Fallouts of Subsidy Crisis

President Jonathan was in a weak strategic position when the fuel subsidy removal was announced on January 1, 2012. He also underestimated public resentment of the policy. Nigeria’s politicians and ruling class were also yet to understand the implications of telecommunications industry changes on the ability of citizens and civil society to organise themselves! NCC data indicates over 127.2million connected; and 95.3million active lines; plus 172.4million installed capacity in Nigeria as at November 2011. Internet penetration has also improved, and a significant number of youths and middle class Nigerians have blackberries and are on facebook. These demographics in effect have altered the balance of power between government and citizens, in favour of the citizenry! It was this dynamic (also at play in the “Arab Spring”, “Tea Party” and “Occupy Wall Street” protests) that left government surprised at the popular reaction during the oil subsidy strike. The strike illustrated the power and possible abuses of the internet and social media! Information and (a lot of) disinformation is enabled by the internet. Ranged against government in the subsidy protests were several disparate groups-labour exercising its legitimate duty of protecting its constituency’s interests, as it perceived it; youths and middle class Nigerians who sought to prevent what they considered an adverse policy, which would take away their “right” to cheap oil; social and civil society activists, who were fulfilling their self-assigned roles in society; Life-long “comrades” and socialists (such as Dr Fashina, former ASUU president who chaired the Joint Action Committee) who interpret deregulation as a capitalist philosophy which would take Nigeria away from their socialist utopia; the broad political opposition, especially ACN and ANPP, which felt they had no reason to help a PDP government sell an unpopular policy; and CPC politicians led by Nasir El-Rufai, Tunde Bakare, Yinka Odumakin and Kayode Ogundamisi (supported by Femi Fani-Kayode and Dino Melaye) whose agenda progressively appeared to be an unconstitutional take-over of power! This last group had many active collaborators and supporters (and probably a few silent ones too!) whose advocacy for regime change would ultimately help government re-define the protests as a security threat and attempted treason, which put labour in an untenable position and led to the suspension of the strike! Nigerians exhibited great passion during the period; even though the space for reasoned debate of the deregulation of downstream petroleum sector (or oil subsidy removal) policy was often severely constrained and the discussion reduced many times to vulgar abuse, demonization and demagoguery! Many found pleasure in abusing Jonathan, Ngozi Okonjo-Iweala, Sanusi Lamido Sanusi and Atedo Peterside, the only government officials (later joined by Shamsudeen Usman and Bolaji Abdullahi) who had the courage to speak in defence of government policy. In the media, only Ijeoma Nwogwugwu of THISDAY and this columnist expressed pro-deregulation viewpoints. Which brings me to one of the less-savoury fallouts of the crisis-the ethnicization of the issue, which THISDAY’s Segun Adeniyi discussed in his article, “Their Son, Our President” of January 19, 2012. While it may or may not have been legitimate for Segun to disclose his earlier aggravation by respected banker Atedo Peteside during the transition from Yar’adua to Jonathan and pro-Jonathan sentiments by Niger-Delta leaders, I was shocked by the completely unnecessary and unjustifiable attack on well-respected President of the Christian Association of Nigeria (CAN), Pastor Ayo Oritsejafor who the columnist referred to as “otherwise respected”! Contrary to Segun’s assertion, Pastor Oritsejafor, an Itsekiri (they are not known to be best friends to Ijaws and Urhobos, two of the dominant groups in the Niger-Delta) has never made any pro-Niger-Delta comments since President Jonathan’s assumption of office. Instead his two concerns appear to be Islamic Banking, and “Boko Haram” terrorism/killings of Christians in Northern Nigeria. I would imagine that these are legitimate concerns of a leader of the country’s Christians. I have warned earlier in this column that there seems to be intense anger in some quarters (an anger that apparently led Professor Jubril Aminu to call for the banning of CAN!) at Oritsejafor’s support for Northern Christians and his audacity in seeking to protect his congregation. I have also heard that some non-Christians are so upset that they seek to sponsor an alternate leadership for CAN that is more amenable to their interests! Hopefully everyone has learnt something from this crisis. Government now knows that it can’t take the people for granted. It must communicate and engage with the populace on policies before implementing them, and our democracy is probably stronger. Government can no longer neglect the imperative of fighting corruption, and enthroning transparency and accountability in government business. On the other hand, most Nigerians now concede the necessity for downstream deregulation, and the crisis has indeed taken the nation closer to a deregulated oil sector. There is now consensus around the need to investigate and punish all abuses of the subsidy scheme. I would recommend that government should return the scheme exclusively to oil majors and scrupulously implement the reduced SURE programme so that benefits can be visible to all. Government must resume consultations towards correcting industry lapses, enacting the petroleum industry bill, and commence consultations towards setting a date for full industry deregulation. I would urge government to consider issuing full investment guarantees to all prospective investors to commence action in the expectation that the sector would be deregulated by the time construction is complete.

The Fuel Subsidy Palaver (2)

There is a socio-political, economic and global context to the fuel subsidy removal crisis. When President Jonathan overwhelmingly won the April 2011 general elections, his major opponents vehemently rejected the outcome. Their contrived angst couldn’t really be the actual polls conduct, but a carry-over of the sense of entitlement and anger felt by Northern politicians, traditional rulers and elites after the region’s perceived loss of power due to late President Umaru Yar’adua’s death. The promise to make Nigeria “ungovernable” was soon to manifest in escalation of religious tensions and “Boko Haram” terrorism leading to heightened insecurity across the country, especially the North East and North Central. Government’s confused and confounding response to the bombings, shootings and killings carried out in the name of “Boko Haram” angered most Nigerians. Meanwhile a more insidious de-legitimisation of Jonathan commenced in the media and hearts of citizens, especially in “core” North and South-West. The media onslaught was on two fronts-social media and mainstream press. Most “civil society activists” and vocal youth, the type that inhabits and dominates internet and social media tended to support either Nuhu Ribadu or Muhammadu Buhari, candidates of Action Congress of Nigeria (ACN) and Congress for Progressive Change (CPC) respectively in last year’s elections. Typically idealistic and highly passionate (though sometimes lacking commensurate insight), they favoured change from the PDP status quo. While the South-East, South-South and North-Central had made up their minds long before the voting to back Jonathan, the battle was really over South-West votes. When ordinary South-Westerners turned to Jonathan, the activists became an often-angry minority determined to prove the majority had made a grievous error! They were joined by a large number of Northern facebook activists whose pro-Buhari posture was unequivocal, though nicely expressed in nationalistic terms. The mainstream media, particularly three strategic ones (a trusted medium that projects Northern intelligent opinion; a relatively new but powerful national newspaper reflecting dominant thinking in the South-West; a very influential daily which acquired very strategic anti-Jonathan columnists!) also turned against Jonathan. Jonathan’s public image steadily became “clueless”, weak, indecisive and floundering and his wife portrayed as a laughing stock! Meanwhile Jonathan’s communication machinery went to sleep, with key Jonathan supporters pre-occupied with the spoils of office!!! Jonathan who had brought Facebook into Nigerian politics and governance, became its most savage victim, and fared little better in mainstream press, where editors surprisingly found access to Jonathan’s media managers difficult. In governance, signs were mixed as Jonathan assembled a fair cabinet and an initial policy vacuum around the inchoate “transformation agenda” began to be filled. But government appointed prominent businessmen into an otherwise sound economic management team, an error that signalled prospects of crony capitalism. Disturbing rumours began to emerge about import duty waivers, and in the petroleum sector about management of the subsidy regime, which almost certainly contributed to ballooning subsidy figures. It was soon apparent that oil marketers were quite enamoured of petroleum minister, Dieziani Allison-Maduekwe as they flooded newspapers with congratulatory adverts every time she collected a honourary doctorate, national award or celebrated a birthday! The regime crowned these with a badly-managed jumbo national honours ceremony in which up to 350 persons-the bad, ugly, good and not-so-good received high honours. Meanwhile corruption, poverty and unemployment remained high; and middle-class Nigerians and youths having seen people power demonstrated in the so-called Arab Spring and “Occupy” protests were anxious to stage a Nigerian version, irrespective of history and context! In six short months, Jonathan well-meaning, simple but naïve, and lacking a vibrant political, strategy and communications backbone had lost so much goodwill that his sensible policy of downstream petroleum sector deregulation erroneously sold as subsidy removal, was going to be badly-received by the populace! There were also reasons to believe that Jonathan’s government and security services contained not a few persons whose loyalty to the regime was probably questionable! Ironically deregulation of downstream petroleum is the first real bold and transformational action taken by the Jonathan administration! The initiation of a Nigerian Sovereign Wealth Fund was positive and the 2012 budget proposals made the right calls on the big issues-deficit reduction, structural reform, fiscal consolidation, changing the ratio of recurrent to capital expenditure, social sector investments in education, health and employment generation, and agricultural policy and incentives, but all these positives were lost in social media bluster and anger. Deregulation of downstream petroleum is one of the most important and critical actions government can take in helping fulfil our economic potentials. We have finest grade crude oil, but we import refined petroleum products because we prefer the short term and short-sighted benefits of a wasteful and corrupt subsidy scam. Deregulation would promote huge private sector investments in refineries, petrochemicals and the value chain. It would create jobs and resolve permanently and sustainably petroleum product supply issues and is the structural solution (like import licensing and foreign exchange trading earlier) to the huge arbitrage opportunities that provide incentive for corruption. It is unlikely that the inflationary impact of N141 petrol would be fully reversed even if today the price was returned to N65. It is wiser to reach agreements on palliatives, anti-corruption, reduction in government waste and profligacy, and monitoring of the SURE (Subsidy Re-Investment and Empowerment) Programme and let Nigerians reap the benefits of a deregulated downstream petroleum sector.

The Fuel Subsidy Palaver

Government case for subsidy removal is unwisely based more on the need to increase government revenue, rather than deregulation to ensure investment, massive job creation and sustainable product supply in the downstream petroleum sector. Why should Nigerians want corrupt, inefficient and often dysfunctional governments to have enhanced revenue (and this is not about Jonathan, but ALL Nigerian governments to date!)? Of what significant benefit has government revenue been to our people? Nigerians don’t trust government, for good reasons, and Jonathan hasn’t yet given Nigerians overwhelming reasons to believe his is different. Nigerians are right to demand that the executive and legislature demonstrate willingness to make sacrifices, as requested of Nigerians. Personally I think Jonathan means well, and I trust Ngozi Okonjo-Iweala (irrespective of the irrational social media ranting), but the essential character of the Nigerian state remains the same! However I have always supported downstream petroleum sector deregulation! Deregulation and liberalisation have transformed several sectors in Nigeria-financial services; airlines and aviation; broadcasting and media-radio, television and newspapers; upstream petroleum; universities and polytechnics; and telecommunications. Every sector which relatively “works” is conducted by the private sector; those that don’t-power, refineries, railways, water, public education, public health, security, judiciary, roads etc are managed by government! But not every sector can be deregulated and liberalised e.g. security, public health and education. Even there private players can play critical roles such as in the Lagos State Security Trust Fund by its private sector partners, which has transformed the security sector in Lagos. Clearly downstream petroleum sector should be deregulated so that private capital and investment can build refineries, petrochemical plants and invest down the sector’s value chain. The best insight is drawn from telecommunications experience. Imagine this was 2000 and we were pondering how to provide 100 million telephone lines for Nigerians. Would we hand over $20 billion to then corrupt and inefficient telecommunications monopoly, NITEL and given it “marching orders” to ensure it provides 100 million lines within ten years? That would have been sheer foolhardiness!!! We would simply have made individuals rich-Minister for Communication, senior civil servants, NITEL officials, contractors, and their friends and cronies, as we had done since independence! Ten years later, NITEL may have moved from 470,000 lines (actually less were working) to may be 750,000!!! Instead we acted sensibly-deregulated the industry, sold licenses to private investors (earning billions of dollars from digital mobile license auctions, 3rd generation licenses, second national carrier licenses; additional operator licences) and earned additional revenue from taxes, import duties, spectrum sales. We created thousands of jobs, with employees paying P.A.Y.E taxes to government and the sector impacted other industries-media and entertainment; advertising and public relations; professional practices; small and medium enterprises (even micro enterprises); and telecommunications enhanced overall economic productivity. Private capital in excess of $20 billion flowed into the economy, and government corruption in the telecommunications sector has disappeared! Today the Nigerian telecommunications sector has 125million connected lines, capacity for 167.8million lines and tele-density of 67.09 percent!!! Why would we so resolutely insist on not using a similar strategy for downstream petroleum??? If we hate corruption, one of our most important actions would be ending the petroleum subsidy scam which is now the largest single source of corruption in the Nigerian economy. The evident irony is that if subsidy stays, the happiest people will be the oil importers!!! I also think many of the opposing arguments are escapist-a gradual removal (that is what we have been doing since 1986! Global oil prices and exchange rates will go up, while petrol prices remain fixed, so a bigger subsidy will re-emerge and we will have merely postponed the evil day); the timing is wrong (evidence suggests that there could never be a right time to ask Nigerians to pay more for petrol. A sense of entitlement to cheap petrol has developed and prior governments have got negative reactions irrespective of timing); there was insufficient consultation (we hear stories of labour leaders who privately agree with government, but refuse to admit so publicly to preserve their populist base-they may later “change their minds” when they get into government!); it is IMF/World Bank policy (no intelligent observer needs an international conspiracy to know that spending one-third of your budget on a corrupt subsidy scam which stunts a potentially huge industry, while you lack jobs, infrastructure and social spending on education, health and transportation, is nothing short of insanity!) The big challenge is how government will calm the populace and alleviate the short-term impact on the poor and struggling masses. Government must urgently implement credible and well-thought out measures to ameliorate the impact on the vulnerable. I support downstream deregulation and I hope the policy is successful, but government must offer deep and meaningful sacrifices of its own. Government must also unequivocally begin the process of transforming itself before it can transform Nigeria! Jonathan must fight corruption, inefficiency and lack of commitment of government officials to the people. The people must henceforth see that government exists for public good and not private benefit!

The Jonathan Year

In Nigeria, 2011 was often about President Goodluck Jonathan-his nomination as PDP presidential candidate; his conduct of the 2011 elections; his victory and swearing-in as elected President; his acts of commission and omission since his election; his power sector road map, economic reforms and “transformation agenda”; the weak response to “Boko Haram” terrorism; the nature of his cabinet and other appointments; his surprising decision to start his presidency with advocacy for an extended single-term presidency; the impassioned debate sparked off by his downstream deregulation policy (popularly referred to as “subsidy removal”); the mannerisms and grammatical activities of his wife, First Lady Dame Patience Jonathan; his 2012 budget proposals; his “cluelessness” (the word most regularly used on internet and social media to describe Jonathan in 2011 was “clueless”) and naïveté in handling power; etc. There were other actors who stamped or attempted to stamp their authority on 2011. Asiwaju Bola Tinubu led the Action Congress of Nigeria (ACN) to an overwhelming victory over the rival Peoples Democratic Party (PDP) in the South West, recovering gubernatorial seats in Ogun and Oyo States; retaining the prized Lagos governorship through a thumping victory; and sweeping state and federal legislative seats in all states in the region (except Ondo) including Ekiti and Osun, where the party had earlier re-taken governorships through judicial verdicts. The ACN also built credible coalitions across the country and mounted strong challenges in Benue, Akwa-Ibom, Kwara, Jigawa and Anambra States. Tinubu essentially reversed AD/AC/ACN losses to the PDP in 2003. Professor Attahiru Jega, who Jonathan appointed as Independent National Electoral Commission (INEC) Chairman to popular acclaim also contributed to shaping the year. The 2011 elections were by-and-large the first credible general elections after our 1999 return to civil rule, and though the elections kicked off on a shaky rule, all was well that ended well! Most dispassionate observers, local and international agreed that though not perfect, the elections generally reflected the will of the Nigerian people. Two of President Jonathan’s appointees made a quick impact-agriculture minister, Dr Akinwunmi Adesina and returning Minister of Finance AND Coordinating Minister for the Economy, Dr Ngozi Okonjo-Iweala. Adesina hit the ground running, revitalising agricultural policy for the first time in decades. Until his coming, the sector was about fertiliser corruption, phony silos and other strategems for corruption and deliberate misallocation of resources. Now Nigeria is addressing the issues central to agricultural development-financing, value chains, properly targeted subsidies (zero duty on imported agricultural machinery; interest subsidies on agricultural loans etc). Okonjo-Iweala proved her mettle as finance minister between 2003 and 2006. This time she has returned transparency to federal, state and LG fiscal allocations; set up a system to improve turnaround time at the ports; championed the downstream deregulation policy; and started the process of fiscal consolidation and structural reforms. At the state level, Governors Fashola and Amaechi of Lagos and Rivers States remain torch-bearers for that tier of government. Fashola’s achievements in security, infrastructure and social sector investments (health, education, women and youth empowerment and poverty alleviation) and his calm and humane leadership are a testimony to the possibilities if Africa can find the right leadership. Amaechi’s investments in education, health, agriculture, power and roads will transform Rivers State when they are completed and made fully operational. Dame Jonathan enjoyed space in social media and national folklore often due to her alleged grammatical interventions. It is difficult to say if she actually made the statements attributed to her, as an industry appears to have developed around creating statements purportedly made by the first lady. However Dame Jonathan played an important role in mobilising women across the country to vote for her husband and while her opponents and their agents focussed on her grammar, she proved that ordinary voters and not linguistics skills decide the outcome of elections! Her husband’s major contenders for the presidency were Ibrahim Shekarau of All Nigeria Peoples Party (ANPP), Nuhu Ribadu of ACN and Muhammadu Buhari the perennial candidate, this time on the platform of his new Congress for Progressive Change (CPC). In the end, it was a straight battle between Buhari and Jonathan, and given the regional and political realities, Jonathan’s victory was inevitable. Shekarau’s and Ribadu’s ambitions were probably premature-they stood a better chance in future, and as for Buhari, signs are that 2015 may yet be another try! In the end, Jonathan defined 2011! His defeat of Atiku Abubakar in the PDP primaries and victory in the general elections were unprecedented in Nigerian political calculations! But after taking power, Jonathan became (or rather remained) tentative and seemingly unsure of himself. His response to terrorism was downright confounding and he often appeared unwilling or unable to project the power of his office. His style emboldened his adversaries-disgruntled regional politicians, “Boko Haram” and its sponsors, political opponents and even civil society activists who often made him an object of derision on facebook and other social media. Even Jonathan’s supporters were often exasperated by his style! Interestingly he appeared to end 2011 finally attempting to project strength-declaring a state of emergency in fifteen local governments across four states (Borno, Yobe, Plateau and Niger) affected by fundamentalist terror, and deregulating the downstream petroleum sector in spite of popular opposition.