Nigeria: Anatomy of a crisis

The recent sudden removal of Nigeria’s fuel subsidy, which the government says costs the nation $8bn annually, sparked angry protests and strikes that paralysed the country for days, forcing President Goodluck Jonathan‘s government to temporarily reduce fuel prices to appease the protestors. Bellow are the views of some Nigerians for and against the removal.

President Goodluck Jonathan

As part of our efforts to transform the economy and guarantee prosperity for all Nigerians, the government, a few days ago, announced further deregulation of the downstream petroleum sector. The immediate effect of this has been the removal of the subsidy on petrol.

Since the announcement, there have been mixed reactions to the policy. Let me seize this opportunity to assure all Nigerians that I feel the pain that you all feel. I personally feel pained to see the sharp increase in transport fares and the prices of goods and services.

I share the anguish of all persons who had travelled out of their stations, who had to pay more on the return leg of their journeys.

Fellow Nigerians, the truth is that we are all faced with two basic choices with regard to the management of the downstream petroleum sector: either we deregulate and survive economically, or we continue with a subsidy regime that will continue to undermine our economy and potential for growth, and face serious consequences.

Previous administrations tinkered with the pump price of petroleum products, and were unable to effect complete deregulation of the downstream sector. This approach has not worked. If it did, we would not be here talking about deregulation today. I understand full well that deregulation is not a magic formula that will address every economic challenge, but it provides a good entry point for transforming the economy, and for ensuring transparency and competitiveness in the oil industry, which is the mainstay of our economy. To ensure that the funds from petroleum subsidy removal are spent prudently on projects that will build a greater Nigeria, I have established a committee to oversee the implementation of the Subsidy Reinvestment and Empowerment Programme.

I sincerely believe that the reinvestment of the petroleum subsidy funds, to ensure improvement in national infrastructure, power supply, transportation, irrigation and agriculture, education, healthcare, and other social services, is in the best interest of our people.

Finance Minister
Ngozi Okonjo-Iweala (for removal)
The government understands the feelings of many Nigerians because transport costs have gone up and the government is trying to make sure the benefits that come out of the removal of this subsidy are put into programmes that directly benefit the people and bring down costs.

For instance, President Goodluck Jonathan has launched a programme of mass transit to improve bus and road transportation for the people. About 1,100 buses were put on the road and the road transport workers’ association has agreed to bring the costs down because the buses use diesel which has been deregulated for quite some time. So there was really no need for costs to go up. What we are doing is trying to bring the benefits of the subsidy phase-out to bear, so that prices can come down.

We are also working to improve other services that affect the population. For instance, part of the money from the subsidy removal will go into services for maternal health and child mortality. We have one of the very bad indicators for maternal mortality in the world and it is unconscionable that our women should be dying in childbirth whilst we are using money to subsidise petrol, which the poor people in the population do not get.

We are going to be improving roads. Of the $8bn that goes into the subsidy, $4bn will go into improving road transport and rail transport, and the rest will go into supporting the creation of youth employment, improving maternal mortality and mass transit systems. These are all programmes in which the poor in the population will benefit much more than they do now from fuel subsidy.

Seun Kuti (against removal)

This is not the first time that Nigeria has seen the fuel subsidy removed. The Obasanjo government removed it a total of eight times, promising better investment and infrastructure, yet most Nigerians have not seen this materialise.

This subsidy removal is the latest in a long line of foreign concepts and ideologies that are being forced down the people’s throats. What the Nigerian government has failed to realise is that we cannot continue to model our economies on foreign blueprints.

We have inadequate electricity in the country, so everything runs on generators; even the power plants are powered by generators! These generators run on petrol and diesel fuel. With an increase in the price of petrol by 117% from 65 naira to 141 naira and even 200 naira in some places, virtually everything in Nigeria has risen in price overnight. How can the government even talk of saving any money with this kind of inflation crippling the purchasing power of the population?

Award-winning novelist
Chimamanda Adichie (against removal)

Many government officials argued that the fuel price increase would eventually benefit Nigerians, but they were unable to clearly articulate how. They made economic arguments that were abstract at best and nonsensical at worst.

Sometimes the arguments conflicted: on the one hand, we were told that the government would go bankrupt if it continued to pay the subsidy, and on the other, we were told that the subsidy would still be spent, this time on “infrastructure”, a vague word if ever there was one.
It is obvious that this price increase, the abruptness of it, the murky justifications for it, the government’s inability to properly engage about it, the destructive consequences it will have for millions in a country where there are few government services, will only further calcify the cynicism of a people who are already very cynical. Yet our leaders did it anyway. The message sent to Nigerians is this: ‘You don’t matter. We don’t value you’.

The doyen of Nigerian writers Chinua Achebe

My hope for Nigeria actually is that the people will channel all that pent-up rage towards a fight for sound democratic institutions – a competent electoral body that can execute free and fair elections. In other words, exercise their frustrations at the ballot box. Movements that begin on the streets should channel their frustrations in a non-violent, organised direction – politically.

But the great challenge for Nigeria – one that has stunted its development since independence – is how to convince 150 million people to put aside competing interests, sideline different religions, ethnicities, political persuasions, and build a united rostrum or two with strong leaders to truly bring about fundamental change to the country. That is the challenge.

Economists often give us condescending lessons in favour of fuel subsidy removal – that fuel subsidies siphon much-needed cash away from the treasury of the federal government, that its removal will yield $8bn; that those who benefit the most in the current system with subsidies are some of Nigeria’s wealthiest citizens; that subsidies further fuel corruption in the oil industry, including the state-owned NNPC [Nigerian National Petroleum Corporation].

What has not been pulled into this entire debate is that the scale of corruption in Nigeria – the Nigerian government – and I am talking about corruption at all levels of government – federal, state, local, municipal, etc. – amounts to at least $10bn a year. Putting an end to this should be the focus of the present government. Is this amount saved by tackling corruption in Nigeria not more than what would be made available with subsidy removal – and at no cost in pain and suffering to the average Nigerian?