The frustrations of Nigerians over government’s plan to remove fuel subsidy are understandable. It is one proposal they would rather not hear, at least for now, because of the negative spiral effects it would visit on the average Nigerian. The uproar it generated when President Goodluck Jonathan indicated, in a letter to the National Assembly, that subsidy on petroleum products would go from the 2012 fiscal year, was therefore expected. Government’s promise to cushion its harsh effects by injecting the savings into provision of critical infrastructure has also made little impression. Such a promise is anything but new; it is one of those promises they regard as empty and which will be, as has been the case in the past, observed in the breach.
The rationale for the new policy as marshaled by the President is plausible, even if hapless Nigerians have heard it all before. The Government spends a large amount of its resources on oil subsidy, the bulk of which ends up benefitting only a few shylock businessmen who hold the sector by the jugular. This time, the policy of fiscal consolidation is expected to free up about N1.2 trillion in savings. And since the action usually triggers a series of harsh economic effects especially on the poor, government promises to utilize the funds for the provision of safety nets for them.
These may be soothing words, but many believe that gaps still exist in the Jonathan proposal. The closing of such gaps may well be the key to understanding – and probably accepting – the subsidy removal proposal. The pessimism of Nigerians must be understood from the series of bureaucratic rigmarole over the years, on the subsidy issue. No people have had a more pathetic story to tell on their petroleum sector. They have not forgotten that several times in the past, they were subjected to brazen deceit by their leaders who have successively failed on their promises to properly address the rot in the oil sector, arguably the nation’s economic mainstay.
The gaping hole is in the details. Why has the President been unable to break down, in as much detail as possible, the specific projects he intends to invest the savings in? Nigerians have heard of “investments in critical infrastructure” so much that it has since lost efficacy. They have not forgotten that after Nigeria exited the Paris and London club of creditors towards the end of the Obasanjo regime, they were promised that savings from the debt servicing would be invested in critical sectors of the economy such as infrastructural development. Five years down the road, the huge savings has not translated into any major development in the nation’s social infrastructure. The Obama jobs plan, all of a thousand odd pages of written detail, is a good example on how government should present an argument. For Jonathan, however, something like that may be a tall order, but a plan he still needs to provide.
Since the revelation was made, opposition has increasingly mounted against it, for good reasons. Labour leaders, opposition parties, prominent citizens have come down hard on the plan, which many describe as ill-advised. Former Petroleum Minister Prof Tam David-West, even questioned the existence of any subsidy on fuel, calling the proposal a lie and a fraud. The National Publicity Secretary of the Conference of Nigeria Political Parties (CNPP) Osita Okechukwu tied the decision to Jonathan’s inability to fight corruption, which many believe, is at the centre of the issue of oil subsidy. Why should the world’s seventh largest oil producer with over two million barrels of crude oil production per day, import 80% of the finished petroleum products? Why should the country’s four refineries that have, between 1999 and 2010, gulped over $2 billion on rehabilitation alone, still run below 40% of installed capacity? Why should the rehabilitation of Nigeria’s refineries become a conduit pipe to siphon public funds?
However, for having the nerve to take on this issue at all, President Jonathan deserves some commendation, knowing that the popular mood is tilted against it. He jolly well could have sat out his tenure, allowing sleeping dogs to lie. His handlers must have warned that he risks discrediting his record of having stabilized the oil sector, if this new policy runs into a fiasco. Yes, he deserves commendation for this hard, seemingly unpopular decision and one must appreciate the passion and purposefulness with which he pursues this plan. For one, any discerning Nigerian or even a lay economist knows that the economy cannot sustain the present regime of fraud and waste that oil subsidy connotes. That this practice has been sustained over time does little to justify its continuation at this critical moment, but again it depends on whether government keeps its promise. Anything short of following this promise to the letter would definitely inflict more economic grief on the people, and threaten the political stability of the nation. As someone has said, the consequences of failure on the President’s part will far outweigh whatever economic gains in the new policy.
As has been pointed out, one thing still lacking in the plan is a graphic detail –call it a road map if you will – of how the savings will be utilized. After years of deceitful promises, any Nigerian leader needs more than mere words to convince a pessimistic populace. To this end, therefore, Jonathan without a clear road map spelling out the whats, hows, and the wheres the savings will go makes this policy, however plausible, harder to believe. Even Abacha of a military regime that supposedly owes the people little explanation, had to detail how his oil savings would be spent. The Presidential Task Force which he set up to utilize them, has since become a reference point in successful government intervention. At this time, that model comes highly recommended.
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