Just when it seems the Buhari administration has run out of ideas in governance capacity, it manages to find a further depth in ignominy. The unexpected decision to abruptly end the fuel subsidy regime, jerking up the pump price of petrol from N86.50 per liter to N145 is one example of that inherent predilection for digging a grave beyond six feet. Last Wednesday’s decision came down without notice. It is therefore not surprising that the labor movement in the country has threatened protests and an indefinite strike action against the petrol deregulation policy next Wednesday. By that singular act of insensitivity, the president showed that his government is totally out of sync with Nigerians. By ending the fuel subsidy without any corresponding measures to mitigate the effects on the poor, Buhari confirmed, for the umpteenth time, that Nigerians are mere clients, instead of primary stakeholders of governance. No government that derives its power from the popular will of the people treats its citizens with such ignominious contempt. It appears things will only get worse before they get better.
Crisis times require bold reforms and President Buhari lost a golden opportunity to tackle one of the most contentious issues in Nigeria because of the cavalier manner in which it was handled. The price hike from N86.50 to N145, representing a 67.63% increase, is provocative and punitive and the height of insensitivity and impunity. Fuel subsidy is an emotive issue. Nigerians rightly feel that being one of the world’s producers of crude oil, the cost of petrol should not be overbearing, especially as government does very little for the people. Nigerians fully expect that with the coming to power of the APC and their promise for change, life should be getting better. But it is not, making people wonder whether inflicting more pain on an already destitute people is the APC’s own idea of governance. Roads everywhere are bad, power unreliable and potable water supply inadequate. Additionally, the country has to contend with skyrocketing food prices, a near total lack of security, unmitigated unemployment, absence of social security, a comatose railway, crumbling education and poor health care delivery systems.
Deregulation can only lead to even higher prices and inflation of virtually every commodity, and if the government believes it is accountable to no one; if the president thinks he can succeed where his predecessors failed, then he obviously misread public opinion. Subsidy removal will stifle the economy, and without adequate mitigating initiatives to cushion the shock, social dislocation and public unrest is unavoidable, especially now that organized labor has vowed to “shut down all banks, sea and airports, government and private offices as well as markets.” A joint communique by the Nigerian Labor Congress and the Trade Union Congress and allied civil society groups urges the government to “revert to the old price regime in order to reduce the suffering of the people and to consider this singular act of mindless pump price increase as a betrayal of trust.”
The argument for the removal of fuel subsidy is based on the notion that poorly targeted consumption subsidies deprive the country of scarce resources critical to other priority sectors. Announcing the end of subsidy, Petroleum Resources Minister, Ibe Kachikwu, looked confused and sounded like a man in a hurry. He said one thing and then contradicted himself. Here him: “Government arrived at the new price by a simple conversion of using foreign exchange at N285. That N285 is from nowhere; it is basically the secondary source that people buy foreign exchange from, versus the N320, which is the black market rate. If you convert it and throw it in, you will get about N141, N142 or N143. So there aren’t much of palliative elements left there for you to use. It is simply, go out, find your product, your cost is covered, there is an opportunity for your efficiency to make money, come and deliver.” What exactly does this confusing grandiloquence mean? Kachikwu is either bereft of ideas or has a superficial understanding of what deregulation is all about, his pedigree notwithstanding.
This in itself is strange as the same Kachikwu told Nigerians just last month, that the subsidy had been removed through his ingenuity and that Nigeria was saving $1billion from this process. And come to think of the fact that during election campaigns, Buhari said there was no fuel subsidy in Nigeria; and if at all it existed, he would not remove it if elected. It is doubly mind-boggling that the same Kachikwu is now assuring Nigerians that the new price regime would block the drain through which government loses N16.5 billion monthly. Here is one minister who often appears so determined, well-intentioned and so much on top of his game that he could easily be deemed a star of an administration not renowned for surefootedness. But Kachikwu is now a public embarrassment and a disgrace to Nigeria.
It is curious that on Wednesday, when Kachikwu said the new price was based on foreign exchange conversion of naira to the dollar, the exchange rate was N320. But 48 hours later; at close of business on Friday, the exchange rate was N385; raising doubts over the sustainability of the new N145 pump price. Granted that fuel subsidy crowds out other development spending, aligning fuel importation to the secondary market exchange rate, amid dwindling revenues from falling oil prices and pressure on the naira from dollarization of the economy, amounts to economic suicide.
The government has announced its intention to redirect the funds from the subsidy into infrastructure, support for domestic refining capacity and safety net programs tailored by states, which henceforth will receive 100% of their allocation from the Federation Account. This is a step in the right direction, but the success of these programs rests on proper oversight and participation of all the relevant stakeholders, especially the media and civil society. In a country where there is already a lack of trust between the people and government, communicating the huge costs of the subsidy and the benefits of its removal to the population is critical. On this, as in much else, the government has failed woefully.
Although the government claims to have saved about N16.5 billion from April this year to date, the standing view is that deregulation is just another ploy by the nation’s vampire elite to further capture the country’s resources. The real challenge the government faces is winning the trust of the people. Some form of social protection must be launched immediately to protect the most vulnerable. This could include measures to reduce the cost of public transportation in the short term. Working Nigerians are hurting and their livelihoods are in danger with the increase of petrol prices. They want to know that the government has a credible plan and whatever street protests will ensue, it will be a clarion call for the government to quickly implement post-subsidy programs targeted toward helping the poor. Most importantly, the programs must be tied to the nation’s overall development goals.
