Subsidy removal: coming full circle

In January of 2012, I watched with dismay as the labour unions, youth groups and civil society groups shut down the country in protest over the government’s deregulation of the downstream sector and the removal of subsidy on petrol. What started as mere protests by the youth caught fire and became a popular movement that almost brought down the government of the day. Despite the rationalisations of some of the protest leaders, it was apparent Nigerians were resolutely against the removal of the subsidy on petrol.

But I just could not see the sense in the protests/strikes.  In 2011 alone, about N1.5 trillion naira ($9.3 billion) was spent on subsidising imported refined petrol. This represented about 30 percent of Nigeria’s government’s expenditure, 4 percent of GDP and 118 percent of the capital budget. In comparison, Nigeria’s education, health and works/roads’ budget for 2011 was just a mere $2.2 billion; $1.32 billion and $680 million respectively.  This is besides the obvious fact that Nigeria was exporting its jobs and what it does not have while importing what it has.

How could any right-thinking government accept this nature of expenditure? It was quite clear to me then that thegovernment was right in wanting to do away with the subsidy regime so as to free up such huge funds for other priority areas like education, health, infrastructure, and security among others. Besides, the removal of subsidy will ultimately lead to private investments in refineries that will obviate the need to spend hard-earned foreign exchange on importing petrol. The later revelations that the subsidy regime was riddled with fraud were all the more reason why I thought it should go.

What was more, evidences from other climes then showed that removal of subsidy on petrol was a global trend. It happened even in Ghana under late President John Atta Mills, who came to power on the strength of his virulent criticism of the Kuffor administration for daring to remove part of the subsidy on fuel. Atta Mills had to finally accept the inevitable and end the subsidy regime arguing with all humility that “subsiding fuel is not sustainable, and removing it is the right thing to do, so we can sustain our fiscal consolidation”.

But not in Nigeria! Buoyed by a sense of entitlement, Nigerians felt they should not be paying much for fuel and that it is part of the benefits they should enjoy since their country produces oil. And since it sold the cheapest fuel in West Africa and amongst its neighbours, those countries stopped spending their foreign exchanges to import fuel altogether and depended on Nigerian marketers who are all too willing to claim subsidy on importer petrol in Nigeria and divert same to those countries and make huge profits.

But arguing for subsidy removal wasn’t a popular position to hold in Nigeria in January of 2012. Some of us who did were called names and I was even labelled a traitor by my close friends. Perhaps that is why thought leaders, prominent citizens and academics decided to bury their heads in the sand with some hypocritically claiming to side with the people when it was clear the people were being seduced into demonstrating against their true interest.

Much more pitiful however is the behaviour of opposition politicians who saw the protests/strike only through the prism of their ambitions. They fuelled the protests by concocting figures and arguments to show that there was nothing like subsidy and petrol should actually be selling below N40/litre. No wonder some Nigerians were expecting the president to reduce the price of petrol upon coming to power.

Organised labour on its part was only interested in protecting its interests – which is better served by government regulation of the industry so it can retain the privilege of protesting and going on strike anytime an increase in price of petrol is announced. That was how they seduced late president Yar’adua into revoking the sale of 51 percent equity stakes in the Port Harcourt and Kaduna refineries to the Bluestar Consortium Limited for a princely sum of $721 million promising him, together with the NNPC that the NNPC was capable of turning around the fortunes of the refineries to make them functional at 100 percent capacity within months.

Now the opposition is in power and the spending on subsidy hasn’t really reduced. Some days ago, the Minister of State for Petroleum informed a joint sitting of the National Assembly that the federal government has spent in excess of N1 trillion on petrol subsidy alone in 2015. Besides, the crumbling prices of crude oil meant that the government wouldn’t even have the resources to subsidise petrol importation even if it wanted to. After a period of prevarification and dodging the issue, the government has finally accepted the inevitable. The Minister announced that the government will “work towards taking those figures off our budget in 2016”, arguing like Atta Mills of Ghana that “subsidy was no longer sustainable” and that the government doesn’t need to fund subsidy”.

But even before the government accepted this truth, some of its prominent party members who were vociferous in arguing against the removal of subsidy in 2012 had done a complete volte-face and are the current champions of subsidy removal. One cannot say whether they were recent converts to the subsidy removal school or had all along known the truth but choose to play politics with the issue. For the hapless masses, the civil society and youth groups that were used against their interest, the reality will begin to hit home.

 

Christopher Akor