Bid to end Nigerians' 'only oil benefit'

2011-11-15 07:48

Lagos - Nigeria's government may be finally pushing things too far in the eyes of many citizens fed up with corruption: It wants to end what is widely seen as their only benefit from the nation's oil wealth.

The irony is that the proposal, which would eliminate fuel subsidies and result in higher pump prices, is one that economists view as a legitimate and necessary reform in Africa's largest oil producer and most populous nation.

Try explaining that to long-suffering Nigerians, most of whom live on less than $2 per day. Some have vowed protests and others simply plead for mercy, saying they will sink further into poverty.

"It is a lie, because we can't see what they have done with the billions of naira made from previous hikes in prices," said unemployed economics graduate John Akinsaya, 23, as he helped his mother with her roadside food vending business.

"Where is the money? You and I know the money has ended up in private pockets."

It is easy to understand the anger. Nigeria earns mountains of cash from oil, yet electricity blackouts occur daily, many roads are so badly maintained they look like they have been hit by asteroids and police extract bribes from drivers at checkpoints.

The fuel subsidy has provided a small measure of relief. It is designed in part to hold pump prices at 65 naira per litre ($0.40).

But the truth is more complicated. Nigeria refines very little of its crude, a situation also blamed on corruption and mismanagement, putting the country in the odd position of exporting oil and importing fuel.

Serious questions

Billions of dollars in subsidies are supposed to keep pump prices low even though fuel is being imported at market prices.

Yet there are serious questions over how the subsidy cash is being doled out - and it is no small chunk of change. Nigeria's government says it has spent more than $8bn so far this year on fuel subsidies.

There have been accusations that much of the money goes to a handful of corrupt elites - what many call a "cabal". Beyond that, fuel is sold above the set price in many areas outside of major cities.

Nigeria's government, whose finance minister Ngozi Okonjo-Iweala is a highly respected ex-World Bank managing director, wants to begin phasing out the subsidy next year.

It is a move many economists have lauded, pointing out that it will free up cash for infrastructure as well as relieve pressure on Nigeria's foreign exchange reserves.

Kayode Akindele, a partner with 46 Parallels investment firm, said the subsidy programme is riddled with corruption and does not function as intended.

He acknowledges the difficulty average Nigerians will face at first, but said the government will have to use the money wisely to demonstrate its sincerity.

"In the short term, yes, there will be pain in that regard, and what the government will have to do is make sure people can see where this cash is going," he said.

It all seems logical, but many Nigerians warn that the real-life consequences will be brutal.

Promises of protests

Some ask why the government does not first go after other wasteful spending, such as massive allowances given to lawmakers, which activists say can amount to as much as $140 000 a month for a senator.

Chidi Odinkalu of the Open Society Justice Initiative said "no right-thinking Nigerian" believes the money saved from the subsidy would be spent wisely.

"It's enough that people are not seeing benefits from government," he said. "But when they actively begin to see government as the cause of the denuding of their lives, I really don't believe you can predict what will happen."

Labour unions have come out strongly against removing the subsidy, and it is unclear whether a government push to convince Nigerians of the benefits of the move has had any effect.

Promises of protests have often fizzled out in the past, but clearly the latest proposal has touched a nerve.

Lagos lawyer Friday Archibong, 45, said the government "will be looking for trouble" if it goes ahead.

"What are we enjoying as citizens of this country?" he asked after pulling his sports utility vehicle into a petrol station in the upscale Ikoyi district of the economic capital Lagos. "There are no jobs, no good roads, no electricity."

- AFP