The planned nationwide protest by the Nigeria Labour Union (NLC) with the support of the much-trusted Joint Action Front (JAF) the proposed removal of the controversial fuel subsidy by the federal government beginning on January 27, 2022, triggers the questions on the persisting paradox of preventable poverty of millions of Nigerians in the midst of the vast, God-endowed natural resources, including oil and gas.
Coming at a time when the prices of food items, cooking gas and building materials have skyrocketed the pertinent questions are being raised. Amongst such questions, therefore, are the fundamental reasons for the pleasure the government derives from inflicting pains on the poor people? Has the oil not become a crushing curse on the people its proceeds are supposed to serve?
“The government solution to a problem is usually as bad as the problem”. -Milton Friedman
What is the explanation for the government spending billions annually on the near-comatose refineries that produce not a drop of refined fuel? Is the federal government not earning revenue from increased Value Added Tax (VAT), direct and indirect taxes, license and land revenue, rent of government property, interests and repayments and mining of solid minerals?
Furthermore, how do we explain the ever-increasing internal and external borrowings with decrepit infrastructure, low levels of education and primary healthcare delivery that give no value for the humongous trillions in naira so borrowed? Why must the enormous burdens be placed on the lean shoulders of the world’s poorest people?
In its words: “The NEC resolved to reject and resist the planned increase in the pump price of petrol by the Federal Government, as it is extremely insensitive to the acute hardship being experienced by Nigerian workers and people.”
The NLC called on the federal government to promote the local capacity to refine petroleum products for domestic use and adopt effective economic policies to halt the trend of hyper-inflation in the prices of basic goods and services especially essential commodities, cooking gas and building materials.
According to the labour union, the inflation alone has put additional pressure on the lean income of Nigerian workers and other citizens and made life terribly unbearable for the poor.
In fact, it has been observed over the years, that every increase in the pump price of petrol has had a spin-off effect on virtually all aspects of the cost of living. These include feeding/food security, transportation, accommodation, education and health services. That is the bitter truth of the matter.
Fuel subsidies began in the ‘70s (1970-79) with the government routinely selling petrol to Nigerians at below the cost price. But most Nigerians were unaware that this was being done. Virtually everything in Nigeria was heavily subsidised – education, health, electricity, water supply, air travel and even provisions or ‘essential commodities such as milk, sugar, rice, wheat and beverages.”
“The removal of the fuel subsidy will expose Nigerian workers and the citizenry to acute deprivation and worsen the hyper-inflation trend in the country”. -Nigeria Labour Congress Communiqué (December 18, 2021)
According to legit.ng subsidies were sustained by the oil boom. Nigeria enjoyed, thanks to the oil shock caused by the Arab-Israeli conflict that saw global oil prices skyrocket.
“As part of the subsidy jamboree, public-sector workers received a big boost, specifically in their wages in 1975, under the ‘Udoji awards,’ which they considered as the ‘national cake.’ The country’s state-owned National Electric Power Authority (NEPA) did not even bother to collect electricity tariffs, while the national carrier, Nigeria Airways, sold tickets at below market-clearing prices,” he said.
Read also: 10 years after protest, over $60bn on subsidy, no change
But this jamboree was short-lived, following steep drops in oil price in the 1980s. Subsidiesbecame institutionalised in 1977, following the promulgation of the Price Control Act which made it illegal for some products (including petrol) to be sold above the regulated price. This law was introduced by the General Olusegun Obasanjo regime with the noble aim to cushion the effects of the global “Great Inflation” era of the 1970s, caused by a worldwide increase in energy prices.
Nigeria reportedly spent about 10 trillion Naira (or US$24.5 billion at the current official exchange rate of 411 Naira = US$1) on petroleum subsidies between 2006-2018. In 2019 and 2020 about 3 trillion Naira ($7 billion) was spent on subsidies.
Comparatively, in 2018 alone, it spent 722 billion ($2.4 billion at that year’s official exchange rate of $1 = 306 Naira), but spent only $1.5 billion on health! Nigeria’s growing fuel subsidy may have contributed to the country’s health-financing gap.
While in 1970, about 72percent of the cost of a litre of petrol was paid by the government that figure fell to 43percent in 2011. This explains the fact that Nigerians have been increasingly bearing the huge burden of fuel price increases. This perhaps, explains why they vehemently oppose, through the NLC-led protests attempts at reducing or eliminating subsidies.
In 2012, when the subsidies were removed by then President Goodluck Jonathan the price of petrol became twice as high. The protests in the form of civil resistance, civil disobedience, and strikes lasted for a week forcing the then president to reduce the petrol prices by 30percent.
In 2016, the subsidies were cancelled once again with the global drop in oil and petrol prices, the government claiming that it was no longer possible to sustain the process, keeping in mind the heavy corruption in the subsidy payment.
But Nigeria has been criticised by the International Monetary Fund as well as World Bank for the heavy financial burden it carries in providing subsidies for fuel and kerosene.
Over the decades the ordinary Nigerian has always taken the brunt of subsidy removal. President Shehu Shagari’s government – from 1979 to 1983 – increased the price of petrol in 1982, from 15.3 kobo a litre to 20 kobo. Then in 1986 military President Ibrahim Babangida announced a partial removal of oil subsidies, which saw the petrol price rise from 20 kobo to 39 kobo per litre. This followed his implementation of the Structural Adjustment Program (SAP) as set out by the International Monetary Fund (IMF). But the Abacha-led military junta that followed left subsidies in place.
Years later, President Muhammadu Buhari’s administration granted approval to the Petroleum Products Pricing Regulatory Agency (PPPRA) to remove the price cap that was in place for petrol. But later, the government announced it was keeping the pump price of petrol unchanged despite increasing crude costs.
Yet, the economic equation cannot be balanced. How do we explain to the common man that Nigeria, which produces about 2.4 million barrels of crude oil has much of it being exported and not refined; that due to insidious corruption and many years of neglect, the local refineries factories stay out of work? How can we tell them that the country still imports about 70percent of the petrol used in the country?
The way forward, one will continue to harp, is to restructure this contraption of a country characterised by a bloated centre. Let the federating units of the six geo-political zones control their resources and pay an agreed tax to the centre. The world has since gone digital with less focus on crude oil production and sales. Let us learn lessons from Japan and several non-oil producing countries and gain from the strategies they have employed for economic survival and success.
Let government policies stop fueling the anger in the land!
