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Dear Friends and colleagues

The questions remain: How do Nigerian fuel subsidies work, what are their purposes, and who benefits?

Nigerians and sympathizers took to the streets in DC, London, New York, DC, Vienna, Dakar, Jo-burg, and all over Nigeria to protest the Government decision to remove fuel subsidy from its expenditure budget. Nigerians make up the largest population of African people in one entity and they are scattered around the world. When Nigerians protest, it resonates globally. It appears that the government is caving in to the pressure from the people according to the latest information that the Senate will mediate between the government and striking labor unions to end the deadlock and recent announcement made by the Minister of Finance and Coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala, saying that state governors entered into an agreement with the Federal Government on the removal of the fuel subsidy 6 months before she took office ( see full article in Tribune ). This indicates that she doesn’t want to be solely responsible for the decision made by her office. Okonjo-Iweala had previously argued in favor of the Subsidy removal, saying that Nigerians won’t suffer in vain — (see full article in Punch) How Iweala convinced Jonathan et al (see full article in Vanguard). Okonjo-Iweala once asked a Chinese foreign mister about how to deal with Nigerians because they are undisciplined (See this article on Ted)

Like most scholars around the world, we have buried our heads in research materials trying to figure out how removing the subsidy is a necessary course to address the root cause of poverty in the nation. In our observation, we found Nigerian scholars to be engaged and committed, while some few people especially on the listserv and discussion boards reacting very impulsively — disrespecting, attacking and breaking each other’s spirit using unworthy nouns like mad, stupid, fool, etc..(We decline to mention names). Psychological violence on the discussion forum is not too far from far from those looting and burning on the streets, as well as police atrocities in this time of crisis. We consider all of these factors as part of the collective consciousness or collective neurosis of the Nigerian mob. People are watching and listening all over world. Everything Nigeria stands for and how its people handle crisis are now under microscopes and will constitute toward the nation’s contribution and role in world peace and global stability.

Clearly, Nigerians are incredibly clever people, and that may in fact be a problem. Simply because they know that they are and therefore their social relationship is rigged with suspicion of one another and is often grappling with the illusion of limited resources. When this is the case, intense competition drives people to outsmart, outrun, or take out one another in order to have access and control of obvious resources. As a matter of fact, survival becomes the daily Modus operandi. Smart Nigerians are never to be under-estimated under any circumstances. It is not a surprise that Nigerians make the highest educated expatriates in Diaspora. Nigerians are worth much more abroad than at home. That’s one of the main reasons that people emigrate. They bail the rat race at home. Nigerians at home will often say that if you can’t beat them, join them. This mean do not expect the system to change, which in turns mean that many do not believe in ideas. Power talks but money is the ventriloquist. Money talks though power in various ways: government, religions, media, etc. So no one ever really sees the puppeteer. This is analogous to the dilemma of the government.

The Government of Nigeria had a problem from the beginning. It had never acknowledged that it was handed a broken clay pot from the colonials, so the illusion of plenty persisted as well as the anxiety of insufficient creates a heritage of greed and corruption. Let’s be candid. A broken clay pot can never be fixed. It has to be remolded from scratch. These are no criticisms, many Nigerians are well aware of the fact that things are not working as they ought. However, many optimistic Nigerians are proud of their nationhood or what they envision it to be. They are committed to talking, singing, and writing about fixing the broken clay pot. Pessimistic Nigerians simply blame the government for all the social ills in the country. People tend to forget that governments are people. Just like looking at one self in the mirror, they reflect the collective consciousness of both the optimists and pessimists.

This incumbent government has a trust issue, just like those before them. This is best analyzed by Onyekachi Ubani during this interview on Fuel Subsidy Removal (http://www.youtube.com/watch?v=pMD79XImgqo) it is not the first time they removed this subsidy. Our take is that the government underestimated the intelligence of its people (once again). The government argued that it will “put the money into areas that will facilitate production, such as provision of power supply, providing state-of-the-art hospitals, especially to curb the maternal mortality rate. Government would invest heavily in refineries, which will be sustained by private investors, as well as hydro power projects. This, including others, would create more jobs for our people.” The government cannot be telling people to expect things whilst putting measures place to protect itself against the very same thing that people are afraid of. The fact of the matter is that one cannot attempt to do right in one department of life whilst doing wrong on the other.

In due course, deregulation is a good thing, but one has to get to the river before you can cross it. The Nigerian government must have certain pillars of basic sovereign infrastructure in-place before they start tin-cupping around their citizens. Nigerians must ask themselves, what is the purpose of their citizenship, and why should they hold allegiance to a government that overtax, underpay, oppress, imprison, and deprive them of better quality of lives. A government that does not respect, let alone love its people makes the nation simply nominal. Nothing more than a sectional order of people and resources of the earth managed by a pseudo democratic oligarchs for invisible ventriloquists. People should begin to ask themselves, what is the benefit of Nigerian citizenship other than birthright in the first degree of artificial order. People deserve more than a government that looks for ways to milk them and suck them dry. How long must this go on for? The world is growing a very fast pace.

The fact remains that Major oil-producing countries continue to direct higher tax rates at oil and gas extraction income. Generally speaking, the tax rates imposed by those countries on oil and gas income are 10-60% higher than the generally applicable tax rate. In Saudi Arabia, for example, the income tax on oil and gas extraction income is 85%, while the non-petroleum tax rate is 20%. In Nigeria, the petroleum tax rate is 85%, while the generally applicable rate is 30%. In the United Arab Emirates, the petroleum tax rate ranges from 55-85%, while the general rate is 20%. See details here: Comparing U.S Govt.

Fuel prices: For OPEC members, it is different tales for different states:

http://www.tribune.com.ng/index.php/features/30760-fuel-prices-for-opec-members-it-is-different-tales-for-different-states

The government ought to be investing in the people and not exploiting them. Clearly the Nigerian government is not doing enough to encourage home grown producers. Oil production tax is one of the highest in the world. Take for example OANDO: a Pan- African multinational energy corporation. Headquartered in Lagos, Nigeria, and active in various African countries, it is engaged in every aspect of the energy value chain, including Petroleum marketing, exploration and production; refining, and power generation. Oando is Nigeria’s largest non-government owned company in the energy industry. Nigeria produced an average 2.2 million barrels of crude a day in December, according to data compiled by Bloomberg, and is the fifth-largest provider of oil imports to the U.S. At least 90 percent is pumped by Shell, based in The Hague, Exxon Mobil, San Ramon, California-based Chevron Corp., Total SA and Eni SpA in joint ventures with state-owned Nigerian National Petroleum Corp. Gasoline prices in Nigeria, where two-thirds of the population of about 164 million live on less than $1.25 a day, more than doubled after Jonathan abolished the subsidies on Jan. 1. The price had been capped at 65 naira a liter, undermining investment in refineries that forced the nation to import about 70 percent of its fuel. Note that Oando is the only corporation that is drilling, refining and distributing in Africa. OANDO is doing great things but needs even more government leverage. See information about deregulation here: http://www.oandoplc.com/industry-topics/deregulation/

Nevertheless, comparing consumers’ subsidy and producers’ subsidy is like comparing apples and oranges. The government failed to convince its people with sufficient evidence that the benefits from removal of the fuel subsidy can outweighed the present hardship the people are facing. So in all aggregate the protesters (peaceful demonstrators) were right to voice out their concerns and we hope that the Nigerian governments as well as other African states start to respect and consider the wishes of their subjects.

We hope that the people of Nigeria win this round of the battle towards rights of citizenship and government call to order. We encourage Nigerians to continue to demand integrity, accountability, and transparency and not to give up because the purpose of a government is to serve and invest in its people.

Article by Wale Idris,

Executive Director, African Views
AV is a framework for global intelligence for African Affairs

Relevant Resources:

Fueling America: Key Facts and Figures: https://docs.google.com/viewer?url=http%3A%2F%2Fwww.nacsonline.com%2FNACS%2FResources%2Fcampaigns%2FGasPrices_2011%2FDocuments%2FGasPriceKit2011.pdf
ANALYSIS OF THE SCOPE OF ENERGY
SUBSIDIES AND SUGGESTIONS
FOR THE G-20 INITIATIVE

http://www.iea.org/weo/docs/G20_Subsidy_Joint_Report.pdf

Nigeria Federal Budget Office for Revenue and Expenditures
http://www.budgetoffice.gov.ng/

Gasoline Prices, OPEC, and Biofuel:

http://www.farmfoundation.org/news/articlefiles/1698-zilberman.pdf

Estimating U.S.Government Subsidies to Energy Sources:

http://www.elistore.org/Data/products/d19_07.pdf

Fuel Subsidy Removal with Onyekachi Ubani:

http://www.youtube.com/watch?v=pMD79XImgqo

How Gas Prices Work: http://auto.howstuffworks.com/fuel-efficiency/fuel-

consumption/gas-price.htm

What causes gas prices to rise?

http://curiosity.discovery.com/question/causes-gas-prices-rise

www.africanviews.org

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