The fuel subsidy conversation: Between 2012 and 2016
Japheth Omojuwa
Having spent a whole week in Germany travelling through villages in Lusatia, Brandenburg and attending lectures in Berlin studying the German Energy Mix for the purpose of understanding lessons Nigeria could learn, today’s article was meant to start a conversation on that but one would be missing an opportunity to address the most pressing issue of the day: the petrol price hike. The conversation on the energy mix can happen at a later date.
I have seen a lot of arguments around, “Why are you supporting subsidy removal now when you occupied Nigeria against it in 2012?” It is a valid question when asked by those who intend to indeed know the rationale behind such differing positions. There’d be a zero need to address those who ask the question, not because they indeed want to know why but because they see the question itself as a conviction of your person because as far as they are concerned, it does not matter what changed, you simply do not change your position on an issue. To this group of people, to change your position, you must have been paid – I even had one refer to me as a low grade paid agent of the government – because the fact that the realities surrounding one’s previous position have changed are not enough to necessitate a change of position. This article is not for those and their kind, instead, it is for those who are indeed interested in knowing one’s rational position.
Former President Goodluck Jonathan increased the price of fuel in January 2012 and President Muhammadu Buhari did just that in May 2016. How can anyone react differently to the same action by these men? To a logical mind, you then have to go beyond both actions to “why they did what they did!” What is done cannot be as important as why it is done. The January 2012 increase was induced by the subsidy payments of 2011 that crossed the N1tn line. According to the Nigerian Extractive Industries Transparency Initiative, Nigeria paid N198.11bn for subsidies in 2009, the sum went up to N416.45bn in 2010 and then some extraordinarily amazing thing happened in 2011, the subsidy numbers against reason shot up to N1.9tn! You need not be an expert in Mathematics to see that the 2011 number was way out of line. We paid just N219.72bn in 2006 and N236.64bn in 2007. What happened in 2011 to take the subsidy numbers to celestial realms? It was the 2011 elections. Not only did President Jonathan and his ill-fated co-travellers fund his 2011 election from the subsidy payments, they also depleted the Excess Crude Account to $3m in 2011 from almost $20bn in 2009.
This was what happened before January 2012. Something had to give. It was too late to stop those who got the windfall of N1.9tn from getting something smaller the following year. The President then decided to transfer the burden to Nigerians. This was what Nigerians rejected in 2012! This was why there was a lot of argument on “Cut waste not subsidy” and “Kill corruption, not Nigerians” during the protests. These amongst other issues were the prevailing conversation. There is no need to state that something similar happened for the 2015 elections, only this time, the money mostly came from defence spending.
Bottom line; President Jonathan increased petrol prices in January of 2012 because of the looting that had happened right under his nose and mostly for his own benefit. Several probes proved this in different ways; including the Nuhu Ribadu report, the KPMG report, and the ill-fated Farouk Lawan report that got shot down with the active connivance of the then Presidency. The people naturally protested the fuel price hike of 2012 because all of these were apparent to the general public. Despite the protests, the government succeeded in raising the fuel price. It set up a Subsidy Re-Investment Programme called SURE-P. The scheme was better known for the scams committed under it than for anything else.
What then is inducing 2016’s fuel price hike? A global reality. Before addressing this global reality, I must address the failings of the Buhari government on this issue. You cannot find a more confusing situation than the dollar exchange regime. We have an official exchange rate of N199/$1, then petrol importers now have an exchange rate of N298/$1 while the parallel market continues to speak in different tongues; on Tuesday, it was about N350. Such a state of chaos and absolute uncertainty helps no one, certainly does not encourage private investment. The current FOREX regime is nothing but a form of subsidy for the rich and privileged, it has to end! Apart from this, I will reecho what Dr. Omano Edigheji stated in his recent article, “Where is the APC government’s Development Agenda?” How long are we going to be using piecemeal moves to fix a system that obviously craves a structural change? Something has to give!
Back to the global reality, Venezuela has increased fuel prices by 6000 per cent. You read that right, six thousand per cent! It has also devalued its currency, the Bolivar. The government then increased the minimum wage by 30 per cent. This sounds amazing until you hear the new minimum wage is now just about $13! That is N4,550.00 at N350/$1. Venezuelans despite the increase apparently still get to buy fuel at the world’s cheapest price but the reality should not be lost on anyone, arguably the world’s most socialist country today has been forced to make adjustments, increasing fuel prices for the first time since 1996!
Qatar Petroleum laid off some 3000 people in 2015. RasGas, the gas company, did its own firings. Qatar Museum and other companies including the almighty AlJazeera have had to reduce their staff strength. The sackings continued into 2016.The Abu Dhabi National Oil Company laid off 2000 staff members about two weeks ago. In Kuwait, salaries and other benefits are being reduced while the oil company is sacking those even less fortunate. Kuwait is OPEC’s third largest producer, also holding eight per cent of the global oil reserves.
Hardly any Nigerian conversation ends without comparisons to the United States, despite the obvious disparities in our realities. According to Houston-based Graves and co., Global Oil and Gas job losses have topped 350,000. As of the last report, it stood at 351,410 and counting. Between October 2014 and January 2016, the US alone accounted for nearly 100,000 job losses in oil and gas and supporting segments, understandably, more than half of these job losses are from Texas. This is according to the US Bureau of Labour. There are more examples to pick from but having outlined the reality in five countries above, anyone who cannot see a trend has either simply refused to see it or does not have the ability to see it.
These global realities are one thing, Nigeria’s Dasuki-Dezianian exceptionalism is another. This country has been stolen dry to its bones. Nigerians have been left mostly poor and with frail hope. Despite selling oil above $100/barrel for the better part of the last half a decade, we went on a splurge where “people sat down and shared the money as if it was lunch or dinner.” We are here today with the price of oil and the attendant exchange rate dealing us twin blows! Surely, something has to give! Or the house will come down fast.
No matter what happens, the poor must be protected. The government must make sure its N500bn intervention plan reaches the poorest of the masses; we cannot afford another Dasukian reality here. Apart from this, Nigeria must be intentional about strategically pursuing a structural change in its economic and development agenda. Even Saudi Arabia is advancing plans to restructure its economy and compared to Saudi Arabia, we earn peanuts from oil, even when we were earning a lot.
In summary, the 2012 price increase was necessitated by election-induced corruption; the 2016 fuel price increase is being necessitated by the reality of oil’s dwindling fortunes globally and the effect it is having on foreign exchange earnings and exchange rates added with Nigeria’s poor choices of years past. One cannot protest like one did in 2012 for President Buhari to go after thieves, he appears more desperate to jail them than the average Nigerian. These are my explanations for those who were genuinely asleep and required assistance to be woken up to smell the coffee. Those pretending to be asleep need no such help.