Wednesday, January 11, 2012

nigeria burning


unless you've been blinded by the new hampshire primaries in the states, and mitt romney's mitt, you probably have heard some sort of news about nigeria this week. while boko haram is burning up the north with threats and gunfire, protests are burning up the rest of the country. i want to spend some time considering the protests. since monday, the labour unions and other organisations including #OccupyNigeria have taken to the streets of Lagos, Abuja, Ife (even London, Atlanta...), etc to protest the governments decision to remove fuel subsidies that have been hampering economic growth, depleting the national budget,  and further enabling corruption. at the same time, these subsidies have allowed nigerians, ordinary nigerians, to benefit in one aspect from the god-given natural deposits of oil. that priviliedge (or is it a right) was taken away by the jonathan administration on january 1, 2012. happy new year!

admittedly the minute i heard about the fuel subsidy removal, i was elated. from an economics point of view, the subsidy never made any sense. it was eating into at least 25% of the budget and the rest of the budget was used for recurring costs. if any developmental projects are meant to happen, the subsidies needed to go. i looked at the subsidies, as well, as a hamper on downstream economic growth in the oil industry. its a national shame that nigeria produces and exports some of the largest amounts of crude oil in the world, yet still has to import oil for its population because it has no (zero, zilch) facilities to in which to refine oil. the subsidies do not help bring in that beneficiation investment however. think about it: what incentive does a company have to set up a refining plant in nigeria and hire nigerians, if it can set up a plant in another country (perhaps a neighboring country...), buy its oil in nigeria for the subsidised amount, ship (or smuggle...) the oil outside the country to where the refinement plant is, refine the oil and then turn around and sell it back to the nigerian government at the much higher market prices? no incentive whatsoever. hence i was for the removal of the fuel subsidy.

as i debated with my friends and with the majority of the online community about the subsidy, i started to understand the arguments that i was missing. [big side note here: i still and will continue to vehemently disagree with those that demonise the current administration (i.e. the presidency and the cabinet) and prefer to overlook the good things that sanusi, okonjo iweala and others have done in nigeria and to side with the cracked-up, crooked-up, more-blatantly-corrupt-than-400-bernie-madoffs-put-together congress (house of reps and senators). how that makes sense in people's heads is beyond me. i typically have a rule of thumb: whatever side nigerian representatives and senators are on any issue, run (dash, flee) to the other side, and fast!]

what i do understand more clearly than ever is how this affects the ordinary nigerian. they have been discarded and lied to for most of their lives (if not all). promises turning into lies. lifestyles destroyed. hopes dashed. people are poorer now in nigeria than they were 30 years ago. there is no reason to trust the government. i get that! now government has made it harder to live, to go to work/school, to go shopping, to buy food, etc. i really do empathise. empathising for the people does not however mean that i am against the fuel subsidy removal. however, i think it could have been implemented in a different way (i'll get to that later).

this was not the first time time that fuel prices have been hiked. our buddy president, obasanjo, during his eight years hiked fuel prices about 9 times, including 2 days before leaving office, a move that would later be reversed by his successor, Yar'Adua. In all, the price of fuel was 275% more expensive when OBJ left office in 2007 (N75) than when he came in in 1999 (N20). Thats, Two hundred and seventy five percent!! the current price hikes are a little over 100% of the previous price. we all praised okonjo-iweala when she came to nigeria (then went around the world) saying that they were going to make the nigerian budget and spending very lean, given the tough economic times and nigeria's history of wastage and corruption. what did we think she meant? removing subsidies is simply part 1 of that plan, no?

so with the president claiming there is no going back on the subsidies and the organised protests threatening to halt the economy, what gives? who do we expect to blink first. i believe there will be a compromise between the president and labour, if the president can play his cards right. throughout all of OBJ's price hikes, labour threatened to halt the economy and did organise several strikes. one was  effective in getting the president the reverse the hike, but most were effective in getting the two sides to compromise on a less daunting price hike. so i believe there is room for compromise. in fact, the govt should have looked to phase out the subsidy removal, instead of removing it all in one go.

so then what happens when there is a compromise. this is where i see the value of the strike action and movements such as #OccupyNigeria (thanks to BTC-Africa for pointing out). To further compromise with the protestors, the government ought to have a clear plan of action that will ensure removal of the subsidy (which we all agree is needed) as well as removal of corrupt elements in government (which we all agree is needed) and improvements in education, employment and industry development (which we all agree is needed). There ought to be benchmarks and checkpoints that are required before we can move on to the next phase of the fuel subsidy removal. If, for instance, the government says, we will remove 25% of the subsidy now and couple that with developing refineries, privatising the electricity sector, and prosecuting corrupt politicians. If then targets are set to prosecute 1 high ranking politician, or bring in 1 private investor to begin operations in the electricity sector by the end of the year, then they can remove another 25% of the subsidy. Targets and milestones should be no stranger to the finance-heavy reform team in the cabinet! This shows not only a give and take attitude, but a government that is serious about making a social contract with the people and getting back the trust that has been severely eroded over the last 50years.

the government is asking nigerians to trust them to do the right thing without much basis for this trust. its time to wake up, president jonathan! nigerians have woken up in all corners and your credibility and livelihood is fearfully at stake. i have been on board with this administration and continue to be because i believe they've got the right ideas and the right people and the right processes. obviously they could use more people and process, and a bit of common sense. nigerian people are demanding accountability by the government. show us you're serious about development, about jobs, about schools, about roads, then we can trust you more when it comes to raising prices of everything. and to the nigerian people, lets try to be constructive and stop with the demonisation of the presidency and the name calling; its un-becoming of this nation. lets be better than chavez, than south africa, than the US. lets come together in building a better nigeria and not a worse, more fragmented one. that's the spirit of revolution.