Unpicking the Politics of the Fuel Subsidy Removal: The Role of the State Governors in the Saga. By @thinktask

Nigerians woke on January 1, 2012 to the sudden and unannounced fuel subsidy removal. Since then, many Nigerians have protested and taken to the streets as a result of this announcement, which many think is unfair. The blame and dissatisfaction have been heaped on GEJ and his cabinet. Yet many Nigerians seem not to fully appreciate the intricate web of political interests underlying the removal of fuel subsidy and the attendant nationwide protests and industrial action, and the role of the State Governors in this plot. This piece tries to throw some light on this. Recall that the President had shortly before the April 2011 Elections signed the Minimum Wage Bill into Law, an action that Statutorily fixed the Nation’s minimum wage @ N18,000 a month. Given the timing of the introduction of the minimum wage, one could suspect that it was a political strategy by the President & State Governors to garner votes at the Polls. The reality, however, was that the Federal Government was not in a position to fund such a wage increase, much less the State Governments given the state of their finances at the time. Shortly after the Election, the President declared that the FG could not pay the minimum wage. The State Governors quickly followed suit. Even former NLC President and Governor of Edo State, Comrade Adams Oshiomhole, who had earlier boasted that he would implement the minimum wage reneged on his promise. Quite naturally, organised labour took to the streets in protest of the seemingly orchestrated deceit by the different tiers of Government. At the end of the protracted crisis and negotiation, the FG only implemented the wage increase for Junior Staff Workers (GL 01-07), while Senior Staff Workers (GL08-17) got a nominal increase of 1,000 (One Thousand Naira Only). Most State Governors, even Edo State, where a foremost Labour Leader holds sway, followed the same pattern. The State Governors consistently argued that they will not be able to pay the new minimum wage and simultaneously fund capital projects. What they did not say, however, was that implementing the new minimum wage would mean curtailing their excesses. The Governors’ dilemma was further compounded by the establishment of the Sovereign Wealth Fund (SWF), which put an end to the illegal excess crude account and its slush funds. Hitherto, the slush funds of the excess crude account were shared between the three tiers of Government, at the discretion of the President. Then again, most State Governments had raised bonds worth billions of Naira from the Capital Market. Because these bonds are normally securitised by an Irrevocable Standing Payment Order (ISPO) in favour of the Bond Trustees, the CBN and Ministry of Finance would deduct the bond servicing fee, which is usually a huge chunk of the State’s Monthly Allocation, at source. This leaves the State with little or nothing at the end of the day. So, caught between the prospect of a potentially disastrous increase in personnel costs, a drastic reduction in revenues as a result of the abolishment of the Excess Crude Account, and the rising cost of servicing Bonds and Loans, the Governors had to make strategic decision – i.e. find a way to collectively swim or perish together. Their strategy was incredibly slick and deceitfully simple! They unanimously opposed the proposed Sovereign Wealth Fund (SWF). It is important to note that the SWF is set up to help the country profitably invest in capital projects from excesses saved from crude oil sales. Their argument was that: the Sovereign Wealth Fund violated the principles of Fiscal Federalism as enshrined in the Constitution. The Governors, led by Gov Rotimi Amaechi of Rivers State, and Chairman of the Governor’s Forum, threatened fire and brimstone, should the Sovereign Wealth Fund take off as planned. They also blackmailed the President and indicated their readiness to seek legal redress against the FG’s infringement of the Constitution. Having successfully boxed the President into a tight corner, the Governors went into negotiations with the FG with a view to getting a ‘political solution’ to the crisis. In the course of high-wired politics and horse trading, the Governors made it clear that the only way they will support the Sovereign Wealth Fund, was for the FG to remove the fuel subsidy. That way, they can attenuate the potential adverse effects of a drop in revenues occasioned by wage increase and the scrapping of the excess crude account. Simply put, while the FG got its Sovereign Wealth Fund, the State Governors succeeded in removing fuel subsidy so as to share the much touted ‘savings’ from fuel subsidy removal. As the saying goes, its politics, stupid! So, all the arguments about deregulation of the downstream petroleum sector and the provision of ‘palliatives’ are diversionary. In fact, a perusal of the blueprint of the Subsidy Reinvestment Fund Programme (SURE) that was prepared in the last quarter of 2011 reveals a startling information. The ‘savings’ from the removal of fuel subsidy had already been shared between the FG, States and Local Governments as follow: 1.RIVERS-N44,628,272.62 2. AK IBOM - N43,406,713.87 3. DELTA- N40, 965, 476.92 4. BAYELSA - N33, 839, 652. 09 5. ONDO - N12, 554, 345. 28 6. KANO - N11, 210, 304. 04. 7. LAGOS - N10, 126, 514. 01 8. EDO - N9, 432, 709. 30 9. KADUNA - N8, 944, 553. 13 10. IMO - N8, 729, 126. 56 11. KATSINA- N8,525,402.69 12. BORNO - N8, 451, 350. 27 13. BAUCHI - N8, 309, 773. 31 14. NIGER - N8, 294, 895. 04 15. OYO - N8, 283, 911. 05 16. JIGAWA - N7, 848, 086. 61. 17. CR RIVER -N7,718,686. 26 18. BENUE - N7, 659, 631. 38 19. ABIA -N7,460,062.24 20. SOKOTO - N7, 395, 670. 79 21. ANAMBRA -N7,164,697. 14 22. KEBBI - N7, 131, 000. 67 23. KOGI - N7, 113, 202. 30 24. ADAMAWA -N7,093,217. 24 25. TARABA – N7, 005, 145. 87 26. ZAMFARA -N6,973, 520. 31 27. PLATEAU - N6, 956, 827. 74 28. YOBE - N6, 952, 382. 78 29. OGUN - N6, 932, 554. 10 30. ENUGU - N6, 692, 449. 99 31. OSUN - N6, 575, 162. 77 32. KWARA - N6, 482, 037. 63 33. GOMBE - N6, 291, 166. 08 34. NASSRWA - N6,073, 343. 25 35. EKITI - N5, 931, 760. 50 36. EBONYI - N5, 880, 552. 17 TOTAL = N411, 034, 176. 00. (Source: the SURE document of the FG) Against the backdrop of the foregoing, it is apparent that the bulk of the ‘savings’ accruable from the removal of Fuel Subsidy will end up in the coffers of the State Governments. A closer look at the numbers in the distribution chart above reveals an interesting fact – legislators from the top four beneficiaries were the most vocal supporters of the removal of fuel subsidy during the Emergency Session convened by the House of Reps to debate the issue on Sunday the 8th of January 2011. The top four states are: RIVERS-N44,628,272.62, AKWA IBOM - N43,406,713.87, DELTA- N40, 965, 476.92 & BAYELSA - N33, 839, 652. 09. Obviously, the legislators from these States were motivated by pecuniary considerations and were promoting the political agenda of their State Governors. Given the foregoing analysis and the political intrigues underlying the current crisis bedevilling the FG’s policy of Subsidy Removal, the Thought Leadership Forum (TLF) is calling on the FG to revisit the proposed removal of fuel subsidy. While we support a deregulation of the downstream petroleum, which involves, but is not limited to the removal of subsidies, we are of the reasoned opinion that Transparency, Accountability and Integrity are critical success factors and must be institutionalised in the proposed deregulation. One way to do this is to encourage the State Governors to put in place visible and verifiable “palliative” plans to cushion the likely effects of the fuel removal subsidy on the citizenry, especially those at the greatest risk of vulnerability. @thinktask – supported by TLF a think tank for the revival of Africa’s socio-political consciousness

Social Watch: Mama Nnamdi and the fuel subsidy

Social Watch: Mama Nnamdi and the fuel subsidy: Let me tell you a story. Somewhere, behind where l live is a slum, getting to the slum are untarred and treacherous roads which houses what ...

Social Watch: Subsidy Removal: a grand illusion or a trust rebui...

Social Watch: Subsidy Removal: a grand illusion or a trust rebui...: The recent live debate on the proposed subsidy removal on Channels television focused on the question “Removal of Petroleum Subsidy: In wh...

Social Watch: News flash: Fuel Subsidy removal kicks in Nigeria ...

Social Watch: News flash: Fuel Subsidy removal kicks in Nigeria ...: The Federal Government of Nigeria removes fuel subsidy earlier than promised. Nigerians, yesterday, January 01, 2012, were rudely awakened...

Social Watch: Petroleum Subsidy Removal and the Rape of Democrac...

Social Watch: Petroleum Subsidy Removal and the Rape of Democrac...: She was raped once, twice, thrice, and so on. Her oppressors were powerful and were ironically meant to protect her. She had been ofte...

Petroleum Subsidy Removal and the Rape of Democracy in Nigeria. By Kenneth Amaeshi

She was raped once, twice, thrice, and so on. Her oppressors were powerful and were ironically meant to protect her. She had been often frustrated about her situation, but the resources and access to justice were largely controlled by her oppressors.  With the passage of time, she had come to accept the brutality and callousness of her oppressors. As such, she subsequently became a victim of both rape and learned helplessness. She accepted new measures irregularly introduced by her oppressors. Daily molestations became a normalcy for her. Suddenly, one day, her oppressors, as if they had a change of heart, asked her to trust them to protect her interest; but on the condition that she would allow for more temporary pains to be inflicted on her. They promised some palliatives to help her endure the pains they would inflict.

Whilst the thought of freedom sounded exciting to her, she was required to trust her oppressors ex ante – i.e. even before they put the palliative measures in place to help her endure the anticipated pains. She did not have any cause to trust her oppressors, and knowing their kleptomaniac tendencies, she did not equally have any antecedents to base the trust on. The oppressors promised further consultations to convince her of their genuine intention. Unexpectedly and surprisingly one day, the oppressors inflicted pains on her without any considerations of her feelings. Unsurprisingly, it turned out to be grievous pains, which could cause death.  Although she was prepared to give her oppressors the benefit of the doubt, their unanticipated behaviour convinced her more than ever that a leopard would never ever be spotless. She is Nigeria and her oppressors are her successive governments.

Only a couple of days ago, I watched them on Channels Television: Ngozi Okonjo Iweala – the super minister and the economic messiah from the World Bank; Mallam Sanusi Lamido Sanusi – the very “erudite” economic scholar and Governor of the Central Bank of Nigeria; and Deziani Allison-Madueke – the invincible minister of petroleum resources. They appeared human and genuine. They curried for trust. They banded tenets of neoclassical economics to support the removal of petroleum subsidy. They claimed we were in it together, although Sanusi Lamido Sanusi made it clear that he did not know where the fuel for his cars came from. The postulated date for the introduction of the subsidy removal was the glorious April 1 – not withstanding that it is a fool’s day! But what they did not say was that they would sneak in the petroleum subsidy removal from the back door on the New Year – very typical of the Trojan horse Greek gift. They were supposedly the best brains from the World Bank, the Central Bank of Nigeria and the uber Ministry of Petroleum Resources in Nigeria. They want the Nigerian populace to trust them, yet they have blatantly undermined the very trust they crave for.

The heinous and deceptive removal of the petroleum subsidy from the back door without the courtesy and civility of letting the public know beforehand, and on a New Year for that matter, has come to epitomise the decayed and distorted democracy in Nigeria. It is a rape of public legitimacy and trust, by an insensitive government oppressing innocent and powerless Nigerians – the very people they portend and pretend to represent. They carefully and intentionally avoided the fight for corruption, which is the bane of Nigerian politics and development, in their argument and actions for the petroleum subsidy removal. This is not surprising since some members of the cabal who have held the country hostage might have captured the government and its governance machinery. They could have been their friends, political supporters and cronies. Even rumour and conspiracy theories have it that it is all a gang up by the present government to disarm the groups armed by the previous government of Obansanjo. In other words, it is a struggle for GEJ to displace those empowered by OBJ. No matter how true or false this conspiracy theories might be they mainly confirm the old long saying that the grasses are the obvious victims in a fight between two elephants. The masses will definitely bear the brunt of this callousness and insensitivity meted by a conscienceless and selfish government and its crème of arrogantly deceptive technocrats.

Unfortunately, despite the grandiose claim that the removal of the petroleum subsidy would make available resources for infrastructural and development initiatives, as well as spur foreign investments in the sector, it is very obvious that the claim is empty and bogus given the weak institutional context of the Nigerian political economy. Empirical evidence from institutional economics suggests that the main socio-economic problems in Nigeria are traceable to poor governance, weak institutional context, and lack of institutional trust. As a result, Nigerians who have suffered repeatedly under successive brutal regimes and have been disappointed many times by kleptocratic governments will find it difficult to believe a word of what the government of the day says.  This is a necessary context for the appreciation of the subsidy debate. Going by the tenets of institutional economics, before any subsidy removal, the government needs to win the hearts and minds of the people through tangible actions – including containing its own prominent financial extravagancy and profligate Epicureanism. To acknowledge that the government is over-bloated and do nothing about it, as a necessary first step, appears to me as a miscalculated judgment and a further manifestation of the old behaviour, which the people detest.

Poor governance and weak institutional context are recipes for creating successful markets for corruption. Corruption, as one of the deadly socio-economic ‘diseases’, has continued to threaten and diminish quality of life in Nigeria.  Pretending that the removal of the subsidy would work, without first addressing the issue of corruption in Nigeria, is an illusion.  The people are not as dull and passive as the government may want to believe. The people have been hard pressed for so long, which would prompt any reasonable person to conjecture that Nigeria is teetering on the edge at this moment and a cost shift in the name of subsidy removal could send the country over the cliff. The lessons from the Arab Spring are still very much fresh in the minds of people.

Suggesting that the rent-seekers are the main problem and yet do nothing about arresting, prosecuting, and punishing them if found guilty, is a million dollar question begging for a credible and trustworthy answer from a government that is struggling to win the people’s trust. Unfortunately, but unsurprisingly, the government has chosen not to set our house in order, first, by enhancing our governance institutions, before removing the subsidy. This is the height of public deceit, which is tantamount to a rape of democracy!

 Dr Amaeshi writes from Edinburgh, UK; and is a Visiting Faculty at the Lagos Business School. He is the Founder of Nigerian Thought Leadership Forum

News flash: Fuel Subsidy removal kicks in Nigeria amidst protests from citizens

The Federal Government of Nigeria removes fuel subsidy earlier than promised. Nigerians, yesterday, January 01, 2012, were rudely awakened to a hike in fuel prices, signifying the removal of the fuel subsidy which the Federal Government had earlier stated will be removed in April of this year. The announcement of the removal was made known by the Petroleum Pricing Regulatory Agency (PPPRA). The development has been highly criticized by Civil Societies and several others as been highly insensitive to the plight of Nigerians, most of which are already burdened with the high cost of living and high levels of poverty. 80% of the population currently earn below $2 per day. Analysts say that this move further entrenches the lack of will on the part of the Government to tackle the issue of corruption, which many believe has led to the petroleum pricing problems. Whilst many Nigerians agree with the removal of subsidy in principle, they have, however, on several occasions called for the government to first tackle the problems associated with the supply of fuel, such as building refineries, dismantling and bringing to justice the cabal purported to be behind the petroleum pricing scam. They have also called upon the government to take a cue from neighboring countries such as Ghana who cushioned the effects of subsidy removal with several other visible palliatives. The effects of the increase in fuel has already kicked in as transportation prices immediately went up. It is expected that this will be transferred to other areas such as food, housing, education, health care and many others. The worrying aspect for many Nigerians who spoke out on this issue, is the fact that there isn't a commensurate increase in personal income, which can justifiably address the cost of living. For others who are watching the build up in scenario such as investors who are being cajoled to invest in the country; the uncertain operating terrain, the inconsistency in government policies and inability to plan and the lack of trustworthiness of the Nigerian government remains an issue of serious concern. The questions being asked by many include: When will the palliatives promised by the Federal Government kick into effect, if it ever will? And is there hope for the Nigerian people? Finally, anlalysts believe that this will further worsen the already rising case of insecurity currently being experienced in the country as many more will be thrown into the throes of poverty if the promised palliatives do not materialize to cushion the effects of the subsidy. The new fuel price is expected to go up by a whooping 116.9%.