The politics of oil subsidy removal

On December 13,2015 President Muhammadu Buhari  urged Nigerians to prepare for tougher economic policies in the New Year.
The message was delivered through his Minister of Finance, Kemi Adeosun.
Speaking at the opening of the 7th annual Bankers Committee retreat in Lagos, Adeosun noted that Nigeria was faced with some fairly significant micro-economic challenges that required what she called, “fiscal housekeeping”, an euphemism for austerity measures.
She had declared: “It is going to be tough and we are going to have to make extremely tough decisions. We have got the resilience and space to do that.”
For an anxious electorate that voted for change and craved for a departure from the agonizing misery
and squalor they were subjected to under the immediate past administration, their joy of a new dawn was turned into ashes in their mouths.
Misplaced hope
Government was to give an illumination of what it meant by extremely tough decisions as it declared that it would no longer sustain the subsidy on petroleum products in 2016.
At the Federal Executive Council meeting held on December 9, 2015 the Minister of Budget and National Planning, Udo Udoma, while unveiling the Medium Term Expenditure Framework and the government’s N6 trillion budget proposal for 2016, said the government was seriously weighing the options between removing or retaining fuel subsidy next year.
In the Medium Term Expenditure Framework (MTEF) and the Fiscal Strategy Paper (FSP), which was presented to the National Assembly same  day, President Buhari made no provision for kerosene subsidy.
Also, speaking at the launch of the new edition of Nigeria Economic Report on the same date, a representative of the ubiquitous international financial institution, the World Bank, John Litwack, said it was compelling for the Buhari administration to remove subsidy on petroleum now, when global crude oil price is at its lowest level.
Litwack stated that pushing the price of fuel beyond N100 per litre would not negatively impact on the people beyond what they are currently facing.
His words: “The fuel subsidy appears to have vast modest benefits for the majority of citizens, but the costs are quite high. There is a strong tendency for the cost of fuel subsidy to increase over time as increasing domestic demand for petrol outpaces growth in oil output or revenues.
“The $35 billion cost of fuel subsidy during 2010 – 2014 was one of the reasons Nigeria was unable to accumulate a fiscal reserve in the Excess Crude Account that could have protected the country from the recent oil price shock.”
He explained that fuel subsidy obligations were expected to reach 18 percent of all government oil revenues in 2015, pointing out that if the current regulated price regime of N87 per litre was maintained, subsidy could increase to more than 30 per cent by 2018.
Conspiracy of silence
While many Nigerians were stupefied over the excruciating economic policy to be unveiled in the New Year by a government that promised them hope, its vociferous civil society groups and activists that had squealed against same unpopular policy by the previous administration have suddenly lost their voices.
Abuja Metro checks revealed that a similar removal of oil subsidy in January 2012 by the Goodluck Jonathan administration led to shutdown of oil terminals by the nation’s two main labour organisations, the Trade Union Congress and the Nigeria Labour Congress, which issued a joint statement condemning the move.
Their statement had read in part: “We alert the populace to begin immediate mobilization towards the D-Day for the commencement of strikes, street demonstrations and mass protests across the country.”
The organised labour walked its talk and mobilized Nigerians against the increase in fuel price from N65 to N97 as major cities in the South West and the Northern parts of the country were paralyzed through strikes.
The Jonathan administration’s explanation that public fund removed from subsidy would be channeled to pressing social services and infrastructure, was rebuffed.
Unlike the torrents of indictments that trailed subsidy removal under the PDP- led federal government, leaders of the erstwhile opposition party, the APC, now the ruling party, have been rationalizing the need to remove the subsidy.
Former governor of Lagos State and national leader of the ruling party, Asiwaju Bola Tinubu, at an event in Kaduna last week, called for the immediate removal of fuel subsidy.
Speaking at the 10th memorial anniversary of late Dr. Bala Usman, a politician and former lecturer at Ahmadu Bello University (ABU), Zaria, Tinubu said fuel subsidy came with, “many demons.”
His words: “In a perfect world, I wish we could sanitize the subsidy regime and thus continue with it. However, I have reached the conclusion that there are too many demons in the system for that hell to be turned into heaven. It is better that we remove it, not for the austere purpose of saving money, but to use the money more wisely that we might better save the people.
“Let us begin a process of a thoughtful, but decisive subsidy phase-out. While this is occurring, we should simultaneously phase in social programmes benefiting the poorest, most vulnerable among us.
“Programmes such as transportation subsidies, school feeding, improved basic medical care and coverage for the poor, and water projects are some of the things that can be done with the same funds.
“This way, we can undertake this massive expenditure confident that the fruits will go to the hungry, not the already too well fed. End the fuel subsidy. Subsidize the people instead.”
Recall that during Jonathan’s administration, the organised labour, civil society groups and players in the upstream and the downstream sectors of the oil sector demanded for functional refineries, commuter railways and subsidized transportation system before full deregulation, another name for removal of subsidy in the oil sector.
They were worried that Nigerians had little choice but to use motorcycles, minibus and taxis, whose fares are closely linked to the price of petrol.
Today, the four refineries with 445,000 refining capacities are not functioning at installed capacities and the social programmes that Bola Tinubu canvassed are not in place yet. So, what has changed? What makes subsidy removal a wise policy under Buhari and a road to infamy under Jonathan?
Therein lies the politics of oil subsidy.