewhat the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has approved forthem. The National Assembly should listen to the voice of Nigerians and reduce this provisionsubstantially. The provision for the salaries and allowances of public servants has risen by aboutN150 billion from the 2011 levels to N1.655 trillion. This increase cannot be due to the usualannual salary increment. There is something more and it contradicts the stated goal of theadministration to reduce the cost of governance. The National Assembly should scrutinise thismore closely with a very sharp knife!

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Other items of expenditure that need closer review are the overheads - the N11 billion forinternational travel, more than N30 billion for research and development, maintenance of

vehicles, furniture, etc., over N20 billion, stationery, magazines and newspapers at over N5billion, and nearly N17 billion (more than $110 million) to purchase yet another plane for thepresident, 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 areindicative for the time being of the need for close scrutiny by the citizens and the NationalAssembly.

We will now briefly look at the provisions for the security sector. The president announced thatthe sector got allocated some N922 billion for 2011. This number is the sum of the budgetaryallocations of the ministries of defence, police affairs, and interior plus police commands andformations and the intelligence community (NSA's office). The president forgot to add thefollowing - (1) Amnesty Programme (N74 billion), (2) Military Pensions N60 billion, (3) ArmyInternal 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 onthe security sector to N1.145 trillion, not the N922 billion highlighted. The equivalent tally for2011 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 (ExternalCounter-Intelligence) and the Presidential Air Fleet (PAF). The budget of the DefenceIntelligence 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 NationalAssembly for the president, but he sits in the Federal Executive Council (FEC) as a member. Hisoffice is an advisory office and his main job is coordinating the activities of the securityagencies, with staff strength of about 100. Each agency is independent of the NSA and routinelyreports directly to the president. It is therefore difficult to explain how the NSA has the highestbudget of all in the intelligence community- higher than that of the SSS with about 15,000 staffmembers 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 awhopping N33 billion for capital projects! The respective proposals for the SSS are N17 billion,N5 billion and a paltry N1.8 billion! No wonder the SSS is handicapped in dealing with securitythreats within our borders! The NIA is not much better with N19.7 billion for staff costs, N3.9billion for overheads and N2.6 billion for capital projects.

A cursory look at the NSA's capital projects is even more revealing. Over N1.1 billion will bespent on satellite communications, over N3.5 billion on something called data signalcentre/equipment and N717 million for Iridium/Thuraya Communication platform. I thoughtthat Iridium went out of business nearly a decade ago, and Thuraya is an insecure form ofcommunication used mainly by global companies to connect far-flung personnel. Are ouragencies using this for secure communications in the 21st century? I wondered about that until I

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saw the provision of N78 million for a presidential communications network and N27 billion forthe 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 satellitesystems like the defunct Iridium!

The Presidential Air Fleet is under the NSA's office. Apart from modest provisions of N15.6million for personnel costs, N969 million for overheads (spares, checks, and aviation fuel can beexpensive!), there is a provision of N16.8 billion ($110 million) for a brand new plane for thepresidency. This is quite an expensive plane because a fully-equipped high-end Gulfstream 5 canbe acquired brand new for between $40-50 million. The plane type and specifications were notmentioned in the budget, and these should interest the citizens of Nigeria and the NationalAssembly.

Within the budget of the State House is a proposal to buy two brand new, bullet-proof MercedesBenz 600E cars for the presidency at about $1 million each. I guess since our two top men aregetting 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, andborrowing N794 billion to make ends meet? We are broke as a nation, we now know. We willcollapse if the fuel subsidy is not withdrawn, according to our president. Are our leaders not tooexpensive? Are they sensitive to our cries for improved electricity, affordable transportation andjobs for our youths? The ball is in the court of the National Assembly to restructure this budget.

This President Just Cant Get It

21 Jan 2012

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By Dele Momodu

Fellow Nigerians, please permit me to sound American today. The type of arrant nonsense goingon in Nigeria today would have elicited some exclamatory remarks from the Americans. What Iadmire in them is their no-nonsense attitude to life. Love them or loathe them, the Americanswould always fight for their rights. They have a long history of robust (to borrow PresidentJonathans favourite adjective) battles to fight for the rights of man. And America ended upgiving the world some of the most famous civil rights leaders such as Thomas Paine, John Lewis,

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Abraham Lincoln, Martin Luther King Jr., Malcolm X, W.E.B Du Bois, Coretta Scott King,Jesse Jackson, Al Sharpton, Andy Young Jr., Gordon Hirabayashi and others. They all fought fortheir beliefs and made the world a better place.

About 30 years ago, it would have been unthinkable or even impossible to imagine a BlackPresident leading America. Today, America has a Black President in Barack Obama. I was adoubting Thomas myself during the election that produced Obama. I told everyone who cared tolisten that such a dream would never materialise in our lifetime. As a typical Nigeria, I took aflight out of Newark Airport in New Jersey that evening because I was sure there would be riotsas soon as Obama failed to win. The result was announced to us just before we landed atHeathrow Airport the following morning. The entire aircraft erupted in an orgy of wildjubilation. The first images that came to my mind were those heroes who fought for us to witnesssuch a wonderful and happy day.

I have seen a picture of Obama with President Goodluck Jonathan in the White House andobserved the glint in the eyes of our own President who was obviously proud of the momentousopportunity. But Im not sure it occurred to him that many big dreamers who wanted a morehumane society were bayonetted or mercilessly assassinated by those short-sighted leaders whowanted the world to exist only from their backward view. The Guyanese revolutionary, WalterRodney suffered that fate. In Africa, several radical leaders were frustrated or killed. Theyinclude the Congolese leader Patrice Lumumba, Thomas Sankara of Burkina Faso; and even ourown Moshood Abiolas wife, Kudirat, who was murdered in cold-blood for demanding that herdetained husband be released from Abachas gulag. Abiola himself later died under suspicious

circumstances in detention. That sad saga became the watershed for the unusual democracy someof our leaders are abusing in Nigeria today. I wish to emphasise that the sacrifice made by someNigerians is what Jonathan is enjoying today.

We need to retrace this history for the gang of reckless spenders in power to understand wherewe are coming from in case they are too intoxicated to know. Since they were never an integralpart of the struggle to free Nigeria from the clutches of military dictatorship, members of theruling party are not likely to appreciate the hard-earned democracy they are about to endanger.Many were detained, harassed, maimed and killed for the Jonathans to be in power today. It isnot that they have two heads or four legs to qualify for this rare privilege to lead us. Most ofthose who made this possible are nowhere near power. They enjoy no special privileges. Theirfamilies are barely surviving while the carpetbaggers continue to hold our nation to ransom. Ourpoliticians behave like they are unaccountable to the people. The country is their personalproperty, and they can treat us as they like.

But that is a fallacy. We are all stakeholders and have the right to ask questions about why somepeople can waste all our resources on themselves and yet have the effrontery to tell us we haveno entitlement in this our forced union called Nigeria. The only so-called cheap oil they think weare enjoying must be taken away from us. How more callous can one be to fellow citizens? I

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have taken great pains to listen to arguments of the subsidy gang, championed by Ngozi Okonjo-Iwealla, Deziani Alison-Madueke, Sanusi Lamido Sanusi, Atedo Peterside and others. I mustsalute their efforts at going from one television station to the other in an attempt to sell a deadhorse to us at a premium. But I was not impressed a bit. I wondered why such otherwise brilliantladies and gentlemen carried this subsidy matter on their heads as if it was a matter of life and

death. The gains they listed in favour of fuel subsidy removal were too little to warrant thishiggledy-piggledy. It was too obvious they were coming from a background that alienated themfrom the ordinary people.

Let me join those who have frowned at the unfortunate role of Mr Atedo Peterside in the wholetragedy. While hes entitled to his fundamental right of freedom of speech, his position as theChairman of Stanbic Bank of Nigeria puts him in an awkward position to stretch out his neckinto what is likely to attract political sanctions is less than thoughtful. Many have argued that theoverzealousness displayed by him can backfire and haunt the fortunes of a great bank. If he wasthat interested in politics, he should have resigned and gone into politics. His arguments were too

condescending and sometimes jejune. Please, someone should help me, whats the meaning ofwho would you trust, Ngozi Okonjo-Iwealla who has a reputation for telling the truth or?Who would you trust, Lamido Sanusi, who has a reputation for? He went on and on and on. Icould not but ask when this supposedly urbane man became a town-crier?

Nigeria is truly in big trouble when technocrats that we thought were the last hopes of rescuingour nation begin to engage in dirty politicking and defend primordial sentiments. The mainculprit in this regard is Mr Peterside who introduced ethnic colouration to the fight againstsubsidy removal. He was clear in his mind about the need to remove subsidy and for him it was aone-way traffic. This is the tragic flaw in most of our economists. It is sad that they all stakedtheir reputation without undertaking due-diligence to determine if indeed there was a subsidy.

There are just too many questions begging for answers. What was the worth of the subsidy?What was our consumption rate? How did the subsidy budget rise so astronomically within oneyear? How do we expect the ordinary man to find the money to pay for this sudden increase infuel price? What are the social implications of this harsh decision? Are there alternatives in theshort run to this subsidy removal? What was the hurry about that the government could not waitfor the new year to pass? Why did government renege on its promise to engage in further andwider consultations and wait till April to execute the full deregulation of petroleum products?How can we pour petrol into a raging inferno at a time we are unable to contain the conflagrationof Boko Haram?

To compound the problems, one week rally exposed many ills of our society. Thanks to socialmedia, everyone became an itinerant reporter and blasted incredible stories from the barricades.The government boys who boasted weeks before that a revolution was impossible in Nigeriansaw red pepper. They forgot how Nigeria had amassed the largest concentration of unemployedyouths in Africa. These were people who had nothing to lose if Nigeria went on indefinite strike.

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They were powerfully supported members of the privileged class who were also sufficientlyfrustrated and angered by the unprecedented backwardness in our over-blessed country. Despitethe bravado of Jonathan and members of his Kool & the Gang, government was compelled to eatits own vomit and did a substantial reduction of the fuel price.

But the bigger news is the on-going investigation into oily matters at the House ofRepresentatives. Nothing could be more salacious than the giant worms jumping out of thebarrels of oil. Without doubt, the NNPC is a house of horror. I was delighted to see the way mydear sister Dr Ngozi Okonjo-Iwealla was rattled by some questions thrown. And I wondered whyshe desperately campaigned for a policy she did not have enough facts on. It is a big lesson forother technocrats in power who want to cry louder than the bereaved.

My Heart Bleeds for Kano

As I was working on this column, I received the saddest news from Kano and was just totallystupefied. Multiple blasts were reported to have gone off in one of Nigerias biggest cities. Mythoughts and prayers are with the good people of Kano at this difficult moment. I have close tiesto Kano like many other Nigerians. My Vice Presidential candidate, Dr Yunusa Tanko is fromKano. It has been impossible reaching him and other friends. Im told the whole place is chaotic.

There are all manner of gory details coming on social media with horrific pictures.

I dont know who will rescue Nigeria. This is not the time to play politics with a tragedy of thismagnitude. But someone must rescue us. Our President must rise up to the occasion and dowhatever is needed to restore peace to Nigeria. I have some free advice to offer him. He seems to

have failed himself and the nation. It is time to re-examine his strategies. Hes obviouslysurrounded by some incompetent people who are misleading him. My first advice is that heshould make friends with members of the civil societies. They are not his enemies. He needsmore friends now than ever. And he definitely needs a miracle.

Budget 2012: Where el-Rufai Got it Wrong

23 Jan 2012

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RIGHT OF REPLY

By Bright E. Okogu

Our attention has been drawn to an article by Mallam Nasir el-Rufai on the back page of

THISDAY of Friday, January 20, 2012 titled Budget 2012 Broke Country, ExpensiveLeaders. In the article, the author indicated that his objective was to enlighten allstakeholders on the provisions contained in the Budget. We recognise that the budget is not just

a technical document, but a major instrument of public policy, and hence it is inevitable thatsome analysts would choose to dissect it with a political scalpel. Nevertheless, debates of such animportant matter in the public space need to be factual lest the intention of public enlightenmentbe defeated. Ordinarily, the Budget Office does not join issues in respect of its work, for thesimple reason that, by the very nature of that work, it cannot satisfy everyone. This reluctance tojoin issues is even more so in the case of el-Rufai, a former cabinet minister and member of theformer Economic Management Team. Our stance has always been to provide clarifications asand when required, and it is in this spirit that we have considered it necessary to offer

clarifications on some of the issues raised, so that readers are not confused.

I group the issues raised into the following categories (1) those due to incomplete information atthe authors disposal (2) those due to a lack of understanding of the classification process, and

(3) those that are political -- a refusal to acknowledge ongoing efforts of government to addressproblems that have been with us for a long time. We shall address the issues raised, although notin a grouped order.

Before addressing these issues, however, I think it is necessary to state categorically that Nigeria

is NOT broke, as suggested by the title of the article. We have challenges, like other countries,but the balance sheet of the nation is strong a fact that has been recognised by independentanalysts, including Fitch Rating Agency and Standard & Poors, which both recently upgradedthe outlook for Nigeria at a time when they are downgrading many OECD countries! We shouldnot talk our country down when others are celebrating it because this serves no good purposewhatsoever. What we need is for Nigeria to start putting its financial house in order now, so as toavoid the negative fate suggested in the title of the article. This is why bold policy reforms of thegovernment need our collective support, irrespective of political differences.

Purported omission of JV cash calls and special funds

The article claims that there was no provision for Joint Venture cash calls, and that SpecialFunds were also not reflected in the revenue framework. The truth is that provision is alwaysmade for JV cash calls, and the 2012 budget is no exception. Indeed, it is unthinkable that thisitem would have been left out of the fiscal framework submission to the National Assembly, as itis the basis for generating our oil revenue, which constitutes a major part of our budget. Theversion of the framework on our website is an abridged one, containing the broad aggregates,

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which is not an unusual rendition of web data. An amount of N832 billion (about US$5.4 billion)was provided for this purpose in the fiscal framework. The same explanation applies to thespecial funds said to have been omitted. This is calculated automatically, based on the revenuesharing formula and properly reflected in the framework sent to the National Assembly. A slightcorrection is, however, needed, so that readers can fully understand. The share of special funds is

4.18 per cent; not 7.5 per cent as stated in el-Rufais article, and it complements the directFederal Government share of 48.5 per cent.

Transfer to the Excess Crude Account (ECA)/ Sovereign Wealth Fund (SWF):

The claim by el-Rufai that No provision has been made in the Budget to transfer any amounts tothe Sovereign Wealth Fund is rather curious. Fund transfers to the ECA/SWF are NOT usually

reflected in the annual budget because it is the difference between the revenue based on thebenchmark oil price and the actual revenue accruing on the basis of actual international oil price.

At the time of doing the budget, it is not possible to know what the eventual oil price would be.The best professional approach under such circumstances is to estimate accruals based onvarious price scenarios. Let me assure readers that we do have scenarios. As is the standardpractice, accruals are lodged in the ECA/SWF after they are realised, and the 2012 budget will beno different.

Further borrowing to pay for subsidy?

El-Rufai states the obvious when he said that the fact that ...with the fuel subsidy not fully gone,the FGNs assumption of zero-subsidy-deduction (for 2012) is off the table. Yes, the partial

deregulation will pose financial challenges, but progress has been made for the country, andindustrial harmony has been restored. As the Chinese say, the journey of a thousand milesbegins with one step. The hole in the budget arising from partial deregulation obviouslymeans that monies will have to continue to be drawn from the ECA to meet the gap. It does notnecessarily mean that more borrowing will be done. I should point out, however, that the 2012budget does provide for some borrowing on a declining basis up to 2015. Thus, the amount ofborrowing to finance the 2012 deficit is N794 billion compared to N852 billion in 2011.

No money included in budget to fund the SURE Programme?

The SURE-Programme (SURE-P) is a well thought-out package designed to be a vehicle forreinvesting the proceeds from deregulation into specific social programmes that target those whomost need it, as well as in high-profile capital projects. Yes, this was not budgeted for because atthe time of the 2012 budget submission, deregulation had not yet happened. The idea is thatresources freed up from deregulation would be used to finance intervention on socialprogrammes and infrastructure. With partial deregulation now in place, the logical thing will beto scale down the programme in line with the reduced amount of resources that will be freed up.

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The benchmark price does not have to be raised on account of this. Currently, the subsidy is paidlargely from monies that would otherwise accrue to the excess crude account, and the SUREProgramme will be financed through this account with the approval of the National Assembly.The beauty of the programme is that resources will be moved from subsidising the rich andvested interests to things that benefit the poor and for development something that the

generality of Nigerians (including, I suspect, el-Rufai) agree to be a good thing, even if they havereservations on the timing of deregulation. Indeed, a variant of this model has been triedsuccessfully in other climes, including in fellow OPEC member Iran as part of their deregulationprogramme.

Size of the non-debt recurrent cost:

The article criticises the size of the recurrent expenditure, starting with the claim that The

provision for the salaries and allowances of public servants has risen by about N150 billion from

the 2011 levels to N1.655 trillion... [and] cannot be due to the usual annual salary increment.Yes, el-Rufai is right; it isnt just for annual salary increases only. Surely, he must be aware ofthe minimum wage granted civil servants in 2011, and the relativity increase for other levels inthe aftermath of the minimum wage law. This explains the increase in the wage bill, andunderscores the need to manage this item of the budget in an orderly manner, and not politiciseit. In addition, Nigerians should be aware that the wage bill had been increased by 53 per cent in2010, on the back of earlier increases for staff of tertiary institutions and medical personnel,starting in 2009. The article further talked about Other items of expenditure that need closerreview (in the overheads).

Here, I would say that el-Rufai is preaching to the converted. Even before the submission of the

budget, President Goodluck Jonathan had directed that steps be taken to rein in the overheadspending of MDAs. He further directed, several days before the appearance of the article, that thebasic salaries of political office holders should be reduced by 25 per cent, and for more cuts to bemade to the overhead expenditure of MDAs. These measures are already being implemented. Onthe wider issue of the recurrent expenditure, a cursory look would confirm that the main driver isthe wage bill and government has initiated steps in this regard, including the committee that isreviewing the number of parastatals, and which was clearly stated in the budget speech of Mr.President. Management of the wage bill is an issue of political economy that requires carefulhandling. You just cant throw civil servants out into the street overnight without carefulassessment, knowing that each such person has six or more dependents they support in ourpopulation. We are taking other measures, including the ongoing biometric verification ofworkers and pensioners, towards making further savings, which are already yielding significantresults.

El-Rufai also raised the issue of N1 billion for food in the State House. Sure, we can debate thesize of the allocation, which, by the way, is N896 million, but Nigerians need to know that this isnot just forthe presidents kitchen. It is from this vote that state banquets, reception for visitingheads of state and dignitaries, particularly African heads of state who visit quite frequently, is

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met. This latter group sees Nigeria as an important country to which they bring their issues.There is a gamut of other responsibilities met from this vote, such as provision of meals forcabinet members in their weekly meetings, monthly National Economic Council meetings(involving state governors); Council of State meetings, etc.

Security expenditure

The comments on the security sector allocation regarding the classification, size and distributionare neither here nor there. Whether the classification should include pension payments to retiredservicemen is a moot point. The bottom line is that I believe that we should be a bit circumspectwhen discussing issues of national security, including details of their budget. The practitionersknow more about their issues than the rest of us, so I choose not to be drawn on this. I should,nevertheless, point out that some of the data used in the article are wrong using 2011 budgetfigures in some cases, and criticising the government for giving a paltry sum to a particular

security agency when, in fact, the 2012 allocation was higher. In at least one other instance, thearticle cites a 2011 budget figure that is higher than the 2012 equivalent, and uses it to give theimpression that government is profligate. A related matter is the claim that there is provision ofN16.8 billion for a presidential aircraft in the 2012 budget. We do not have such an item in the2012 Budget! A balance of N1.9 billion was, however, provided in the budget to complete thepayment for an aircraft, the procurement of which has been going on since 2007.

I would like to reiterate that we value the right of Nigerians to study and comment on the budget,which is why we have been consistent in uploading it on our website over the past few years. Weget inquiries for clarification on an ongoing basis, which is part of our public enlightenment

programme. It is essential that public discourse on it should be guided by the facts, even withpolitical differences. The public that we all seek to serve should not be misled.

Dr. Okogu is Director-General, Budget Office of the Federation

Budget 2012: Three Billion Daily for Insecurity? (2)

27 Jan 2012

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We will revisit our analysis of the security sector budget beginning with some clarifications andrebuttal of the Budget Office's right of reply to last week's column titled - "Where el-Rufai Got itWrong". I commend the Budget Office for choosing to respond this way instead of asking theSSS to arrest me as the president did on July 1, 2011. The democratic space can only beexpanded with more freedom to express opinions and disagree often, and it is not just aboutpolitics. It is about improving our nation, enlightening our citizens and raising the levels ofaccountability. And the world today is too open and citizens too aware for much secrecy ingovernance to be sustained.

The "right of reply" only served to confirm the points I made about lack of transparency in therevenue 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 askedfriends in the National Assembly for their more detailed version and got the same document. Arewe not as citizens entitled to this complete information as well?

Nigerians now know that our Joint Venture (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 ofthe constitution for this huge item of expenditure to be incurred without specific inclusion in amoney 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 7.5per cent, and no new revenue allocation law has been passed yet. And there is a world ofdifference between "fuel subsidy removal (FSR)" and deregulation. It is sacrilegious to some ofus that deregulated some monopoly sectors to confuse the two. The attempt by the budget officeto refer to the partial FSR which hiked the price of petrol to N97 per litre as 'partial deregulation'is simply untenable. This administration is not deregulating the petroleum sector today. It isdesperately looking for easy money to fund its profligate habits and thought the FSR would beone source. When the Petroleum Industry Bill (PIB) is enacted into law, we will concede thatderegulation 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 besaid to be broke. The balance sheet lists assets and liabilities, not the level of one's liquidity orsolvency. The difference between the balance sheet and income statement is that one can have astrong balance sheet but be unable to meet day-to-day financial obligations. That is the situationwith Nigeria with its trillion naira budget deficit but billions of barrels of oil reserves. As for thecelebrated Fitch rating, we will leave that for another column, but suffice it to say that such

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rating agencies are being asked questions in other jurisdiction about their rosy ratings thatevaporated 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 isevident to those of us that have lived here for more than 50 years - which is - today, the Federal

Government's cost of operations exceeds its sustainable income - and something needs to bedone 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 patronising ordinary citizens by assuming that they aremore patriotic than the rest of us. Saying the truth about one's country is not talking it down. Welove this country too, unconditionally. We neither need huge feeding allowances, expensiveplanes and bullet-proof SUVs nor a coterie of aides to do so. So let us debate the issues and cutthe patronising 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 foodbudget include banquets (how many in a year? Once-a-month?), lunch on Wednesdays (50 inone year?) and so on. As a quantity surveyor, one can itemise each component of cost, describeand price it. When I did all that and adjusted for such 'extra-over' items, the villa's kitchen willstill spend nearly N2 million daily. So what kind of food are they eating? And does that makesense 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 (N1.6trillion) is interesting - "You just can't throw civil servants out into the street overnight withoutcareful assessment, knowing that each such person has six or more dependents they support inour 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 the7-8 million Nigerians that are civil servants and their dependents are a bigger priority thaninvesting in infrastructure (N1.3 trillion in the 2012 Budget) for the 160 million that are not civilservants and their dependents? (2) Is it not a fact that between 2005 and 2007, a carefullythought-out severance exercise was carried out in which 45,312 civil servants and 50,054parastatal personnel were severed at a cost of some N67.8 billion? (3) Is it also not a fact that anadditional 38,732 parastatal staff were to be severed in 2008 at a cost of N29.1 billion?, (4) Allthose severed had received pre-retirement training, severance payments and had even beguncollecting their pensions by mid-2007?, (5) Some 20,000 of such pensioners were thensmuggled back into the public service by 2009 and restored to the payroll, after collecting theirterminal benefits, (6) perhaps an equal number has been added in 2010 and 2011, and (7) theseactions 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 andthe Finance Ministry leadership knows that too. What is so difficult about getting rid of thesealready-severed staff, and completing the 2008 exercise now? Dr. Goke Adegoroye who was theDG of the Bureau of Public Service Reform, now retired, published these details in his book

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"Beyond Yours Faithfully" and available for the government to dig into, if the political will to doso exists. How personnel costs increased from about N600 billion (including the NationalAssembly) in 2007 to over N800 billion in 2010, and then N1.6 trillion in 2012 is partlyattributable to some of the retired but smuggled public servants! We must do what is right tobring 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 headlineitems, everything written in last week's column is correct. When we got to the details, budgetaryprovisions in 2011 were mistakenly referred to instead of those of 2012. I apologise 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, aswell as concerns about Iridium being used for secure communications. Even if some foreigngovernment departments use Iridium, their intelligence services do not do so for securecommunications, and certainly not for data communications. We deserve better. This week, wewill look at the 2012 numbers and re-present with our analysis of last week related to securityspending.

As stated last week, I will appeal again to Nigerian citizens to study the budget as much as, if notmore than they read the constitution. It is the only way we can see how policy decisions translateinto resource allocations, and ask questions about how our resources are spent. Details of thebudget are available online on http://budgetoffice.gov.ng/2012budgetproposal.html or if for anyreason 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 InternalOperations (N17 billion), (5) Police Service Commission (N2.5 billion), (6) Customs,Immigration & Pensions (N8.6 billion), (7) SSS/NIA Pensions (N11.2 billion), (9) Death

Benefits - Army & Police (N5.4 billion), (10) Federal Road Safety Commission (N28.9 billion),(11) Maritime Security (N4 billion) and Police Reform Fund (N15 billion). Adding all these upbrings the total of our spending on the security sector to N1.145 trillion, not the N922 billionhighlighted. 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 opendue 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 thePresidential Air Fleet (PAF) will now be commented upon. The budget of the DefenceIntelligence Agency (N10.8 billion), Defence Intelligence School (N560 million) and Directorateof Military Intelligence are under the Ministry of Defence, and are therefore excluded for thetime being.

It is worth noting that the NSA is one of the 20 special advisers approved by the NationalAssembly for the president, but he sits in the Federal Executive Council (FEC) as a member. Hisoffice is advisory and his main job is coordinating the activities of the security agencies, withstaff strength of about 100. Each agency is independent of the NSA and routinely reports directlyto the president. It is therefore difficult to explain how the NSA has a capital budget nearly twice

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that of other 'operating agencies' within the intelligence community - higher than that of the SSSwith about 15,000 staff and the smaller but far more effective, NIA. The NSA's budget consistsof N285 million for personnel cost, N3.64 billion for overheads and a whopping N29 billion forcapital projects! The respective proposals for the SSS are N23.5 billion, N4.8 billion and much-improved N18 billion for capital spending! The NIA is slightly better with N23.6 bilion for staff

costs, N3.1 billion for overheads and N14.8 billion for capital projects.

We will continue the in-depth analysis of the budget of the security sector next week because theproposed budget this year envisages direct spending of N130 million per hour on nationaldefence and security, or about N3.1 billion every single day. In the light of the escalation inlevels of terrorist sophistication and violence in the North and other violent crimes in other partsof the country, we must insist that these daily billions will not buy us more insecurity.

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Reflections on the Subsidy Struggle

22 Jan 2012

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Simon Kolawole Live!: Email: [email protected]

Senator Bukola Saraki, former governor of Kwara State, wanted to move a motion on the floor of

the senate last year. He wanted a probe of the fuel subsidy regime. How was N240 billionbudgeted for subsidy for the whole of 2011 and nearly N1 trillion had been spent by Septemberwithout appropriation? For months, the senate leadership refused to touch the motion. The mediapiled pressure on them. Eventually, it was tabled and passed. An ad hoc committee, headed bySenator Magnus Abbe, was set up to probe the subsidy saga. What Saraki started a few monthsago has now snowballed into something of international interest. But while the senate probeseems to have lost momentum, the House of Representatives version is yieldi ng revelationsupon revelations, in excess of what we expected.
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Now we know that while we consume 35 million litres of petrol everyday, we actually imported59 million litres daily under the subsidy regime last year. That is a difference of 24 million everyblessed day. At the rate of roughly N76 subsidy per litre, that comes to N667 billion worth ofsubsidy paid on what we most likely did not consume or was most probably not imported at all.The Nigerian National Petroleum Corporation (NNPC), we now know, used to import petroleum

products without proper documentation, according to the testimony of Nigeria Customs Service.In other words, NNPC could do anything with the products since there was no record. Theycould divert the products to neighbouring countries. In fact, they could claim 200 million litresfor 20 million litres. NNPCs regular excuse, according to Customs, was that it was a matter of

urgent national importanceas it wereand Customs should not constitute a stumbling blockthat could lead to fuel crisis. Wonderful.

We also know now that the quoted subsidy figure of N1.3 trillion was not for petrol alone. Wenever knew this before. When government was campaigning to increase the price of petrol, wewere only told that the N1.3 trillion spent on subsidy would now go into infrastructuraldevelopment. But now we are being told the amount included kerosene as well. And there was

no plan to remove kerosene subsidy all along. In essence, N1.3 trillion savings was justpropaganda. The savings would be less. Which reminds us once again about the lack oftransparency in the whole business. Whose figures are these? Who verified them? TheCoordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala,finally told us that nobody authorises NNPC to deduct subsidy before federal allocations areshared. She said it was just a practice. NNPC sells crude, collects the proceeds, decides howmuch is subsidy, deducts it and then hands over the balance to the Federation Account AllocationCommittee (FAAC). Wonderful.

In the whole debate, the Governor of the Central Bank of Nigeria (CBN), Malam Sanusi LamidoSanusi, also stimulated my thinking. He was the first and only government official to openlycanvass a compromise as the strikes and demonstrations brought the economy to a halt. I dontknow if he was sent to do so by the government to douse the tension (he said he spoke in aprivate capacity), but it struck a chord in me immediately. However, I am more interested in theperspectives that he brought forward. As someone who had been canvassing the removal ofsubsidy long before the latest round of fuel price hike, Sanusi made his points quite clearly, evenif I didnt agree with him on some issues.

Being the one largely responsible for maintaining macro-economic stability, he had raised thealarm on the increasing demand for dollars to import fuel. This was hurting the economy andpiling pressure on the exchange rate. Even before he became CBN governor, Sanusi had beencanvassing the removal of fuel subsidy. Last year alone, CBN sold $8 billion to fuel importers.There are several implications that go with that. One, with the increasing demand for dollars,CBN had to dip hands into our foreign reserve to fund the forex market; if not, the naira wouldhave gone on a freefall. It would probably have been N250 to $1 today if CBN had failed tointervene and left everything to market forces. You can guess the effects of a fallen naira on theeconomy and on the public. Already, because defending the naira affected our reserve position,we are being told somebody has stolen or mismanaged the savings.

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Two, because of the subsidy regime, there were spurious demands for forex to import fuel. Wenow know that not all those who claimed to have imported fuel actually did. Unfortunately, theimporter would have bought dollars on the pretext of bringing in petrol; the capital then flies tosome foreign account somewhere, hurting the local economy badly. Sanusi, I believe, was privyto a lot of data on this fraud. This must have informed his rigorous campaign for the removal of

the subsidy. His position was: if subsidy was removed, the true level of demand for fuel andforex (for fuel import purposes) would be established; the demand for $8 billion would fall andreduce pressure on our reserve.

For somebody who had a history of fighting for the talakawa (the masses), Sanusi must have

fallen out with his constituency over his unending justification of the removal of fuel subsidy.

He said recently that he was not against subsidy for the poor. What he is against is subsidisingconsumption which benefits only the elite. He advocated subsiding production which he saidhe was already executing in agriculture through the Nigerian Incentive Base Reach Sharing forAgricultural Lending (NIRSAL). Subsidising consumption, he said, creates jobs in othercountries from where Nigeria imports goods we ought to be producing locally.

Now, I disagree with Sanusi on the issue of subsidising production, not consumption. I do notquarrel with the fundamentals of his argument, but the failings are glaring a bit. If we want tosubsidise production, should we then not return to diesel subsidy since most factories run on it?Shouldnt we subsidise electricity for factories instead of increasing tariffs as we are now doing?As my senior colleague, Kayode Komolafe, pointed out to me last week, if I fuel my car on myway to office, is that production or consumption? The barber who fuels his generator with petrol,is that consumption or production? The salon operator who uses petrol for her generator, is thatconsumption? The tomato grinder who uses petrol to power her machine, is that production orconsumption? On these grounds, I disagree with Sanusi.

I agree that subsidy has to be targeted at the poor so that it can be effective. For instance, whyshould Aliko Dangote and Ado John Sule buy petrol at the same price? Unfortunately, some ofthese things are beyond what we can control. Agriculture is heavily subsidised in Europe. Everyfarmer gets financial incentives to keep farming. As a farmer, Prince Charles of England getssubsidy payments! He is not a poor man, I suppose. When agriculture is subsidised, the produceis cheaper. Everybody who goes to the market to buy carrots or milk enjoys the same low prices.It doesnt matter if the buyer is rich or poor. The market cannot discriminate. The seller will not

ask if youre rich before putting the price tag on it. And, mind you, that is consumption. When

citizens are paid dole, social security, unemployment allowances, etc, is that consumption orproduction that government is subsidising? I dont think Sanusi can push this argument too far

really, even if he has the interest of the poor at heart.

However, Sanusi made one of the most telling contributions to the debate with his take on thesize of government. Do we need all these expenditure centres? Do we need 36 states and 774councils? Do we need all these ministers? Long ago, he alerted us to the huge budget allocated tothe recurrent expenditure, and also what the National Assembly is consuming as overhead. Theywanted to chop off his head then, but the reality is biting us harder now.

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By and large, I enjoyed the debates and agitations that the last fuel price hike generated. I don tthink weve had anything that fruitful in years. Those who think the people lost out because

petrol price was not reverted to N65 per litre are not seeing the larger picture. What I am sensingin my spirit now is that if we keep the momentum going, we would end up cutting the hugewaste in government and also having more transparency in the oil sector. Thats not a bad

bargain.

And Four Other Things...

Kano Attacks ForetoldOn December 19, 2011, THISDAY ran a story on impending attacks on Kano. We quoted an e-mailed statement from Boko Harams spiritual head, Muhammad Abubakar Shekau, who

vouched to launch endless and violent attacks on the city. Shekau said the group had earlier

released an open letter to the people of Kano, including the Emir of Kano, Alhaji Ado Bayero,and Governor Rabiu Kwankwaso. He said: The message here is that everybody knows that a lot

of our people were killed in Kano State, especially in Wudil town. We had perfected plans totake revenge but some notable scholars intervened by pleading with us. They also assured thatour members would never be persecuted again and we took them by their words. Unfortunately,however, about five months ago, security agencies began trailing and arresting our members whoare carrying out their legitimate businesses, alleging that they were thieves and armed robbers."Last Friday, Boko Haram launched massive attacks on Kano. So far, 143 deaths have beenrecorded, including that of Channels TVs Enenche Akogwu. Hmmm

Escapist ResponseWhere did the rumour originate from that President Goodluck Jonathan gave Inspector Generalof Police Hafiz Ringim 24 hours to produce the runaway Christmas Day bombing suspect,

Kabiru Sokoto, or be sacked? To the best of my knowledge, what the Police Affairs MinisterCaleb Olubolade said was that the IG had been queried to explain Sokotos escape from policecustody. There was no question of sack in 24 hours. I dont think President Jonathan is interestedin sacking anybody. If not, the entire security apparatus would have been overhauled since thecountry came under heavy bombardment from Boko Haram, especially with the successful attackon police headquarters in Abuja last year. I dont need any expert to tell me that something isseriously not working in the way we are prosecuting the war. Neither do I need anybody to tellme that a change in personnel is urgently needed. Unfortunately, President Jonathan would doanything but tamper with his security chiefs who are presumed to be his loyalists. So it goes.

Unknown Soldiers

While Nigerians have been facing a serious threat from Boko Haram militants who haveunleashed unprecedented terrorism on the country, the most urgent priority now, it would seem,is to militarise Lagos State over a very peaceful demonstration. The misuse of troops should becondemned by all reasonable Nigerians. Those who are rejoicing over it today should realise thatthey would have no justifiable reason to protest tomorrow if the guns are turned in theirdirection. The most disingenuous explanation came from the Defence Headqu-arters whichclaimed that it was Lagos Governor Babatunde Fashola who requested for the troops in 2010!

Of course, there was a joint police/military arrangement in place with Lagos long ago, renewable

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from time to time; but it was purely to fight crime not to stop peaceful protesters.

One More ResolutionI have thoroughly been impressed with the role the National Assembly has been playing in thissubsidy crisis. Senate President David Mark acted as a good mediator and seasoned crisis

manager, while the House hearings have exposed a lot of rot in the petroleum sector. We arehearing so many disgusting things. However, I could not but comment on the House resolutiontwo weeks ago that petrol price should revert to N65. Good one. We also need anotherresolution: the federal lawmakers should revert to the allowances they were collecting beforejacking them up two years ago. That would be a great sacrifice and a sign of sincerity on theirpart as they go through the 2012 budget.

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Budget 2012: The Security Spending Spree (3)

03 Feb 2012

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We continue our detailed review of the 2012 Budget proposals today looking closely at theamounts earmarked for the office of the NSA, the SSS and the NIA. Our objective is toappreciate the huge amounts allocated and ask the standard quantity surveying question - isNigeria getting value for its money? A security consultant familiar with Nigeria, Gordon Duff,wrote recently in www.veteranstoday.com that our security services budget for Rolls Royce andend up buying Volkswagen Beetle when procuring services and equipment. Is it plausible?

Are the amounts spent purchasing security for the Nigerian citizen, or are they making a few"security chiefs" and their appendages so stupendously rich, thereby exacerbating the income

disparities, inequalities and injustice amongst us which in turn have contributed to the insecurityin our land? How are security budgets made up? How are they spent? Is there any oversight andaccountability like other public funds? We will raise these and other issues, providing someinsights about practices and spending processes for improvement.

First, some history of our civil security services. The first internal security organisation in ourcountry started as a department of the Nigeria Police Force, and the regional police units. Themost important function of these officers was collecting information, however innocuous - that is
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what is called 'intelligence'. They were plain-clothes policemen living and working in theircommunities, in constant touch with traditional rulers, hotel owners, motor park and marketmanagers, and even commercial sex workers as informants. These 'informants' are placed onmodest payrolls - which the bulk of security vote is supposed to be utilised for. There was asimilar outfit within the Nigerian Army which evolved into the Intelligence Corps. Nigeria was a

safe and secure place to live in then. The system worked for most of the citizens, until quiterecently.

This system and practice continued intact until the assassination of General Murtala Mohammed(may his soul rest in peace) on February 13, 1976. Abdullahi Mohammed, then a colonel andgovernor of Benue Plateau State was recalled by General Olusegun Obasanjo and tasked with thejob of establishing a national security organisation. That led to the birth of the Nigerian SecurityOrganisation (NSO) which became not only the coordinating body and clearing house of civiland military security and intelligence matters, but the main operational body of internal securityand intelligence. The Research Department of the Ministry of Foreign Affairs focused onexternal counter-intelligence but with a dual reporting relationship to the NSO and the Foreign

Minister.

The national security and intelligence system was restructured in the late 1980s under theIbrahim Babangida administration creating three separate operating services reporting to AliyuMohammed, then a brigadier, as Coordinator of National Security (CONS), the precursor to thecurrent NSA position. The old NSO was renamed the State Security Service (SSS), the oldResearch Department became the NIA, the Defence Intelligence Agency was then created, whilethe police and military maintained the remnants of their old intelligence services and remainedinternal to them. This remains the operating structure today to a large degree, with the change oftitle from CONS to NSA under Babangida. The NSA's profile rises or falls depending on theoccupant of the office, personal closeness to the president, type of administration and howinsecure the administration feels about its legitimacy!

Three points need to be grasped from the foregoing (1) over 90 per cent of security effectivenessis proactively arising from getting quality information, in advance (2) intelligence work is athoughtful, patient process not the gun-toting and arresting culture we now see, and certainlyNOT the extra-judicial killing of people that are intelligence assets and (3) the system workedwell when quiet, analytical, 'below-the-radar' professionals did their work as operatives, whilecoordination is undertaken by experienced political appointees with deep intellect and goodjudgment, who enjoy the trust and confidence of the nation's leadership. Looking at these andthe current focus of the sector leadership on spending partly explains the gaps we see, and thehigh levels of insecurity in our nation.

Now back to the budget and spending priorities. The budget of each agency consists of threecomponents - personnel costs, overhead and capital. The overhead is sub-divided into two -regular overhead which I assume is for stationery, snacks, tea, coffee, diesel for generators, andother maintenance and the "operations vote". None of these components is broken down, sowhile we know that the Villa wishes to spend nearly N1 billion on food and snacks this year, theNSA's expenditure on coffee is a state secret - a manifest absurdity! The 'operations vote' isanother name for that notorious ssecurity vote for which no records or receipts are kept, i.e. a

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slush fund for the officials to spend as they please! For each of the services, this amounts toseveral millions daily. The capital components itemise what our intelligence services spend theirinvestment money on - buildings, equipment and infrastructure to get their job done. We willnow look at these in some detail and then encourage the reader to draw some conclusions.

The office of the NSA is supposed to advise on, and coordinate national security matters. Itsdirect involvement in operations is quite limited. It is therefore inexplicable that it has N2.69billion as a lump-sum regular overhead with less than 100 staff in one location. This means theNSA intends to spend about N27 million per employee or N7.35 million every day includingweekends on running his Abuja office. The NSA's security vote (operations vote) is extra - it isN950 million this year, about N2.6 million every single day of monies that are never recorded,accounted for or audited! The capital budget is some N29 billion to be spent on satellitecommunications including training (N8.9 billion), data signal centre/equipment (N14.4 billion),Iridium/Thuraya communication platform (N3.2 billion), 12 SUVs with motorised directionfinder (N373 million), Cyber-Security (without any enabling legislation yet) (N150 million) andPresidential Communication Network (N2 billion).

What should interest us and citizens and our National Assembly members is that similarprovisions were made in the 2011 Budget for all these items, so what have we spent so far andwhen will the budgeting cycle end and the "ongoing projects" completed? Are we getting valuefor money? Except for Iridium which there is enough comparative data, there aren't enoughdetails on the other items to say no for certain and since security procurements are usuallyexempted from open, competitive bidding, 'due process' and procurement audits, we can all drawour conclusions.

The SSS proposes to spend about N46 billion in 2012. About half of this will go to paying the15,000 or so staff of the service - about N1.56 million per head. The regular overhead to run the

SSS offices in Abuja and all the states of the federation is a N4.14 billion. Compared with theNSA's overhead, the SSS provision looks modest! The operations vote, that is what the SSScan freely spend on informants and intelligence is a mere N700 million for operations in 36states, the FCT and headquarters compared with the NSA's N950 million in oneadvisory/coordinating location. There is something amiss here!

The capital budget of the SSS is nearly N18 billion, a nearly tenfold increase from last year's.The SSS intends to spend N1 billion on vehicles, cell phone location tracking system (N1.3billion), counter surveillance jammer (N500 million), VSAT project (N1.675 billion), advancedexplosive detectors (total of N3 billion), arms and ammunition (N500 million) and constructionof various office and residential buildings all over the country for N6 billion. Should SSS stafflive in special provided accommodation? Should they not live within the communities they arelocated, enabling blending and more effective intelligence gathering? These are policy questionsthat require serious consideration.

The NIA intends to spend about N41 billion this year - N23.6 billion for personnel costs, aboutN3 billion for overhead and about N14.8 billion for capital projects. The regular overhead to runNIA's Abuja office and its agents abroad is some N2.6 billion, about the same as the NSA'soffice. The operations vote is N450 million, less than half of the NSA's! Again, there is

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something that does not add up here. The NIA plans to spend a whopping N530 million to buycomputers (N146 million), active and counter-measures equipment (N142.5 million), GSMmonitoring equipment (N104.5 million), access control system for Abuja office (N101 million)and covert photographic equipment for N36 million. If each computer and software bundle costsan average of N150,000, it means the NIA intends to buy nearly 1,000! There must be something

to explain here.

The NIA wants to purchase its own fire fighting engine for about N14 million and upgrade itsfire alarm system for N46 million!. The agency intends to purchase encrypted fixed satelliteterminals (N128 million), 115 Bgan terminals for N100 million, and an assortment of satellitecommunications equipment, interception systems and accessories for over N1.5 billion! Bombdetectors, metal detectors and cyber-security (again!) investments will cost over N1 billion.Servers, storage, central power backup and virtual private networks will cost about N2 billion.'Training and technical presentation tools' for Abuja and our 135 missions abroad will costanother N2 billion.

The NIA intends to buy P.90 Belgian rifles for N1 million each instead of the average retail priceof about $1,900. Russian-made AK-47 assault rifles retail for between $400 and $600 in theopen market, with the East European version as cheap as $100 each. We hope the N63,750 NIAproposes to spend will purchase the more expensive, original Kalashnikovs! In all the NIA willspend N286 million buying such rifles, pistols and ammunition of various kinds. Ongoingconstruction projects to be undertaken in the year include residential buildings (N2.28 billion),Schools (N2.7 billion), three entrance gates at the headquarters (N100 million), the expansion ofits clinic (N100 million), and the rehabilitation of gym and shooting range (N321 million).

Back to the value-for-money question. Are the prices that we are paying for these items the rightprices? Those amongst us that are quantity surveyors, cost engineers and procurement experts

would opine that we are paying way above international market prices for many of these items.However, a more pertinent question is whether the duplication of investments in satellitecommunications, GSM/GPS tracking and interception systems in the NSA, SSS and NIAbudgets (details above) are not wasteful and proof of coordination failures! Clearly, theinvestments need to be streamlined with all the services connected to a 'situation room' in theNSA's office and the Villa, not what appears to be here - each agency pursuing its investmentagenda independent of the other, and buying similar stuff that are probably technicallyincompatible.

Unless we target our resources to real needs, increase transparency and accountability in securityspending as suggested by General Muhammadu Buhari in December 2011, and eliminateduplications and copy-cat procurements in our budget, we will continue to lose the value of theseinvestments. When the spending is supposed to be for our security, it might simply end up in thepockets of officials and contractors, while the citizens get insecurity as the result. Security mustnot be seen as an easy, money- making machine. This is what it appears to citizens these days.We can do better. Our leaders must do better. There is no better time to act than right now, thatsecurity is on everyone's mind.

Budget 2012: The Rewards of Insurgency (4)

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10 Feb 2012

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We continue our detailed review of the 2012 Budget proposals today looking closely at theamounts earmarked for three budget heads that are connected to the security and intelligencecommunity, and ostensibly driven by the decisions in the NSA's office. These are the allocationsto the Amnesty Programme, the Presidential Air Fleet (PAF) and for Maritime Security. Our

objective is first to ask whether we have not become a society that rewards taking arms againstthe state, secondly to appreciate the huge amounts allocated and then ask the standard quantitysurveying question - is Nigeria getting value for the money being spent?

These questions need asking particularly in light of some developments in the last week or so.The first was a text message sent to me from a staff member of the Budget Office observing thatfor the eight years between 1999 and 2007, the cumulative amounts allocated to, and controlledby the NSA's office were about N29 billion, with a brand new NSA office built out of that andmore - less than what the office got allocated in just one year in 2012! Either this allocation is forsomething else other than security, or someone is taking an early, generous pension, the officer

opined. More questions than answers!

The second is the decision of the Goodluck Jonathan administration to hand over security,regulatory and revenue collection functions of the Federal Government in its territorial waters toa private company allegedly owned or controlled by the one-time militant known as Tompolo, inwhat is clearly a dodgy, crony-driven afterthought.

This is even when N4 billion has been proposed in the 2012 Budget for "Maritime Security", andin spite of loud objections by sections of the media and civil society. Thirdly, is what appears tobe a half-hearted willingness of the administration to negotiate with the insurgents of Boko

Haram days after the Chief of Army Staff has sworn that his military solution will wipe out thesect soon. What is the implication of this and what does the immediate future portend?

In 2012, the Jonathan administration proposed a budget of some N124.3 billion for theintelligence community. Separately, N4 billion has been budgeted for maritime security andN11.2 billion for the pensions of the SSS and NIA retirees as consolidated revenue fund charges,and N74.2 billion for the Amnesty Programme, now tucked away under the SGF's office. Thus

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effectively, we are looking at about N210 billion for civil, non-uniformed security spending. Wewill look at the budgets of the Armed Forces, the police and para-military services in subsequentarticles.

A closer look at the president's Amnesty Programme (PAP). It was the initiative of PresidentUmaru Musa Yar'Adua as a response to intensified levels of militancy in the Niger Delta, thedisruption of crude oil production and exports, and heightened insecurity of lives and property inthe region. According to Yar'Adua insiders, the then vice-president was tasked to come up with aplan, which took too long to articulate, and which Yar'Adua found impractical and unworkable.He therefore turned to some individuals, businessmen and 'serious' governors in the region tohelp develop a workable strategy. As soon as that was done, Yar'Adua moved with uncommonspeed to roll out the programme and get stakeholders' buy-in. He made several concessionswhich included releasing the militants then in detention or on trial in courts in Nigeria. Is that aworkable template for engaging Boko Haram?

For Yar'Adua, the failure of successive administrations to address the fundamentaldevelopmental and environmental issues in the region is the problem, and he genuinely wantedto draw a fresh basis for engagement. Similar questions need to be raised and honestdeterminations made regarding the Boko Haram insurgency, identifying the root causes, the'dramatis personae' and how we got to where we are, before developing a workable approach.

With regards to the Niger Delta, the issues in my humble opinion are more complex than thatidentified by Yar'Adua, and that is why I felt then that the solution was flawed andunsustainable. The strategy of handing out wads of cash to people that (1) have not earned the

money through meaningful work and (2) with a pre-existing sense of entitlement may ostensiblyamount to rewarding insurgency - what economists call "moral hazard". Whether the ex-militantsare on foreign vacations, attending skill-building programmes (or even military training, as beingrumoured), the challenge is to find them jobs that pay better than their previous lives - duringmilitancy and after. That means jobs that pay at least N65,000 tax-free monthly stipend, whichwith other costs amounted to N3 million per annum - about what we spent per militant in 2011.Boko Haram of course may require a different approach.

Last year, the programme was allocated N99 billion, rapidly up from N2.9 billion in 2009 andN28 bilion in 2010. In all, over N200 billion would have been spent on the programme by theend of this year, perhaps another N100 billion next year which is said to be the programme'sterminating date. Then what next? Where do we generate the tens of thousands of oil-relatedjobs for them? What about other youths from the region that have not been captured in theoriginal programme, but suffer from the same hopelessness that pushed their elder siblings tomilitancy? What signal does this send to youths of other regions? These are key public policyissues that require very deep reflection.

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The truth is that unless the quality of governance in the region improves and the resourcesallocated used by the state governments, Niger Delta Development Commission (NDDC) andMinistry of Niger Delta Affairs judiciously used for physical infrastructure and human capitaldevelopment, nothing will ever change for the better. Last year, quite apart from the huge funds

from federation account that went to the state governments in the region, the NDDC receivedN56 billion from the Federal Government and the Ministry of Niger Delta Affairs collected andspent about N39 billion.

Like the rest of Nigeria, the binding constraints are quality of governance, accountability in theuse of resources and attitude of the leadership and followership - and when these are resolvedlocally as Rivers State Governor Rotimi Amaechi is said to be trying to do, the task in theenvironment improves for everyone and insurgency and violence lose their attraction. Throwingmoney at any problem, which ends up getting diverted to a few people's pockets is simplypostponing the evil day, and compounding the moral hazard problem. In 2012, the NDDC gets

N55 billion and the Niger Delta Ministry another N57 billion. These funds should be spentaddressing fundamental problems, not on spurious contracts with a "share-the-money" attitude. Iwill return to the Niger Delta in a future article, by God's Grace.

The PAFs budget is under the office of the NSA. This year, PAF envisages spending N20.4

million for staff costs and N665 million for overhead without any breakdowns. The capitalbudget is some N2.9 billion thus bringing the Fleet's total allocation to some N3.5 billion. ThePAF has since its establishment gone through several mutations. It has had civilian pilots fromthe defunct Nigeria Airways side by side with military personnel (due to fear of in-flight coupslike the 1985 aborted plot!), but is today largely manned by Nigeria Air Force personnel.

The PAF's capital budget has been earmarked for motor vehicles (N113.5 million), officeequipment (N11.2 million), purchase of sports and games equipment (N15 million), installationof cameras and related equipment (N12 million), and construction of PAF staff quarters (N241.5million). Other items of expenditure include construction of new hangar (N550 million),computerisation of aircraft spare parts inventory (N14 million) and the balance of N1.9 billionfor purchase of Hawker 4000XP aircraft, which was first budgeted for in 2007 and delivered in2010.

What is interesting is that even after delivery in 2010, the sum of about N17 billion ($110million) was budgeted for it in 2011, and now another $12 million! The N17 billion is theamount I mistakenly assumed was in the 2012 budget. This is a very expensive plane indeed thatwe have been budgeting and paying for across five fiscal years. There is need to know how muchthis plane costs bearing in mind the market prices of similar or better, fully-loaded executive jets- information now freely available on the web.

Some have asked the question whether Nigeria's president needs to maintain a fleet of aircraft.

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After all, they say the Queen of England and the British Prime Minister flies everywhere in theworld on British Airways, UK's national carrier. Such views forget to mention that the USA hasa fleet of aircraft dedicated for the president. Even the secretary of state travels on officialassignment from that fleet. We should look at our environment and choose what will work forus, but without waste and impunity.

Should our president be made to suffer the usual several hour delays when travelling even withinNigeria? I do not think so. Last time I checked, we had five aircraft in the fleet, some of themnearly 20 years old. Do we need five planes? Is the usage of the planes for shopping sprees bypresidential friends and relations legal and justifiable? Should private visitors to the presidenthave access to the fleet? What is the framework for accountability and use of these aircraft?These are the questions that need to be answered to make the system work better.

The last item is the N4 billion earmarked for Maritime Security as a charge on the consolidatedrevenue fund (CRF) without any breakdown or details. Based on budgets prepared some years

back, it is my natural assumption that this item is the continuation of investments in boats andrelated equipment for the use of the Joint Task Force and the Nigerian Navy for use in policingour territorial waters and the creeks of the Niger Delta.

These are constitutional roles for our military that I do not think the president can privatise oroutsource to any private company. And it is therefore surprising that no one reminded thepresident that regulatory, security and revenue collection matters are not in any of the schedulesto the Privatisation & Commercialisation Act 1999. Indeed, the use of private companies tocollect revenue has been specifically outlawed in Nigeria last time I checked. But I forget thatlike Napoleon in Animal Farm, laws, rules and regulations do not apply to some people that aremore equal than the rest of us. Welcome to our new Jonathanian Republic!

Budget 2012: On Defence Spending (5)

17 Feb 2012

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For a nation that is not at war, Nigerias defence spending raises several critical concerns. The

paradox of course is that the more government spends on defence, the more insecure Nigerians

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feel. Travelling within the country has become so perilous that it is now advisable to get asecurity report of all towns and villages on our way before setting out. Today, all majordefence-related structures in Abuja, supposedly the safest place in the country are so barricadedthat images of Baghdad and Kabul come to mind. If the state of our armed forces and defenceapparatus are the way that they are in peace times, what would happen if (God forbid) Nigeria is

faced with a major external threat? Or is it that the amorphous term, defence is being used topull wool over the eyes of Nigerians, while some few anointed people smile all the way to bank?

We continue our review of the 2012 Budget proposals today by looking at the details ofN396.5billion (about $2.56billion) proposed for spending by our armed forces - the Ministry ofDefence Headquarters, the Army, Navy, and Air Force, their recurrent and capital costs, training,welfare and internal operations. Our objective is first to see how we compare with other nationsin terms of defence spending, whether the spending priorities make sense, and then ask thestandard quantity surveying question - is Nigeria getting value for the money being spent?

It is vital to ask these questions because each member of our armed forces which according to

US Air University's Failed State 2030 -Nigeria as a case study is estimated at about 76,000 innumber will cost us about N4.3 million, slightly above the N3.2 million we spend per militant -and this excludes pensions, internal operations, death benefits and insurance. When these areadded, each member of the armed forces cost the Nigerian citizen N4.86 million to maintain thisyear alone. But first, a bit of history and an overview of our defence policy and strategy would beuseful in the evolving discourse.

The Nigerian armed forces began life as a colonial army under Royal West African FrontierForce (RWAFF) that became indigenised just before independence in 1960. In 1967, the armedforces numbered just about 15,000. This grew to about 250,000 at the end of the war in 1970.Today, the total number is about 76,000. The Army which is basically our land-based fighting

force is the oldest of the armed services and the largest with about 60,000 officers and men andwomen. The Navy which is mostly sea-based, is the smallest in size but highly specialised andtechnology-intensive. It has about 7,000 personnel. The Air Force, the youngest of the threeservices is also equipment-intensive and has about 9,000 officers and men (and women!).

The role of Nigerias armed forces is entrenched in s.217 of Constitution and detailed in s.18 (3)of the Armed Forces Act Chapter A20 of the Laws of the Federation 2004. Generically, thedefence of our territorial integrity and defending our nation from external aggression constitutethe principal functions of the armed forces. The suppression of insurrection and acting in aid ofcivil authorities to restore order is also one of their related functions. Deriving from theconstitution and legislation, Nigeria ought to have a defence policy for the 21st century.

The first and only national defence policy was published by General Olusegun Obasanjos

administration in 1979. The armed forces were tasked then with four primary functions (1)preserving Nigeria's territorial integrity (2) contributing to national emergencies and security (3)promoting collective security in Africa while advancing our foreign policy, and (4) contributingto global security. This policy has never been revised or updated, and remains the guidingframework more than 30 years after its adoption. For armed forces that are rated as highlytrained and educated, it is remarkable that they have not devoted their intellectual firepower to

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updating our obviously antiquated defence and security policies and strategies, but that is amatter for another day.

The Armed Forces, with the Army in the lead role have done the nation proud in their peace-keeping roles in Congo and Tanzania in the 1960s, the prosecution of the civil war between 1967

and 1970, and more recently in Liberia, Sierra Leone, Sudan and Somalia. Indeed, the Nigerianmilitary deserves the credit of stabilising and democratising Sierra Leone and Liberia in 1990sand thus ensuring the overall security of the West African sub region.

The paradox of these success stories is that the reverse has taken place in Nigeria. ManyNigerians see the involvement of the military in politics as stunting democratic development andas having militarised the polit

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