There is an ideological similarity between the Tea Party and the protests in Nigeria, but it is not in terms of ignorantly protecting the rich. If anything, Occupy Nigeria is in part a reaction to those who have fed fat of the corruption that the government has allowed. The similarity is in terms of advocating for smaller government at all levels. Nigeria’s 2012 budget is the sort that will make even those who can tolerate larger government choke.
That is where it ends, thankfully. There are no ‘well-financed special interests’ in this case, and there is a growing awareness that the protests of the last one week are about more than petrol subsidies. It is about reviewing the social contract between the Nigerian government and its people. Paul Collier calls the Goodluck Jonathan administration as the most legitimate in our history, and the 22 million people who voted for that government – along with millions who didn’t – want the corruption that has overtaken our nation to be confronted. They want a vastly smaller government. They want electricity, which will make them less reliant on petrol for generators.
In a nation without a lot of basic infrastructure, the classic argument that subsidies disproportionately benefit the rich is less convincing. A lot of people like barbers, tailors and owners of small shops, to mention just a few, use petrol in productive activity. There are also transport costs, which doubled in the days after January 1st. The SURE programme, which the government is trying to ramp up support for is vague, and largely a duplication of other capital expenditure. There is no mention of the effects of sharply higher petrol costs on Small and Medium Scale enterprises, which is a surprisingly neglected group in all this debate.
Economic theories do not and can not exist in a vacuum. People are not cells in a spreadsheet. Removal of petrol subsidies will be painful whenever they are implemented, but there must be measurable evidence that government is moving from promises to action. Since 1999, Nigeria probably has more promises per capita than any other, but desperately little to show for it. The message is clear: No more promissory notes. You cannot talk about ‘responsibility to the younger generation’ while spending $1m to water a garden, taking delegations of several dozen on foreign trips and paying out outrageous allowances to under-performing public officials.
There has been an attempt to tag protesters as a mindless lot who are puppets on strings, but nothing could be further from the truth. A lot of young professionals are out there, and they have made it their business to educate everyone else on the issues. A lot of interest has been generated in the process of petrol importation, the oil industry as a whole, and the cost and structure of government.
The message about going ‘beyond subsidy’ has spread horizontally, among the people on the streets protesting, and vertically, to those who have the ears of this administration. In an interview a couple of days ago, Atedo Peterside, one of Nigeria’s top bankers said: ‘This is not just about fuel price. They want good governance. Don’t insult the intelligence of protesters’. This is exactly what Professor Collier’s article does, perhaps unintentionally. The assumption that those who oppose subsidy removal have been ‘tricked into lobbying against their own interests’ by ‘political opportunists’ is a dangerous inaccuracy, and for the avoidance of doubt, let me state that most people agree that subsidy removal sounds good in theory, but when confronted with a corrupt and wasteful leadership, it amounts to pouring water into a basket.
Collier has long insisted that bad governance is most to blame for global poverty, and that is the same thing wrong with Nigeria, whether under democratic or military rule. From a protest over removal of subsidy, it has become a protest over the cost and quality of governance, as well as accountability at all levels. Seen in that light, yes, Nigeria should be ruled by the street.
The Kaleidoscope 
Yes, Nigeria should be ruled by the street. This is beyond fuel subsidy, it is about a corrupt system that has not shown measurable benefits to poverty now called extreme poverty for 70% of Nigerians. What do you expect? Oligarchical policies seem to increase the likelihood of rebellion by being repressive, economically exploitative, politically unrepresentative and also incompetent, governing in opposition to the interests of a majority of the population. Is this a reason people are out on the streets? Nigeria’s business community runs on corruption that borders on fraud is another reason change is here today. There are many ways forward and people are out on the streets due to failure of leadership.
This is not about fuel subsidy alone.. We are reclaiming Nigeria.
Nigeria should be ruled by the street because it is a democracy. The average Nigerians on the street may not be able to explain the issues or draw graphs like economists, but they know and suffer the bottom line. Paul Collier, Jeff Sachs and other neo-colonialists should kindly eff off.
why bother answer this Peter of an embryo?
Well said!
Too well said. The nigerian’s on the street are those that suffer the bottom line of wat ever public reforms, hence it is only fair and they are involved in it formation.
People, what Paul is saying is that you need to change the incentive system to discourage corruption. Insisting on a subsidy that is grossly abused will not be resolved by street protests but by creating a system that is less easy to “game”. The reason why Nigeria is poor is because of bad policies that do not fit our socio-political context i.e government management of key economic sectors. Any system you create were discretion will be used to determine who imports and supplies products like petroleum will be abused anywhere but more so in Nigeria. The reason why our steel plants, national airways, sugar plants. hotels and government owned banks failed and why NNPC will not work is that we have chosen a system that keeps out the private sector and leaves government in charge. People keep talking about building more refineries and getting the ones we have now to work. They will never work for as long as government runs them. We need to create systems that gets the private sector in to the supply chain. We need to find more efficient ways of helping the less vulnerable. We are not the only country that does not have infrastructure that has competitive fuel markets. The reason we are poor is price sly because we have kept too much government in our affairs. Look at all the model countries Nigerian’s run to including you Mr. Kaledioscope. Governmet focusses on the things that the private sector cannot do and the private sector carries on with creating wealth. Nigeria will remain poor for as long as this continues and by insisting on fuel subsidies that is exactly what we are doing. Respect some of Paul’s white hair. He is right the street will not help Nigeria..the street can help put pressure on government but guys get off the streets soon or you will be consumed by the street. Live the street for the street boys…all you english speaking people don’t know your country. I hope you learn it without getting hurt.
Its not jst abt fuel subsidy, its more abt Accountability in government.! And delivery of service
i couldnt really have said it better. the argument that the occupy nigeria protest is simply a reaction to fuel subsidy removal denotes crass ignorance of the issues on ground. it may have started that way but it definitely isnt going to end that way. I have said something quite similar in my blog and here is the link for anyone who is interested…bit.ly/zsj1wP lets whisper the truth to ourselves: its a revolution….
http://lordedwardteach.blogspot.com/2012/01/talk-about-gift-of-subsidy-removal.html?showComment=1326573856721#c9085552827757665107
A fantastic response, and much kinder than my own was (fortunately or unfortunately, the website did not seem to be accepting responses.)
Very good analysis by Paul Allen.
But fuel price increase in Nigeria today would cost the nation more than N1.3trn that govt says they want to “save.” And this cost will be borne mostly by the poor. The chain effect of pms price hike is increase in costs of goods and services. Apart from the poor state of mass transit system; genertors run about 80% of businesses in Nigeria and the cost of running business is already too high with pms at N65 per litre. We applaud the idea of subsidy removal to curb an aspect of corruption, but:
1. I believe that the cost of pms would never be more than N65 per litre even after subsidy is removed, this is because Nigeria has oil reserves which we should trade for refined products we import and our refineries have 30% utilisation.
2. Infrastructure must be in place especially constant/adequate electricity supply before any reasonable goverment would think of increase in price of pms, infact – considering the ecomonics of pms to Nigeria, govt must work to make the product affordable and available until adequate power supply is put in place. and
3. The “helpless” pose displayed by the Presidency to address the accountability issues sorruounding the fuel subsidy saga is curious. Are we in a failed State? The process flowchart that makes a litre of pms N65 or N140 after subsidy removal have also not been clarified.
Obviuosly, this is not the time to increase fuel price. Let the issue of infrastructure and power, and accountability be addressed before fuel price is increased – if the need for increase is undenyable nobody will occupy any street to protest.
Succinctly Put!
Word!
Thanks Omage, the issue is that we cannot wait for the issues of infrastructure to be addressed to free ourselves from the shackles of the fuel import corruption scheme. Do you know that the fuel supply infrastructure is a critical infrastructure that is now so badly damaged that it needs to be rebuilt in parts? How will you rebuild it when you cannot attract investment into the sector? Even NNPC wants to get out of refining and product distribution business. Why do you think we have so many fuel tankers on Nigerian roads – damaging the roads, exploding and killing people? Until you have a competitive downstream industry and can attract investment including government investment by the way, you cannot address the problem.
Yes I know that the occupy movement is not about subsidy alone but the question is what do you do after you have marched? You settle down to programmatically resolve the problem if you are going to be really effective. The issue with just marching and not having a plan is that those who benefit from the subsidy scheme as well as politicians and hoodlums hijack the process. Unfortunately, things are made worse because our system has produced lots of hooligans and not all the people are as disciplined and polished as some of you folks reading this.
You are wrong re the cost of PMS. With subsidy removed it cannot be 65 Naira. The crude we swap is paid for by NNPC at international prices it is not free. If you run the math even if our refineries were working well which they are not based on crude at $111/bbl, the refineries will break even at 121 Naira per litre.
We cannot wait for constant power before we act or for good roads either – we need to tackle the problems in parallel. As mentioned earlier the fuel distribution infrastructure is critical infrastructure that needs to be fixed urgently as well. Beyond this we really cannot afford it. We borrowed 850 billion Naira last year and we are programmed to borrow 1.2 trillion this year, if subsidies are not removed. At the same time we have depleted our reserves. So if we had a crude price correction of the sort we had in 2007 we will be in deep trouble – exchange rate north of 200 Naira to the dollar and inflation close to 20% according to some models. We are amassing debt that will be paid by the young yet we are exporting jobs by insisting on subsidies. I know that my friend Mr. Kaleidoscope says no jobs will be created, I beg to differ. I think we will create new jobs in refining, pipelines building and maintenance and in relates engineering services over time. They may not be a lot but even 1,000 new high quality jobs in Nigeria means that another 100,000 dependents are catered for. In addition to that, we will be building skills that can be used in other industries for growth. Today none of that is happening. All the jobs and benefits are going to refining centers in Europe. With regards to electricity, I am also not sure when we will be able to resolve the issues. We have the same issues interestingly that have kept both industries comatose – government control. Unless government puts the right tariff to attract investors and desist from asking for ridiculous reserve, prices we will not see power improve in Nigeria.
I tell a personal story once in a while. I am in my mid 40s and graduated with a degree in Mechanical Engineering from UNILAG in the mid 80s. As an oil producing country, you would expect that I would have several class mates work in the oil industry in Nigeria. You may be surprised to know that none of the my class mates and no one in the class before me or after me across our faculty works in the core of the Nigerian downstream oil industry. This should ideally be one of the highest employers of engineering graduates. Today, the average age in our NNPC monopoly downstream refinening and bulk transport industry is about 50! What this means is that we have not hired young engineers for close to three decades into the core downstream industry! What a tragedy! I will like to know what the numbers are for India or China or Brazil. This is the problem that subsidy creates. You cannot get new investment and you cannot train new talent. If we are able to create the condition to build nee refineries or privatize the current ones we will need to bring engineers from abroad to help us typically from countries were markets are allowed to work and subsidies go into sectors where the private sector cannot be effective. Compare the jobs situation in downstream oil and gas to what has happened in telecoms since 2001 when the sector was deregulated. Personally, I think it is better for more people to be employed even if petrol is more expensive than to have a few people employed who are buying petrol cheaply while a few people are feeding of the abuse.
Corruption is a big problem for us..really big. The question is how best to address it. The issue with corruption in emerging democracies is complex. We can play the ostrich and assume that we obtains in the west – which has taking several years to mature – can be replicated here overnight. I am aware of at least one attempt under the military to topple the government because a minister tried to clean up contracting in NNPC. Granted we are now in a democracy and the generals are in the barracks but corruption is not easy to fight. The practical and easier thing to do is to change the incentive system or the business landscape to attract new investors like we did in telecoms. Who talks about corruption in NITEL anymore? Yet at one time it was one of the biggest sources of graft. Fighting party members and people who benefited from a system that we have allowed and that has been abused for years is difficult without changing the system. I think we should commend Mr. President and his economic team for trying to dismantle the largest source of corruption in Nigeria. As civil society, we should take the opportunity and find practical ways of engaging the transparency issue and corruption issue.
On the issue of 141 Naira per liter, the PPRA template is clear and the numbers make sense. The issue with PPRA is what the price represents. It is a reference price and I believe the PPRA arrangement is a transition approach to full deregulation. The PPRA template like the MYTO template in electricity is arrived at after consultation with players and key stakeholders like labor. Please go to http://www.pppra-nigeria.org/
My personal view is that this is the time to remove it. Government and those who know should explain better and should create mechanisms for helping the poor. These should include voucher systems administered at the local government level for the poorest, regulating price of city and inter city transportation, boosting primary healthcare etc. Yes the corruption challenges are there but this is where “occupation” can be truly effective. The minister of finance as started publishing the disbursements to states and local governments. Labour and the larger civil society groups can monitor SURE while the rest of us occupy at the state and LGA level based on funds released from the program.
We need to be strategic and not emotional, we need to be sure that we are not being used.
Please can we get this into the same The Financial Times?
Paul Allen, Na today!!! The governments account with its people is already on “overdraft” they need to make some deposits. Someone asked me a valid question and I am still wondering if no one in governance thought of this. Just an Idea, Let the private company build the refineries with the assurance that the government will buy from them. The government only will be exposed to the fluctuations in price by the refining companies and sell to distributors and subsidized cost…subsidized until the benefits of privatization starts kicking in, and then the governments exposure to subsidy funding starts dropping or at least when the refineries are built over time the government will disengage as the middle man! That rationalizes the number of people the government have to reconcile books with…it will enable better monitoring? Why must it always be the many helpless people that will suffer the wrongdoings of the few rich and corrupt men?
Well I keep saying, that then telephony was seen as a luxury (before the sector was privatized). its privatization how ever bad it went will have little impact of the then living standard of people. In chemistry for example mixing 2 substances under varying temperature and pressure can give rise to different things. fuel touches everything and as suspect said this “subsidy matter na for your pocket”!!! You cannot just take the same approach as the NITEL.
Thanks Fash. Indeed the people are correct not to trust government We just need to do it in a way that we are not hurting ourselves. I think civil society should be asking for vouchers for our people and ask to be part of the investment program at Federal, State and LG levels. Now regarding the idea of private refineries, the problem is that no serious private investor will invest in in refining in a country when the price is fixed. In countries where prices are fixed government tends to be the only producer. You need to have a stable and free market over time before you can attract any serious investor. The truth is that the only way helppless people can be helped is when the economy is growing and rent and corruption is minimised. Please show me one progressive country that has petrol subsidies. Again, I will rather take the subsidy out and pay cash directly to people through vouchers. We need to get government out of every business in Nigeria and let them focus on things the private sector can do best …please. Any time we have done so we minimise corruption and we create jobs.
paul collier is a neo colonialist who used to work for the imf (probably still working for them), the world bank for tony blair and for bill clinton against the haitian people. As an oxford professor (how fake is oxford) this guy is pushing neo colonial policies which have destroyed African, Asian and South American economies. Nigeria needs to kick out all these so called advisers from the former colonies, and the ones from the US esspecially. Nigerian politicians who do not seperate their ties to these neo colonialists and their racist policies should have to answer to the Nigerian people and their own concience . Nigeria needs to nationalize the oil industry, no economic partnerships with former colonial powers and the US these nations should be allowed to buy nigerian oil at market prices. Venezuela nationalized its oil industry to the benefit of its populationo , I dont see why Nigeria cant do the same, I am sure countries like Venezuela or even China or even Norway will be happy to provide support for a proud national Nigerian oil industry . If Nigeria starts nationalizing please dont forget the mobile phone companies. The government will have plenty of income which it can spend on education, health care, electricity grid, railways, social security but please not on roads
peter
peace
Sir,
I find your recommendations strange. Which nationalised industry or business in NIgeiria has worked? Is it NITEL or NPA or Nigeria Airways or Delta Steel or Ajaokuta or ALSCON or The Paper Mills? How can anyone advocate a nationalised industry in Nigeria? The reason Nigeria is poor is because we nationalised businesses during the oil boom. Instead of attracting investors and taking minority stakes like we did when the regions worked, we drove away investors and pumped money that should have gone into infrastructure and education into businesses. If we had invested the money in railways, power, schools, savings etc we will be a much better country today.
By the way, China and Norway do not have fully owned NOCs any more. The companies though have significant government stakes have been privatised and therefore play to rules of corporate governance and conduct that enable them raise capital from international financial markets. One of China’s oil companies is even down to 49% state ownership I believe. As to Venezuela, the NOC is fast being destroyed and when Chavez leaves we will see what happens to PDVSA. It is already a shadow of itself and Venezuela is not a good model for Nigeria. How many Nigerians send their children to Venezuela to school? How many Venezuelan companies are conquering the world? Please let us learn from progressive economies that we like to visit and where we like sending our children and family.
Please stop also stop these blaming neo-colonialism for our problems and get practical. It was the same argument we made in the 1970s when countries like Singapore, Malaysia and Korea zoomed past. We need a private sector led economy. Government everywhere and particularly in Nigeria with our quota system and corruption cannot run businesses successfully. We should privatise NNPC or at least reduce our stake to 49%. Look at the companies that work in the industry – LNG is 49% government it works. Look at Eleme Petrochemicals; it only started working when we privatised it. Today it is profit making and is about to make the next round of multi-billion dollar investments. NNPC is not working and cannot work for as long as it is controlled by government.
Now this idea that anybody who has worked in the IMF or World Bank is a neo-colonialist is ridiculous. We should face up to our issues and forget all this ideological tags. Now as far I can recall Nigeria has never agreed to an IMF program. Yet countries like Korea, Turkey, Brazil have had formal IMF programs and they are much better for it today. So please let us top all this emotional outpouring that is based on some old idea of neo-colonialists destroying our country.
Our problem is that we chose a government led industrial development strategy which has been shown to be unsuccessful in almost every developing country. It failed much more in Nigeria because of our socio-political diversity and our insistence for understandable reasons on quota system and balancing. The truth is that businesses thrive on merit and not on filial or ethnic affiliations. This is why successful businessmen do not choose staff based on ethnic or filial affiliations but on competence. You advocate nationalising the telecoms companies – really! Did you grow up in Nigeria? Please Peter, get real! If government is going to be involved, they should take minority stakes in companies run by experienced investors. This is the reason why the investments made by the regional governments worked. The regional government simply allowed experienced investors – Heineken, Dunlop, Guinness etc to make investment decisions and they took stakes in them. The idea of some civil servant deciding which industries we should build and how much
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