Nigeria: Fuel subsidy removal furore

The biggest oil producer in Africa should refine its own products, unions say.

This article will appear in the Africa Research Bulletin: Economic, Financial and Technical Series, Vol 48 No 10 p. 19298C . Subscribe here.

The federal government’s plan to remove the fuel subsidy as of January 2012 – in phases and executed in a “deliberate and responsible way” according to President Goodluck Jonathan’s formal announcement – has created a furore.

President Jonathan cited the benefits: harness revenues for capital stock formation; leverage on private sector investments in public-private partnerships (PPPs) to help bridge the infrastructural gap; and creating incentives for investment in refineries and the petrochemical industries.

His assurance that “this administration is committed to investing the resources in tangible infrastructure and providing social safety nets and other mechanisms to moderate the impact of the reforms on the most vulnerable segments of our society,” failed to convince the labour unions, Trade Union Congress (TUC) and Nigeria Labour Congress (NLC). The NLC called it “a declaration of war against Nigerians.”  NLC General Secretary Owei Lakemfa said it showed the government’s ignorance about the state of poverty in the country and the magnitude of the suffering of the common man. He said that the country should be refining its own petroleum products rather than exporting crude and importing finished products at a very high price.

The All Nigerian Peoples Party (ANPP) described the plan as inhuman. The party’s National Publicity Secretary, Chief Emma Eneukwu, told This Day the Government should stop feeding Nigerians with ill-motivated theories of deregulation.

The main opposition Action Congress of Nigeria (ACN) also rejected the plan. In a November 7th statement reported in Vanguard newspaper ACN called it ”the handiwork of those propelled by the philosophy of the ‘Washington Consensus’ of rolling back the frontiers of the state.” It said improving government solvency was a “cheap argument” which government thinking should go beyond. Like others, the ACN pointed to the anomaly of an oil producer importing oil for domestic consumption.

The World Bank on October 24th endorsed the plan. It said the policy and the setting up of the Sovereign Wealth Fund (SWF) coupled with strict budgetary fiscal discipline would be in the interest of ordinary Nigerians. The European Union (EU) said the subsidy removal would “accrue more resources to be channelled to development projects capable of generating jobs”. The umbrella Manufacturers’ Association of Nigeria (MAN) called it a “bitter pill that we have to swallow”. Some private sector leaders who attended a two-day presidential retreat in Abuja in mid-October indicated support. The Organised Private Sector (OPS) however denied backing the plan. Speaking on behalf of the OPS, Director-General of the Nigeria Employers Consultative Association (NECA), Olusegun Oshinowo, said the OPS had yet to take a position and advised the government to engage in dialogue with representative organisations of the OPS, rather than “individual business owners, multinationals and favoured business men in the private sector.”

The government’s subsequent proposal to set up a “committee of eminent persons” to advise it on how to use savings from the planned fuel subsidy removal was also condemned with the NLC describing it “as another gimmick from government to force the policy down the throats of Nigerians”.

Minister of Petroleum Resources, Mrs Deziani Alison-Madueke, announced the committee proposal on October 25th on the sidelines of the Commonwealth Heads of Government Meeting (CHOGM) in Perth, Australia. She said that because government wanted to ensure openness and transparency in disbursing the proceeds, it would not handle the implementation of the benefits. She noted that Nigerians should not be worried on when the subsidy would be removed, as “we are still in discussions with labour and other stakeholders including the National Assembly.”

The National Union of Petroleum and Natural Gas Workers Union (NUPENG) said it would support the subsidy removal on certain conditions: that Nigerian refineries work, that new refineries come on board, that high prices for imported products are no longer paid. According to NUPENG National Secretary Dayyabu Garga, quoted by the Daily Trust, there is nowhere else in the whole world where a country blessed with abundant natural resources exports crude oil and imports same for local consumption. According to him, the union believes that if the products can be refined within the country, they would be sold for less than N65 per litre than Nigerians pay for it now.

Find out more with the following back issues of the Africa Research Bulletin

Shell Stands Accused (Vol. 48 No 9)

Gambling on Oil (Vol. 48 No 9)

Ogoni Dig in their heels (Vol. 48)

Deregulation in 2011? (Vol. 48 No 6)   

Petroleum Bill Thrown Out (Vol. 48 No. 5)

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