DOWNSTREAM petroleum sector deregulation in Nigeria, as far back as 1999, with previous administration, has never been soft sell. It has been Nigeria’s headache, and most contentious economic issue to deal with. From Olusegun Obasanjo to Goodluck Jonathan, former presidents; and now, Muhammadu Buhari’s governments – all agreed that retaining petrol subsidy was not sustainable, and should be deregulated. Each government beat the drum of subsidy removal without matching words with actions.
Each government profiled the advantage of deregulating the sector. But the facts, authentic and verifiable figures about petrol importation, and the subsidy regime in Nigeria, remained obscured and opaque; also, said to be ladened with billions of Naira fraud. The subsidy regime, experts say has become inimical to economic development and growth. International Monetary Fund, IMF, and World Bank, consistently, pulsated that petrol subsidy has become a drain on the nation’s resource.
Tenable arguments against petrol subsidy removal have, also, been cutting-edge. That Nigeria’s three dilapidated refineries need to reactivated to produce refined petrol to full capacity. Importation of fuel should stop or reduced to barest minimum. If subsidy removal is based on importation of petrol, it will impact gravely on the citizens, whose income and other economic means of livelihood were very low; and deteriorating. Fluctuating exchange rate of the Naira to the Dollars would worsen matters.
Each government failed to take pragmatic economic measures to address the welfare of the citizens, if petrol subsidy is eventually removed. But only interested in taking economic plunge on the removal of petrol subsidy, according to analysts. They said governments position has been guess work, and economic plunge, that could amount to delusion.
Uncleared vision by governments, and lack of political will, analysts say, hampered attempts to remove petrol subsidy. The leadership of trade labour unions, never pretended their opposition to petrol subsidy removal. They have consistently stood their ground, that until effective and acceptable economic policy measures, to cushion the effects of subsidy removal on citizens are put in place, they will not backdown.
Nigeria Labour Congress, NLC, and its affiliate major labour unions, TUC, NUPENG and PENGASSAN, have argued, that any deregulation or removal of petrol subsidy anchored on petrol importation, without fixing the three obsolete refineries, and getting them to function to full capacity; would amount to economic calamity on citizens – the burden of removal of subsidy to the citizens will be anguish. The unions are not prepared to take any of it.
GOODLUCK JONATHAN, former president of Nigeria, on January 1, 2012, too a bold step, and deregulated the downstream sector without notice. The price of petrol moved from N65 to N140. Ngozi Okonjo-Iwela, former Minister of Finance and Supervising Minister of the Economy, under Goodluck Jonathan, champion the subsidy removal. Okonjo-Iwela said subsidy on petrol was draining billions of Naira from the nation’s coffer. And Nigeria needed to save funds for the future.
Jonathan tested government’s will-power to remove petrol subsidy, against all odds, and promised to use the accrued revenue from subsidy removal to develop infrastructure and to transform the economy. The government stated that there were obvious indications, from economic and financial experts, that petrol subsidy regime was no longer sustainable. And must be done away with for the nation to progress
Nigerians responded with hostility. Labour unions, civil society groups and citizens, under the umbrella of “Save Nigeria” or “Occupy Nigeria” movement, embarked on mother of protests. The protests lasted almost one week, and grounded economic and social activities in the country. Nigeria Labour Congress, NLC, and Trade Union Congress, TUC; led the protest, with backing from NUPENG and PENGASSAN.
At the heat of the massive protest, Jonathan bent backward. In a television address to the nation, he said: “given the hardships being suffered by Nigerians, and after due consideration and consultations with state governors and the leadership of the National Assembly, government has approved the reduction of the pump price of petrol to N97 per litre”.
Jonathan restored the subsidy regime, with assurance to revive the three refineries, and put other measures in place to cushion the effects of eventual removal of subsidy. And added that government would “continue to pursue full deregulation of the downstream petroleum sector”. The subsidy transactions are considered by experts and analysts as favouring the rich and not the poor.
At the end of the protest, labour unions restated that they were never against the removal of subsidy; and were prepared to consider getting rid of petrol subsidy. First, government must fix the huge infrastructure deficit in the oil sector, especially, fixing the three barren refineries in the country. What the labour unions are opposed to has been deregulation policy based on importation of petrol. Jonathan left office in 2015, without fixing the refineries, or put palliatives in place as promised to enhanced the removal of subsidy. And the business of importation of petrol boomed.
MUHAMMADU BUHARI came to power on the mantra of change, and with elevated promises, to swing into action and revive the three comatose refineries; stop importation of fuel; ensure the Naira exchange rate returns to N1 to $1; will not engage in petrol subsidy regime – being a vehement opposer of the subsidy regime. He and majority of those in his government, today, backed the January, 2012, subsidy removal protest against Jonathan’s administration.
With the play of words, in the character of improbable science of Economics, Buhari’s government sustained the subsidy regime, without most Nigerians knowing — a new word was coined for subsidy; and without Nigeria’s lawmakers – the National Assembly, appropriating funds for subsidy payment. When the center could no longer hold, the government confessed, and owned up to the payment of petrol subsidy.
Again, the International Monetary Fund, IMF, and the World Bank stepped in. On their routine assessment and advise on Nigeria’s economy, continued to push for the removal of petrol subsidy. Buhari’s economic team jumped at it, and presented to Nigerians, that the best way to go, for economic survival of the country, was to fully deregulate the downstream sector and remove the subsidy regime.
Buhari’s government began to parade mind bugging figures, going into billions and trillions of Naira, it says, are going into the drain on subsidising petrol. While revenue from oil was dwindling and national budgets could not be funded; yet billions of Naira were going into the drains through subsidy. The debate for or against petrol subsidy removal became clarion.
Nigeria’s 36 State Governors, joined the debate for subsidy removal. Their argument was that the revenue accruing to the states from the center – federal government – was steadily and grossly declining. The governors are careless about the consequences the removal of petrol subsidy would have on the citizens, provided the revenue from the federal to the state governments are ramped up.
GRADUALLY, CONSENSUS of economists, financial experts, labour unions and Nigerians, emerged that subsidy regime was no longer sustainable, and should be removed. But much seemed not to have been done by governments – past and present, to pave the way for the removal of petrol subsidy. How to cushion the effects of subsidy removal, alleviate the hardship that will result, remained unattended.
Analysts, however, advised that any proposal by government for subsidy removal, must factor the welfare of its citizens, especially, the consequences. They argue that to jump into economic policy — such as removal of petrol subsidy, as the president government seem to, once again, embark on, the effect on the citizens, could be hostile on already impoverished Nigerians.
Zainab Ahmed, Minister of Finance, Budget and National Planning, rose from Nigeria Federal Executive Council, FEC, on November 21, 2021, and told State House journalists, that President Buhari’s government plans to remove petrol subsidy, sometime in 2022. She said government can no longer sustain petrol subsidy payment, put at about “N250 billion monthly”, about “N3 trillion annually”.
In place of subsidy removal, Ahmed said, government is proposing N5,000 as transport subsidy payment, monthly, to between 20 to 40 million economically vulnerable Nigerians, for a minimum of six months, and maximum of 12 months. The exact number is yet to be decided.
A committee chaired by Vice President Yemi Osinbajo, made up of some state governors and some ministers, Ahmed said, will consider the exact number to be consider tor the N5,000 subsidy payment. It was agreed that the remittance of the N5,000 will be done digitally, through eNaira, and other payment platforms; without cash payment.
Zainab said at the last meeting of the Federation Account Allocation Committee, FAAC, subsidy cost to the federation was N243 billion. Giving that the cost has been rising consistently, approximately N250 billion months was being considered; and that huge cost on subsidy was no longer sustainable.
NIGERIA LABOUR CONGRESS, swiftly, reacted that it was not keen, on discussing palliative, any more with the government, over planned removal of subsidy on petrol. Ayuba Wabba, NLC President, accused President Buhari’s government of adopting monologue in arriving at the conclusion on subsidy removal. He said, labour unions will continue to reject deregulation that is anchored on importation of petroleum products.
NLC described as “comical” the bait by government to pay 40 million Nigerians N5,000 as palliative to cushion the effect of the uncontrolled increase in the price of petrol, once subsidy is removed. NLC challenged the government to established, and make public, empirical data on the quantity of refined petroleum products consumed daily by Nigerians. And how it arrived at the figures being bandied around on subsidy.
Human Rights Writers Association of Nigeria, HURIWA, recent statement, in Abuja, said since 2018, over 90 million Nigerians are rated as “extremely poor”; in the face of what it described as “so-called” disbursement of conditional cash transfer to poor peasants by government. And demanded that the planned removal of subsidy by government should be reversed.
HURIWA said the proposed payment of N5,000 to vulnerably 40 million poor Nigerians, was another illusion. It sees it as a “perfect opportunity for rogues in government” to become richer on the back of poor masses; even as the economic adversities of Nigerian bites harder.
“We urge Nigerians to speak out and reject this attempt at spreading toxic economic hardships as is being packaged by President Buhari with the support of IMF to pull out fuel subsidy. This government is the most recklessly corrupt, lawless and thieving administration since Nigeria’s amalgamation in 1914”.
HURIWA stated that: “This government led Nigeria to the inglorious status as the poverty capital of the world. This government led Nigeria into two crushing economic depressions and under this government, the unemployment statistics have continued to skyrocket, hospitals, roads, schools have all but collapsed and organised social crimes, terrorism and anarchy have assumed gargantuan proportions.
“The attempt to hike the purchasing price of fuel will lead to the devaluation of Naira because it will lead to a spiral general price adjustments of goods and services and the consequential economic burdens to be transferred to the over 100 million absolutely poor citizens will lead to a bonanza of terrorism, organised crimes and mass murders in Nigeria once it is effected”, HURIWA further added.
Other public reactions to the government planned removal of subsidy in 2022, has trailed government decision. Analysts say the removal of subsidy, at this time, may hike the cost of petrol pump price to over N350 per litre; meaning further dehumanizing Nigerians, who have been overstretched by poverty in Buhari’s government. Prices of commodities and utilities across board, in the markets, presently, have hit roof; and subsidy removal will further escalate the situation.
Buhari’s administration adoption of IMF and World Bank pressure, on subsidy removal, many economists say is simple. Faced with sharp decline in oil revenue, which is a major source of funding the national budget; with the government’s large appetite for borrowing, and huge debt serving burden; the government is looking for a way between the rock and the hard ground.