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Former President Goodluck Jonathan got on the nerves of Nigerians after he removed fuel subsidy on January 1, 2012. This took fuel price from ₦65 to ₦141 at filling stations. This resulted to massive protests by civil-rights groups, labour unions, and Nigerians generally. APC, the opposition party at that time, took political advantage of the situation by identifying with the suffering and criticizing the Jonathan administration for removing subsidy.
Four years later President Buhari officially removed fuel subsidy. Millions of Nigerians are angry. Nigerians are understandably accusing the present administration of cowardice, deception, and hypocrisy, but how true is this?
1. How much was oil price in 2011? Oil price was $113 per barrel. Today, oil price is just about $40 per barrel after going below $30 early this year.
2. And the exchange rate? Under Goodluck Jonathan’s leadership, the exchange rate was $1 to N162. Today, exchange rate is officially N199 to a dollar; N320-N360 in the parallel market.
3. And foreign reserves? Nigeria’s foreign reserves stood at $35billion in January 2012 and $29.61billion as at 28 May 2015, the eve of hand over to President Buhari. Today, foreign reserve is $27.1 billion, amid myriad of restrictive measures to stem the steady slide in the economy’s external sector.
4. Under the previous administration, Nigeria was enjoying an economic-growth rate of 6% averagely. Thanks to Foreign Direct Investment (FDI) riding on the back of a devalued Naira. President Jonathan also, largely, had the right economic mix. But corruption and terrorism were two of its greatest challenges. There were allegations of massive corruption, particularly what was reported to be a fuel-subsidy scam right under Goodluck Jonathan’s nose.
5. Rather than tackle these allegations by investigating and prosecuting those involved in the scam, President Jonathan decided to remove subsidy as the solution to the problem. The administration claimed removing fuel subsidy would free up funds for capital projects. But Nigerians had little or no trust in the administration. The administration was incompetent and corrupt. How can it be trusted to save for the future? This was a fundamental issue. So #OccupyNigeria shut down Nigeria’s economy in January 2012, not simply because Goodluck Jonathan increased fuel price but mainly because millions of Nigerians did not trust the administration with the money it claimed it would “save” for the future.
Today there are strong reasons to believe that if fuel-subsidy removal had been allowed in 2012, most of it would have ended up in private bank accounts.
6. Under Buhari administration, though partly due to some of its own reactive and over-restrictive economic policies, the Nigerian economy is sick. There is scarcity of foreign exchange. Oil marketers are finding it extremely difficult to import petroleum products into the country. FDI has nose-dived. The low international-oil price meant there was no need for it.
7. Now that fuel price has increased internationally, we expected the government to subsidize to alleviate people’s suffering. The Buhari administration says ‘No. We don’t have enough foreign exchange to do so.” Oil marketers are having difficulties opening letters of credit to import petroleum products. The result is that NNPC alone has had to supply over 90% of petroleum products since October 2015. This has not always been so.
8. NNPC used to supply 48% of petroleum products. Since NNPC does not have what it takes to supply so much, there will continue to be fuel scarcity. To tackle the scarcity problem, the government painfully decides to free up the oil-supply system by allowing the international-oil price determine fuel price locally without any fiscal intervention. Oil marketers are now accessing foreign exchange (through secondary sources) to import petroleum products into the country since ₦145 naira per litre provides some reasonable profit margin after supply costs.
9. Meanwhile, the government is taking measures to block leakages through zero budgeting, Single Treasury Account (TSA), and its Anti-Corruption Agenda. We are now talking about refineries, public and private-owned refineries that will eventually make fuel scarcity a thing of the past.
10. Nigerians asked Jonathan to work on old refineries and build new ones, given the resources available at the time, and first kill the regime of fuel importation. Subsidy would have died a natural death and the process of privatization would have been smoother. Today, some of the refineries are functional again, which were not in Jonathan’s days. Government-owned outlets sell refined fuel today, at a far cheaper rate. Not the private ones.
As labour go all out today to attempt to shutdown Nigeria, my prediction is that they will not even achieve up to 5% of what the 2012 #OccupyNigeria protests achieved, the protest is bound to be a massive failure, because more Nigerians trust the sincerity of Buhari’s government unlike his predecessor. And while the ₦145/L price remains a hard pill to swallow, it’s still the 12th cheapest price in the world, facts only.
Culled from: The Politics of Fuel Pricing: How Nigeria Compares with the Rest of the World