THE CONS OF THE FUEL SUBSIDY REMOVAL   4 comments

“After 20 years of implementing [IMF and World Bank-initiated] structural adjustment programmes, our economies have remained weak and vulnerable and have not sufficiently transformed to sustain accelerated growth and development. Poverty has become widespread, unemployment very high, manufacturing and agriculture in decline; and our external and domestic debts much too heavy a burden to bear.” –Kwabena Bartels, Ghana’s former works and housing minister, May 2001

Let me begin by saying that for Nigeria’s very huge oil endowments, the Nigerian people do not deserve to pay the same price for petrol such as which obtains in the world market. For crying out loud, Nigeria is the 6th largest exporter of crude oil in the world and she actually has the capacity to refine her crude locally.

When President Jonathan announced in October 2011 that his administration planned to remove the N1.3trillion subsidy for fuel in January 2012, threatening that if he didn’t, Nigeria’s economy would crash in two years’ time, the first thing that struck me is if indeed Nigeria’s economy was going to crash in two years’ time, why didn’t the Yar’Adua administration (of which Jonathan was a key member) see the warning signs as early as in 2007 or 2008 given the nation’s growing debt profile at the time especially with the creation of the National Planning Commission? If they did, why did they have to wait till the last minute to undertake an extreme measure which further compounds the sorry plight of the masses? If they didn’t how come it took a Ngozi Okonjo-Iweala (NOI) less than a month to make the finding? Mind you, NOI resumed work as Finance Minister with broader economic management powers on August 17, 2011 while she made the case for the removal of the fuel subsidy in two briefings to the cabinet between September 11 and September 17, 2011. Indeed, by October 14, 2011, Jonathan had already bought the idea and announced the removal of the subsidy for January 2012!

It is the controversy surrounding NOI’s widely-suspected IMF/World Bank backed-agenda that comprised prominent constitutional lawyer and human rights activist, Fred Agbaje’s analysis that “One of the things the Finance Minister told them (Jonathan’s advisers) when she was coming to serve is that she must implement the IMF policy which is the removal of the oil subsidy. She said if you are not going to do it, I am not going to serve in your government and the Federal Government foolishly and sheepishly acceded.”

Indeed, the IMF Managing-Director, Christine Lagarde, did not help matters when, on a visit to President Jonathan on December 19, 2011 after meeting NOI, she endorsed the so-called reform programmes being pursued by his administration. Worse still, yesterday, January 6, 2012, the United Nations (UN) joined the chorus by commending President Jonathan for withdrawing the subsidy on petroleum products, describing it as “a bold and correct policy”. Speaking while visiting President Jonathan at the State House, the UN Scribe’s Special Adviser, Prof. Jeffrey Sachs, claimed that the funds from the subsidy removal would go a long way to boost rapid infrastructural development and investments in the health sector. Similarly, following the subsidy removal, the European Union (EU) has said that it has confidence in Nigeria’s economy. Finnish Foreign Minister, Erkki Tuomoija, disclosed this while speaking to President Jonathan during an audience at the State House yesterday as well.

Whereas President Jonathan can take confidence from these Western endorsements, it is actually the very fact of them that comprises a reason to suspect the idea behind the forceful and quick removal of the subsidy by many a discerning Nigerian. To put that in context, it remains a fact that the EU, whose economic growth prospects are as bleak, and the UN’s major financers are badly in need of better oil prices in the world market especially considering the latest round of sanctions on Iran’s oil. This is the main idea behind their quick approval and support for this very unpopular policy by the Jonathan administration.

Meantime and more importantly, the removal of the fuel subsidy immediately throws up many controversies and disadvantages for the suffering Nigerian people. For instance, in making the case for the fuel subsidy removal, Petroleum Minister, Diezani Allison-Madueke, listed some of the things the government will use the money for but interestingly, these projects are in the budget already! She mentioned that the South-West Road will be constructed with the money saved if the subsidy is removed; that is quite shocking because the contract for that road has already been awarded.

It has already been said that the greatest undoing for whatever good there may be in the removal of the subsidy is the controversial haste with which the Jonathan administration has handled it. Indeed, three of Jonathan’s ministers, Ngozi Okonjo-Iweala (Finance), Diezani Allison-Madueke (Petroleum) and Labaran Maku (Information) as well as the NNPC Group Managing Director, Austin Oniwon, assured Nigerians that the policy would not be implemented until negotiations were completed and the 2012 budget was passed. However, as at January 1, 2012 when the removal was announced, and till this moment, neither of the above had happened. Clearly, the Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Reginald Stanley, lied when he announced on January 1, 2012 that “Following extensive consultation with stakeholders across the nation, the Petroleum Products Pricing Regulatory Agency wishes to inform all stakeholders of the commencement of [the] formal removal of subsidy on Premium Motor Spirit…”

Why President Jonathan surreptitiously removed the fuel subsidy on January 1, 2012 after saying negotiations were ongoing and after earlier disclosing that it would actually be removed on April 1, 2012 remains a matter of deep suspicion as to the real motive behind the removal of the same. I mean, where on earth does a government proceed to act on a hugely unpopular policy and even creates an implementation committee only to invite the labour unions and civil society for ‘consultations’? This is not only stupid but provocative!

Evidently, Jonathan missed the golden opportunity to engage Nigerians to buy into the scheme. He should have held on till April as earlier announced to give the already very impoverished masses some time to see reason for, and make spending adjustments to mitigate the effects of the policy. Besides, it beats one’s imagination that Jonathan was urging Nigerians to make sacrifices while busily allocating a whooping N1bn for food allowance for himself and Vice-President Sambo in 2012. This, coupled with the still very hefty recurrent spending (72%) as against a minimal 28% for capital doesn’t do any good to his much-touted transformational agenda for Nigeria. If anything, it simply shows that he lacks the requisite political will to make the much needed recurrent budget cuts and cannot therefore be expected to earn the trust of the masses he’s demanding even more painful sacrifice from.

Another con against the removal of the fuel subsidy is the huge and popular opposition to it by virtually all segments of Nigerian society from the legislature to the civil society to labour, clergy, youth groups, the NBA, leaders of thought and opposition political parties and so on. Democratic ideals demand that no government should wave aside such a massive chunk of her population for whatever reason. Indeed, the reaction of some members of the House of Reps and labour unions to the announcement of the removal of the subsidy begs for citing here.

Members of the National Assembly said on January 1, 2012 that the Federal Government’s decision to remove the subsidy on petrol would not succeed, vowing to oppose the policy. Opposition lawmakers in particular threatened that they would do everything within their power to stop President Jonathan’s “ambush tactics”.

The Senate Minority Whip, Senator Ganiyu Solomon, faulted the government’s decision, expressing surprise that it went ahead to remove the subsidy on petrol in disregard of the masses’ opinions against the policy. Solomon stressed that the government had been inconsistent in addressing the problem, saying it would not remove subsidy until April and then suddenly taking the people by surprise.

On his part, House of Representatives Deputy Minority Leader, Suleiman Abdurahman-Kawu, reacted, saying, “We will use the law to stop this inhuman act. It is another form of terrorism against Nigerians who are already impoverished. We will not fail to salvage them from this bondage and enslavement. This is another form of terrorism against the Nigerian people which we as their true representatives will not allow.”

Late last December, the Chairman of the House Committee on Media, Zakari Mohammed, had said “On this issue, we are on the same page with Nigerians. Nigerians say that they don’t want fuel subsidy to be removed. As their representatives, we will do what they say; we do not support the removal of subsidy”.

Also, the Nigerian Labour Congress said the decision by the government had revealed that it came to the Nigerian public on the subsidy issue with a mindset that was already made up. NLC Mobilisation Officer, Yaqub Denja, said government cannot arm-twist the populace into accepting a proposal that is not well thought-out, and geared towards adding to the suffering of Nigerians.

The TUC complained that the development was a stab in the back by the government, which only entered into a dialogue with the organised labour late last December on how best to forestall a looming anarchy in the New Year if the plans materialized. It added that the congress was surprised that the government could implement the removal without the National Assembly’s approval.

The TUC said, “This action by President Goodluck Jonathan is therefore, dictatorial, undemocratic and a total declaration of war on the poor masses of this country that are being punished by an inefficient system that is anchored on a few corrupt oil thieves who are major sponsors and backers of government. This is why the government cannot muster enough political will to arrest and prosecute them. What we expect the Federal Government through the PPPRA to do is to tackle the corruption in the system first before this present action. For the avoidance of doubt, the TUC insists that until new refineries are built and the old or existing ones are made to function optimally, there cannot be a removal of petroleum subsidy.”

Former Heads of State, Yakubu Gowon, Muhammadu Buhari, Ibrahim Babangida and Olusegun Obasanjo have also been opposed to the policy, especially to the issue of its wrong-timing.

On December 9, 2011, Gowon urged the government to ensure that all the nation’s refineries are functioning at full capacity before they carry on with the policy so that the people would not suffer much.

Speaking on the same wavelength as Gowon, Buhari advised the Jonathan administration to shelve the idea of removing the subsidy for now, “fix our refineries and facilitate the building of new ones, so that we can refine locally for the benefits of our economy and the people and derive maximum benefits from oil.”

Also, on January 2, 2012, Babangida condemned Jonathan’s removal of the fuel subsidy saying the move is ill-timed. He also wondered why the government had to rush into the policy when it had promised the people that consultations were still ongoing.

Even Jonathan’s mentor, former President Obasanjo, decried the policy when he told President Jonathan on December 18, 2011 to forget the idea of ending it for now so as to allow stability to reign in the country.

Seriously, it is quite embarrassing that the Jonathan administration would consider removing the subsidy before seeking to make Nigeria’s refineries work. Reacting to this, an analyst, Martin Ayankola, said “Rather than probing the wastage of billions of naira on the Turn-Around Maintenance of the refineries over the years, the government has simply turned a blind eye to all the malfeasances and opted to make the masses pay for its failure to manage the refineries efficiently and prudently.”

Interestingly, a group of Nigerian children under the aegis of the Association of Conscious Nigerian Children (ACNC) wrote the president on the fuel subsidy removal saying, “We imagined that instead of shouting about that other subsidy you want to annihilate Nigerians with, why not focus on getting the Petroleum Industry Bill passed? Imagine if you had spent half of the energy, time and resources you spent on that wild goose chase trying to get this bill passed?”

In addition, it is obvious that the removal of the fuel subsidy at this point in time was going to prompt public protests and demonstrations that would further stretch an already over-burdened security establishment when one considers the current security impasse in the country following the recent spate of bombings by the Islamist sect, Boko Haram, especially coming on the heels of the naive admission by Jonathan’s National Security Adviser, Andrew Azazi, that the Federal Government cannot police all of Nigeria.

The merit in the cons of the removal of the fuel subsidy is already translating into concrete hardships for Nigerian masses as evident in the very high transportation and other living costs. Not even the Federal Government’s disclosure of a palliative measure to provide 1600 buses for mass transportation will make any significant difference. As it were, Nigerian masses are bent on protesting against the policy to the finish with demands that the government revert to the N65 pump price before the January 1, 2012 150% hikes sent it variously to N138, N141 and even N150 and more in some places. Labour and civil society are mobilising for massive nationwide strikes and protests despite a fraudulent court injunction the Jonathan administration claims it has obtained from the Industrial Court preventing the strikes.

Certainly, the final chapter to this terrible saga and policy blunder on President Jonathan’s part is very far from being written.

GOD bless Nigeria!

References
-“Subsidy removal: UN commends Jonathan, as EU passes vote of confidence,” January 6, 2012, from vanguardngr.com
-“Fuel subsidy removal: Making Nigerians pay for government’s inefficiency,” January 2, 2012, from punchng.com
-“Subsidy Removal: National Assembly Vows to Stop Jonathan,” January 2, 2011, from punchng.com
-“Mr President, Wahala Dey!” January 5, 2012, from thisdaylive.com
-“New Year shocker: At last, fuel subsidy goes; petrol now sells for N141…NLC, others set for mass action,” January 2, 2012, from nationalmirroronline.net
-“IBB condemns fuel subsidy removal, says it’s ill-timed,” January 2, 2012, from vanguardngr.com
-“Fuel Subsidy Removal: How Okonjo-Iweala convinced Jonathan, Sambo, ministers,” December 25, 2011, from vanguardngr.com
-“IMF chief, Lagarde, visits Nigeria, hails Jonathan reforms bid,” December 19, 2011, from vanguardngr.com
-“Obasanjo to Jonathan: Don’t remove subsidy,” December 19, 2011, from dailytrust.com.ng
-“Don’t remove fuel subsidy, Gowon warns FG,” December 10, 2011, from nationalmirroronline.net
-“Subsidy removal: Feeling the pulse of political parties,” November 25, 2011, from nationalmirroronline.net
-“Jonathan’s all motion, no movement…I regret voting for him –Agbaje,” November 13, 2011, from sunnewsonline.com “Why Allison-Madueke Lied about Fuel Subsidy,” October 28, 2011, from olufamous.blogspot.com
-“Why Fuel Subsidy Must Go –Jonathan,” October 14, 2011, from thisdayonline.com
-“The Curse of Oil: How the oil companies have left the Niger Delta in the lurch,” New African magazine No. 513, January 2012
-“How the IMF, World Bank Failed Africa,” New African magazine No. 458, January 2007

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Posted January 7, 2012 by Raymond Eyo in Economy

4 responses to “THE CONS OF THE FUEL SUBSIDY REMOVAL

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  1. Your analysis is well understood but you lacked the knowlegde about a leader taking a TOUGH CALL which is always unpopular but later view as the best decision. Please can you analyse what happen to Lamido Sanusi on banking reform? Where is Nigeria banking industry today? What was the public opinion? In your analysis, you are bias for not including those who milked our country to where it is today. My brother, there is no two ways. We must cooperate to bring the expected economy reform.

    • David, I’m not sure you really understood my underlying emphasis which is that even if GEJ has the concept right, the timing spoils everything. Since you sound intelligent, I’ll advise that next time, you read between the lines to get a firmer grasp before you rush to make criticisms. Secondly, you can’t ask me to deviate from the focus of my arguments into banking, except again you haven’t read my title well. Why not write on banking and Sanusi yourself and invite us to read and react? You talked about me being “bias for not including those who milked our country to where it is today”. Again, you fail to understand that I wrote within a specific context and for your information, if you want people draining our resources, you don’t need history to show you that even GEJ himself is seriously draining this country dry. Mind you, if we must ‘cooperate’, like you say, to bring about the ‘expected economic reform’, you’ll be way mistaken to expect the suffering masses to be the only ones to ‘cooperate’ while GEJ and his gang smile to the bank with huge allowances, some of which include a wasteful N1bn food allowance for the presidency in 2012.

  2. What more can I add Ray. I like this lucid reply to David even more. Many of his unfortunate type “Armchair” critics, who always do not see anything good except from their own myopic & blind perspective, do exist.

    David, endeavor to be constructive or forever remain quiet.

    Ibraheem Baba Shehuri
    • Ibraheem, thanks for the compliment. I hope my reply to David clarified him. If it didn’t, well, no trouble. One thing I know, however, is that no one shall stop the discerning and progressive-minded among us from soon reclaiming our beloved country from the shackles of bad governance – presently embodied by the senselessness and mistaken policies and strategies of the Jonathan administration.

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