A Rearview Reflection On The Fuel "subsidy" Struggle

The worst of the stand-off between citizen groups and Nigeria's government over a massive increase in the price of petrol now seems to be over, but the underlying problems that spooked global energy markets and threatened Nigeria's stability in the past two weeks remain and must be addressed if the perilous trajectory of the fragile, crisis-prone country is to be corrected. The survival of Africa's most populous country is riding on how President Jonathan responds to the accountability issues thrown up by the crisis.

In the wake of such unprecedented expression of citizen clamor, key actors of the Jonathan administration who advanced the scandalously flawed argument for "subsidy removal" are pointing fingers instead of introspecting on how they misled a clueless president and almost brought down his government. Everyone is trying to save themselves from the wrath of the public, which has not dissipated with the partial reduction of petrol pump price.

The casualty in the revelations coming from the subsidy hearings is the truth. Instead of getting clarity we're left to sift the conflicting claims of those who recently presented a united front in support of the fuel price increase. The contradictory claims and stats being advanced by the NNPC, PPRA, Ministry of Finance, Ministry of Petroleum, and the Customs make one dizzy with confusion. It is obvious that the Nigerian oil industry is rigged in favor of politically connected interests and that the main actors are cooking up information on the fly. The unfolding "subsidy" scandal may eclipse all others.

The problem with Nigeria is that we're such poor students of history that we never learn from experience. If I were a betting man, I would wager that, as my friend, Philip Adekunle, stated in the wake of the crisis, the looting of resources and the mindless, potentially disastrous expansion of government - and the cost of governance - will soon resume as though nothing happened.

Still, a showdown for the soul of the fragile country may be brewing. Jonathan should not get complacent. Public anger has been unleashed, and it is unlikely to be placated by half measures and pretend-reforms. There has to be a seminal movement in the direction of transparency, and the cost of governance needs to be halved. These are now the baselines from which Nigerians will relate with their government.

The worst of the latest crisis may be over, but the government's intransigence in the face of overwhelming public disapproval of the price increase, as well as the deployment of soldiers to the streets of major cities have raised the stakes in the continuing debate over subsidy and security.

Let's be clear: contrary to the failed propaganda of the government, petrol was not cheap in Nigeria before the price increase, considering the level of poverty and the country's status as a leading oil producing nation. At $1.64 a gallon, the price was the second highest among OPEC nations, topped only by the United Arab Emirates at $1.78 a gallon. But the UAE has a much higher minimum wage than Nigeria's $46 and has several social safety nets for its vulnerable citizens. With the fell-swoop removal of subsidy and the subsequent readjustment of prices to what the government and the petrololine importers believe to be the appropriate price, petrol sold for 90 cents a liter or about $3.60 a gallon. This was more than the US average, in a country where as many as eighty percent of the population subsists on less than $2 a day.

The public outrage was thus justified. Already, transport fares, rent and the price of food and other essential products have tripled as traders and service providers have both adjusted their prices appropriately. Prices are unlikely to go back down, even with the reduction of the size of the price increase.

It is clear that the government had hoped to ride out the public anger, calculating that it would fizzle out as citizens tired or bought into its deceptive position on the "subsidy." Instead, the size and intensity of the demonstrations increased in proportion to the growing pain of the inflationary trend triggered by the new petrol price. The "Occupy Nigeria" movement has, as a result, morphed irreversibly from spontaneous anger over a fuel price increase to a full-fledged movement for political accountability. This is now non-negotiable.

Affordable petrol is the fulcrum of the Nigerian economy. It powers instruments of mass mobility. It also powers generators, used by households and small businesses to generate electricity to augment unreliable supply from PHCN. As infrastructures have decayed amidst a growing population, citizen self-help has increased, giving rise to a massive sector of small enterprises and informal businesses that are driven by affordable petrol. Nigerians have made the point that this is sensitive territory, and that it should be protected from the maneuvers of a profligate government in search of new funds to raid to feed its excesses.

The government and a few contrarian commentators now want to retrospectively frame the "Occupy Nigeria Movement" as a misguided agitation to preserve a corrupt subsidy regime. This is a disingenuous and mischievous characterization. Nigerians are not enamored with subsidies that strain government revenue and enrich a cartel of fuel importers that they now call the 1 percent, adopting the vocabulary of the Occupy Wall Street movement. They argue, however, that by withdrawing the subsidy without a plan to fix a broken system, without a plan to improve domestic refining, the government was sticking citizens with the bill for corruption in the oil sector and for its unwillingness to clean it up. It's hard to fault this logic.

And Nigerians are on to something potentially explosive.

Industry analysts and even the central bank governor, Sanusi Lamido Sanusi, a key supporter of "subsidy removal," argue that as much as 70 percent of the $8 billion the government spent on subsidies last year was paid for inflated or bogus shipments of petrol. They also fault the claim made by the NNPC and the fuel importers that Nigeria consumes 35 million liters of petrol a day. Nigerians are also asking how the $2 billion spent on subsidies in 2006 during the regime of Olusegun Obasanjo ballooned to $8 billion in 2011. The new price of N97 a liter is based on the landing cost of imported petrol supplied by the import contractors. Experts, including Nigeria's former minister of petroleum resources, Tam David-West, dispute the landing cost and argue that the new price amounts to a legalization of fraud. They are right. Future debates on the rest of the "subsidy" should not take figures supplied by corrupt "subsidy" beneficiaries as a disinterested statistical reference.

Many Nigerians agree that government revenue is strained, but they blame the problem on scandalous government overheads, corruption, and waste. Instead of raising the price of petrol and saddling the poor and the middle class with a new financial burden, Nigerians want the government to find savings elsewhere.

It is possible to do so.

Nigeria's public officers are the highest paid in the world, with each of Nigeria's 129 senators earning about $2 million a year. More than 400 House of Rep members earn about $1.7 million. In addition, legislators are paid a huge "constituency allowance" that most Nigerians believe is wasteful patronage.

Perhaps the most embarrassing signifier of state corruption is the transfer of $2 million monthly to each of Nigeria's 36 state governors to keep the peace in their state. It is constitutionally called "security vote" but governors do as they please with it and usually stash it as personal loot. Nigerians recently learnt that the 2012 budget proposals include provisions of about $7 million for feeding and entertaining the guests of the president and vice president. They also learnt that the president, with a fleet of 7 aircraft and multiple custom-built bullet-proof vehicles, intends to buy one more aircraft and several more bullet-proof cars for his and the vice president's use. The bill comes close to $120 Million!

The president alone has more than a hundred aides, most of them redundant beneficiaries of political patronage. Government at all levels is loaded with meaningless and duplicitous political positions. And half of government agencies duplicate the work of other agencies.

Jonathan can begin redeeming his despised government by cutting all this fat, significantly shrinking the cost of governance and freeing up funds to build and refurbish refineries. With improved local refining, we will end importation and with it the fraudulent subsidy payments. In the interim, the government needs to frontally confront corruption in the oil industry and in the system of paying fuel importers. Corruption inheres in all branches of government, not just in the oil sector. So, how about getting serious, for once, in the fight against corruption?

The Nigerian government is a cesspool of corruption and waste; which is why Nigerians are justified in asking Jonathan to fight corruption instead of increasing fuel prices to raise revenue. President Jonathan will do well to listen to the youths in the streets and not take comfort and refuge in the approval of the IMF and other international entities that have misguidedly praised the subsidy withdrawal as bold economic reform.

I will leave out the betrayal of organized labor because it is now a footnote in this rapidly expanding struggle.

The author can be reached at meochonu@gmail.com