Fuel subsidy removal: Jonathan versus Nigerians?

By Dayo Olaide

IN the last six months, much has been written on the proposed removal of fuel subsidy in Nigeria. This thorny issue is not new but it has never been dealt with decisively; thus it has come and gone like Wole Soyinka’s Abiku, pitching governments against Nigerians. The people are ever ready to resist what is considered as government’s strategy for impoverishing and incapacitating them. President Goodluck Jonathan put together an economic team, whose mandate includes the scrapping of the controversial fuel subsidy. He has also declared that there is no going back on the January 2012 date for the removal of subsidy on petroleum products except kerosene. The meaning of this is not clear to many Nigerians. But government is not clear either. However, Nigerians appear set to rise against Jonathan on this issue. The absence of clarity creates room for interpretations and for some, it means Nigerians should get ready to pay as much as N200 for a litre of petrol which currently sells for N65 based on equalisation pricing.

Nigeria is rich in natural resources. It boasts of more than 39 different types of solid minerals. In addition, it is vastly endowed with oil and gas and is currently Africa’s largest crude producer. The presence of large deposits of natural resources together with a population of about 150 million people, considered predominantly young and hardworking, bring forth the reason why Nigerians regard their country as a rich one. They also believe that like Venezuela, Iran, Iraq and Russia that are similarly blessed, the country ought to provide petroleum products that are cheap and accessible to its citizens. What this means in the reasoning of Nigerians is that they should pay less for petroleum products made from crude oil which nature has graciously and abundantly blessed them with. They also believe that they should not have to pay the same price like their neighbours in Benin, Togo or Ghana that are either resource poor or new entrants to the exclusive club of oil producing nations. Successive governments, on the other hand, have argued consistently that subsidy distorts the market and discourages investment. It is considered as a major drain on the economy; that the subsidy gulps scarce revenues that government needs to survive and provide services.

The eagerness of Jonathan to confront this stubborn issue is admirable, considering that it opens opportunities to put subsidy and fuel supply in Nigeria to rest. But the solution canvassed by his administration is both condemnable and dangerous for Nigeria’s democracy. What makes it condemnable?

The downstream sector has remained far too long in the hands of a selfish cartel that has got too used to super profit at the expense of Nigeria and Nigerians. When Nigeria deregulated and liberalised the downstream sector, it removed the monopoly rights previously enjoyed by the Nigerian National Petroleum Corporation as the sole importer of petroleum products. By opening up the sector for private participation, the government hoped to promote investment, efficiency and effectiveness . These are necessary to stimulate competition and make petroleum products available at reasonable prices to Nigerians. Instead, the deregulation created an oligopoly market where a few investors with strong politically connections emerged to seize and control products supply and pricing; thus cornering the monopoly rights previously enjoyed by the NNPC. Buoyed by political patronage and protection, they milk Nigeria through questionable transfer payments in the name of equalisation and subsidy payments from the Federal Government. By threatening to remove fuel subsidy, Jonathan, like previous leaders, appear to be taking sides with the cartel; preferring to take money from impoverished and helpless Nigerians and handing such resources over to profiteers and looters.   

The downstream sector is locked in several shady deals which hamper accountability. The late former President Umaru Yar’Adua acknowledged this much when he said then that the cartel had become too powerful and out of control. They had seized the sector so securely that government could no longer guarantee uninterrupted supply of kerosene, diesel and petrol unless the importers were regularly appeased. So while the government claims to spend trillions on payments to importers, it has never been bold enough to publish a breakdown of actual amounts paid out and the beneficiaries. Industry experts have also given up, alleging that the petroleum equalisation and stabilisation funds are so opaque in that they will never allow Nigerians to understand or effectively engage the sector.  

But the biggest leakage in the Nigerian economy is the widespread corruption that bleeds the nation of billions of dollars in the form of bloated contracts, over-invoicing, outright theft and disappearance of government properties. Not too long ago, Nigerians were confronted with startling revelations of mismanagement of public resources, including the $16.25bn power sector; over N20bn aviation rehabilitation funds; and N7bn community power projects. Several billions voted annually to education, agriculture, health, police, etc simply grow legs and disappear without a trace, leaving the sectors in a sorry state. Even the controversial excess crude account that stood at about $26bn, at the height of the commodity boom, is now almost totally liquidated. Yet, the country struggles to show value for it. The scale of looting unleashed by legislators in the sixth National Assembly in the form of illegal jumbo salaries, procurement thievery and borrowings in stark contravention of relevant laws could make a small nation such as The Gambia bankrupt. But the economic saboteurs in the serial heists walk around, freely flaunting their wealth while Nigerian prisons, where many of them deserve to be, are stretched to the limit by awaiting trial inmates, in custody for lesser offences.

The cartel in charge of the downstream sector has mutated over the last two decades, consuming local refineries and locking the country in permanent dependence on the importation of petroleum products. The importers have frustrated the half-hearted efforts to license and encourage new investment in refineries. And in so doing, Nigeria now relies on the resource-poor West for its domestic need for petroleum products. Disappointingly, rather than allow knowledge and superior reasoning to address the age-long problem of revitalising the downstream sector and fuel subsidy, the Jonathan administration, like a proverbial stray dog bent on being preyed, appears set to lock out further dialogue and reasoning on the matter. It has choosen instead to stick with subsidy removal as the only solution. 

Removal of fuel subsidy is not an alternative to functioning refineries, an open and efficient supply chain and accountable management of public revenues. Focusing on these ones and ensuring the effective implementation of anti-corruption and public procurement laws will save more than 40 per cent of Nigeria’s annual budget. Without freeing the downstream sector from the hands of selfish oil importers that have successfully shown themselves to be economic saboteurs and others engaged in bleeding the nation of important revenues through corruption, outright theft, wastage and mismanagement, the government will continue to run below its earning capacity.

Now, what makes the current debate on fuel subsidy dangerous? Not a few Nigerians are worried or disappointed by the turn of events since Jonathan emerged as President on the promise of breath of fresh air. They are asking questions on social networks - Twitter, Facebook, MySpace - about when the transformation agenda Jonathan promised in his May 29 inaugural speech will come. In the meantime, the President’s list of sins appears to be growing - attempted tenure extension, poor power supply, insecurity, failed anti-corruption campaign, liquidation of the excess crude account without adding value to Nigerians, troubled amnesty programme, decayed infrastructure, abandoned key reforms (electoral accountability, petroleum industry, citizenship, etc), dishonoured national honours programme and now fuel subsidy. It seems every step of the way the President has been ill-advised - against the same Nigerian people that gave him huge votes.

The eagerness of Jonathan to go ahead with his economic team on the planned subsidy removal leaves the impression of a man desperate to correct a wrong impression. This eagerness at this moment of crippling insecurity that threatens foreign direct investments and bodes a strong possibility of implosion as a result of the sensibilities sparked, in part, by growing disenchantment with the six-month old administration, lessons from the Arab Spring, a near total collapse of governance and seeming lack of direction and urgency in this administration could have destabilising effects on Nigeria.

The Arab Spring has taught people around the world that their resolve can make the change they desire. The Jonathan administration should listen to the voice of reason and save the nation of what can become Nigeria’s ‘Harmattan Fall’.

- Olaide, an international development worker, wrote in from Rue 9x, Point E, Bourgiba- Dakar, Senegal via dayo_olaide@yahoo.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it