Analysis · Nigeria

Nigeria: Do not touch my subsidy!

The economics make sense. ­Nigeria spent N1.3tr ($8bn) in fuel subsidies in the first nine months of 2011 – just less than one-third of our national budget.

The argument is ‘… that is money the government could have spent on mending crumbling roads, improving dismal power service and fixing the creaking health and education systems.’

The other side of the equation is that Nigeria cannot break the vicious cycle (aka the cabal) that forces it to import billions of gallons of gasoline and other oil products unless it fixes the local refineries that have the capacity to refine some 400,000 barrels of oil per day.

And no company, not even the NNPC promises to invest in these refineries unless it can be guaranteed a commercial rate of return. 

That is, refiners would charge about N141 per litre of petrol, which is what companies charge in the oil-producing United States and double the old subsidised price in Nigeria.

And should everyone pay N141 per litre, the government says it can get the refineries working in a few years. Nigerians, however, would have to cope with the huge inflationary side effects.

But the politics are not working. Especially when seen through the eyes of a population fed up with 
senators and representatives paid salaries of more than $1m per year. President Olusegun Obasanjo used to call them “legislooters”.

The government has just spent $150m on upgrading the presidential air fleet.

Workers and students rose up en masse across the country in ­January. Few seem convinced by President Goodluck Jonathan’s promise to cut top government salaries by 25 per cent.

A protestor on Twitter said, “I feel the need to scream each time I hear an int’l report reduce the #OccupyNigeria narrative to ‘they want cheap fuel'”. For tens of millions, ‘cheap fuel’ was the only benefit they got from the oil economy.

Other states – such as Chad, Niger and Ghana (reports suggests that Ghanians are currently protesting the removal of petrol subsidy)  – have imposed slightly less swingeing hikes without the same popular reaction. These governments pushed up prices mainly in response to demands from the International Monetary Fund and Chinese investors in their refineries, a rare example of Washington and Beijing bureaucrats agreeing about economic strategy.

Jonathan’s administration has since compromised by approving the reduction of the price of petrol to N97 following a week of mass protests, and the President must now repair his image with his impoverished countrymen.

Follow MuhdLawal on Twitter.

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