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More thoughts on Occupy Nigeria

A few days back, I wrote a post about the Occupy Nigeria movement. As with many of my posts, my main goal was to research the issue and get a better understanding of what was going on and what I thought about it. The post has generated a good deal of feedback, some of it quite confrontational, some skeptical, some helpful in helping me understand the situation better. I’m particularly grateful for the last two types of feedback, as I feel like I understand the situation better than when I wrote the first post.

In my first post, I argued that removing the fuel subsidy is ultimately the right thing for Nigeria to do, as it is riddled with corruption, offers massive benefits to a few companies fortunate enough to have been awarded import contracts, and dominates the government budget at the expense of critical infrastructure projects. What I hadn’t understood fully is that the protests aren’t against removal of the subsidy per se, but about a lack of trust in government. As Nicholas Ibekwe, one of the organizers of the Occupy Nigeria protests in London explains, “Most organizers of the protest believe that removal of subsidy is not a bad thing. And I share that sentiment as well. However, the removal of subsidy in Nigeria is not about economics, it is mostly about trust, corruption and timing. The Nigerian government has not given the ordinary Nigerian reason to trust it.”

Put more simply by Chude Jideonwo on YNaija, “This is good policy badly executed, not because of timing necessarily as because of trust.” In the long run, Nigeria needs to eliminate a fuel subsidy that buys imported fuel – it makes very little economic sense for a nation to produce raw petroleum, export it to countries that refine it and subsidize its reimportation. It would make much more sense for the Nigerian government to help rebuild the nation’s refineries so the oil could be processed locally.

The problem is that, as Ibekwe and Jideonwo both explain, people don’t trust the Jonathan government to repurpose the subsidy to build infrastructure. Many of the arguments against subsidy removal focus on overspending in the Nigerian government, particularly on salaries and benefits to elected officials. The assumption – not without some justification – is that any savings from the subsidy will line the pockets of politicians at the expense of ordinary Nigerians.

Based on the feedback I’ve gotten from Nigerian friends, there’s no doubt that the subsidy removal was implemented poorly. Removing the subsidy in one fell swoop may have been designed to minimize opportunities for dissent (as each step of a gradual increase might invite protest), but it maximizes harm to the ordinary Nigerians who are struggling to cope with cost increases. The removal of the subsidy during the Christmas season had the additional complication of stranding some Nigerians in their home villages without sufficient funds to pay for transport home. And, as the commentators I quote above have pointed out, the Jonathan government simply doesn’t enjoy enough popular support and trust to have implemented these changes so unilaterally.

Alex Thurston at Sahel Blog argues against two arguments he sees me making in the piece. The first argument he sees me making is that removal of the subsidy is a good thing. I don’t think that’s what my argument was, precisely – I think removing the subsidy, ultimately, is something Nigeria needs to do. But as I’ve conceded here, I agree the move was made badly, without sufficient consideration of the harms to ordinary Nigerians, and I hope it will be rolled back and implemented in a more careful, considered way.

The second argument Thurston disagrees with is my contention that a protest against the subsidy is reactionary. Here I think he and I genuinely disagree. Thurston suggests that removal of the subsidy favors the 1% over the 99%, and suggests that because the World Bank and IMF would like to see the subsidy removed, the interests of the powerful favor subsidy removal. I don’t think it’s especially fair to equate the oft-maligned IMF and World Bank with the globally rich and powerful. There are lots of smart economists – including Nigerian Finance Minister Ngozi Okonjo-Iweala, former Managing Director of the World Bank – who are looking for solutions to Nigeria’s long-term economic woes, and who see removing the subsidy as a step towards economic reform.

There’s no doubt that removal of the subsidy is hurting the 99% in the short term. But poor and middle-class Nigerians were experiencing a great deal of economic misery before removal of the subsidy. In the long term, one way or another, Nigeria needs a functioning infrastructure, a working power grid, better roads and rail, better health care and education. In the long term, some of these services need to come from the government… and the government will gain legitimacy by providing services that people want and need, beyond cheap fuel.

Thurston and the Occupy protesters seem to be arguing that the government can’t and won’t provide those services, and therefore we should focus on the short term: maintaining a large subsidy on the import of foreign petroleum products. That mistrust of government’s ability to provide any services sounds more like the Tea Party than the Occupy movement to me. I’m not saying that the protesters are wrong in their mistrust of Jonathan’s government. I am saying that a government taking steps towards modifying a budget to provide essential goods and services appears more progressive than supporting a massive subsidy.

In US terms, this argument sounds like a very typical right-wing argument: we can’t trust the bloated, lazy government to produce public goods, so we should have very low taxes and rely on the private sector for any goods and services. In practical terms, removal of a fuel subsidy is a tax increase. It’s a badly implemented tax increase and it affects people who are ill able to afford it. But the goal is a progressive one, so long as you accept the notion that Ngozi Okonjo-Iweala and Jonathan are genuinely trying to build infrastructure and help the economy recover. If you don’t trust their motives, obviously, you won’t see this move as anything other than an opportunity for more corruption.

Do I think the subsidy removal was a good idea? I think it’s an admirable goal in the long run, but was badly implemented and should be rolled back and implemented gradually in closer consultation with a variety of non-government groups. Do I support the Occupy Nigeria movement? Yes, inasmuch as I think it’s great to see organized, peaceful, popular opposition to corruption in Nigeria. But I am deeply worried that the movement is focused on rolling back a change that, in the long run, is intended to correct some of the major problems of the Nigerian economy. Do I still think the movement is reactionary? Yes, in the literal sense that protesters are trying to roll back a change made by government, and more figuratively, because the movement questions the ability of the government to create positive change for the people. I hope the movement will become a broader anti-corruption movement, which I would see as less reactionary, more progressive and more in line with global Occupy movements.

Do I expect that this post will reduce the amount of angry email I’ve recently received? Probably not. :-) As several correspondents have pointed out, passions are understandably running very high around these issues. It’s hard to both critique and support a movement, but I think the issues here are complicated enough that it’s worth trying to do both simultaneously.

9 thoughts on “More thoughts on Occupy Nigeria”

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  4. Ultimately, insiders in the government will tell you that the more money the government has the more room for corruption. A progressive policy on paper any where in the world is anything but, in Nigeria. The track record of the Federal Government in General and this government in particular, when it comes to executing projects is so abysmal that it will take an act of extreme faith to believe that they can transfer savings from subsidy removal to capital projects. A quick review of the current budget and intimate knowledge of the players would completely squash that idea. Managing an opaque, bloated and corruption ridden subsidy regime is bad. A very first step would have been to fix the problems in the subsidy regime it self and then tackle the rot in the oil industry and the waste in government. This will build credibility, which can be used to face the fuel subsidy, at which point we will not be talking about a doubling of fuel prices, but probably a marginal increase of at most 20%. The received wisdom, however, is that the administration is broke, after spending a kings ransom to secure first the nomination and then favorable election results and the only source of ready funds seems to repay political jobbers and build reserves for 2015 election seems to be to target Fuel Subsidies. If you had been around Nigeria during the PDP primaries and the elections, you would have seen government parastatals completely starved of funds even to pay for stationary, while PDP chieftains were parading huge wads of hard currency to secure their constituencies. Not everything in Nigeria is what it seems.. Progressive, my ass.

  5. Hi Zuckerman! I read your initial piece and I shared some of the concerns of the commentators with its characterization although i won’t go into details here as that has been hashed out in your commentary page. I also share your sense of annoyance at some of the vitriol that was directed your way as ultimately you are trying to understand and share this issue with an American public with, I believe, a positive intent. However having seen that you have taken onboard some of the opposition’s (to which i belong) views, you still in your current piece mischaracterize the protests. I have been on the street and I have been amazed in many ways that the common man (I daresay i can hardly count myself as one being both educated, at least middle class and an employer) understood the issues to be not one of simply price reversals but more about the role of governance and corruption. What you also miss in your analysis are the alternatives the government had and its behaviour in its so-called consultative process with civil society around this very issue. This Govt has submitted a budget for 2012 (i.e. its next budget) which still says it will spend 74% of that budget on itself with 90% (the Finance ministers figures not mine) going to paying salaries. This in real terms equates to 1.6 Trillion Naira for about 100,000 employees with many of these employees actually being ghost workers (again the Ministers comments not mine). Yet they plan to save 500 billion from removing subsidies. So one alternative was simply to slash the waste/corruption in government. A second option, the subsidy bill had grown virtually overnight from 250 billion to 1.3 Trillion. When asked to explain, the Finance minister and CBN governor said oil price rises $95 to about $110, more cars (no figures given but one cannot estimate more than 15% more if even that many given the fact that banks were ill disposed to giving out loans of any sort and asset loans are the least in their bouquets) and exchange rate declines (about 8%). So essentially about 40% of a 500% jump. The rest left unsaid was corruption. The so called ‘Cabal’. Has anyone being arrested or even probed… No! So we can say that most of the savings projected from this deregulation is supposed to accrue from not having to pay subsidies for phantom services to a cabal the government is essentially sayint it is too scared, hobbled to tackle. Instead it picks option 3, knuckle down the common man and grind him into the dust. Why, simple, our government thinks that the common man won’t protest since he has no history of doing so! It is certainly an easier fight than options 1 or 2. But if you leave the corrupt cabal in place to administer the same oil infrastructure what then is the guarantee that corruption won’t simply show up in new places, say in the administration of the projected windfalls? This is the heart of the struggle! We are simply demanding that the government first shows the steps of good governance; then we may allow ourselves to be taking along for the ride. Please note for example that they did not cut their salaries by 25% as you mentioned previously, they cut their ‘basic’ salaries by 25%. In Nigeria, your basic salary may make up about 10% of your overall compensation package and with the way our politicians and leaders compensation is structured, it is less than that. The president for example has a multi-million Naira furniture allowance, a billion Naira feeding allowance and so on… in reality a 25% cut in basic reduces salaries and allowances be less than 2%. It is this sort of sophistry that has the average person who now has access to these facts thanks to social media and the passage (after 4 years of delays and reluctance on the part of the federal govt and legislature) of the Freedom of Information bill fulminating. We seek social justice as in the case of all the other Occupy movements though I for one could care less whether we belong or not. This is simply a fight whose time has come and you have rightly captured it as a moment when we can finally raise the standard against corruption. The government’s insincerity in passing a measure it claimed it was still consulting about and which no one had yet agreed to was simply the final straw.

  6. Oh and as an addendum. Nothing in the Govts plans on how to spend the money is new. It is the same empty promises that have been bandied about for over a decade. Further more no costs are given just the promises and no idea of the infrasctructure in place for fulfilling these. Diesel and AGO had been deregulated some 4 years ago with similar promises of reinvestment in infrastructure and power. We have yet to see these benefits and as another poster said we only saw war-chests of cash when elections came round.
    This is a fundamental crisis of trust that we a people who have been suckered for far too long have simply said enough. If the Govt had been sincere, it could have raised a 2 year plan during which the subsidy would have gone in stages bookmarked with delivery of key palliatives and alternative measures…
    For example what was wrong with the following roadmap

    30% reduction in the cost of governments (layoff if necessary)
    Immediate injection of saved funds into a priority program to rehabilitate refineries
    Provide a guarantee to purchase of locally refined products at commercial prices (would still be cheaper than buying imported products) as a spur to private investment while also providing matching government funds
    Closer monitoring of the subsidy regime and prosecution of previous offenders to check waste

    Stage 2 – provision of findings on govt savings and then 10% increase in fuel prices
    New power plants brought onstream… the increase in power if delivered thus reduces local demand of petrol used for power generation thus even more savings on the subsidy regime

    Stage 3 – further cuts to government spending and waste and reduction of subsidies through fuel price hike to perhaps about 75% of price delivered (by a combination of refurbished local refineries and importation)

    Stage 4 – as private refineries come onstream a complete removal of the subsidy regime.

    I bet you Sir that there would have been few objections to such a plan and this regime would have been a shoo-in at the next polls!

  7. It is clear that the subsidy removal is an attempt to come up with an ECONOMIC SOLUTION to the SOCIAL PROBLEMS of corruption, collusion of political elite with the private sector and poor levels of accountability in governance – in the oil sector.

    There is one troubling thing though… a government unwilling or scared to take on the ‘cabal’ that made an additional Trillion Naira from subsidies in 2011 alone (an election year). Such a move may be political suicide for the President, especially now that he cannot count on the support of the Nigerian people due to this unpopular policy.

    Personally, I am distraught that the occupy movement does not take a more long term view on both the problems that brought Nigeria to this point… and the lasting solutions to this anomaly. What is worse is the false dichotomy that the movement is establishing, making it a playground for ALL anti-government elements.

    It might not be the best way to go about it, or the right time, but given the facts… it is the most sensible in the medium to long term!

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