The Artful Dodger Subsidy Withdrawal

By Biko Agozino

A colleague asked me to comment on his treatise on the just announced Nigerian policy of removing subsidies from petroleum products. The colleague started by stating that petrol is cheap in Nigeria and that the subsidies served as a form of wealth re-distribution especially given that there does not appear to be any other way of trickling down the oil wealth to the impoverished masses. He did not go the extra step in his logic to recognize that if his premise is right, then removing the subsidies is tantamount to raising taxation on Nigerians by executive fiat and without legislative authority. Not that it will be too difficult to obtain legislative rubber stamping with Ghana Must Go (or Imo Must Go from Abia and vice versa) bags.

I told him that his premise that petrol is cheap will probably be contested in Nigeria because the pump price in most locations is well above the #65.00 per litter that is the official price available only at the few NNPC Depots where you are more likely to run into ‘No Fuel’ cardboard notices. This means that when the government removes a subsidy that was not there in real terms to begin with, then the fuel hawker will put his own jara on top, the okada rider will raise his fares, the garri trader will inch up the cost of eba by factoring in the cost of transportation and the cost of kola at roadblocks, and the landlord will raise rents, schools and hospitals may charge more to cover the costs of gas; hence the inflation my colleague rightly predicted. 

The colleague had good advice for sister Ngozi Okonjo-Iweala to take it easy, because Nigeria is not the US where the World Bank and IMF are located and where the policies of those International Monetary Organizations are never imposed, no matter the level of their fiscal crisis. In the US, for instance, they have welfare policies for the unemployed and the aged but nothing like that exists in Nigeria despite the fact that the US owes tens of trillions of dollars as budget deficits. In the US, citizens are copying the popular struggles in North Africa by organizing the Occupy Wall Street campaign that has spread to cities across the country while in Nigeria, there does not appear to be a popular uprising against even worse income disparities and higher unemployment rates. 

Only the labour organizations in the country are mounting a credible opposition to the proposed subsidy withdrawal. The Nigerian Labour Congress has called on the government to cut  all 'unnecessary spending' as an alternative to the withdrawal of subsidies (This Day, 10/17/11). The NLC has been the leading voice campaigning for a starvation minimum wage of 18,000 per month that state governments are reluctant to implement. The Trade Union Congress has accused the government of corruption for claiming that it will spend #1.2 trillion this year on subsidy while only #240 billion was budgeted for that and the NNPC retaliated by calling organized labour 'enemies of the economy (The Punch, 10/17/11). The SSANU has termed the withdrawal of subsidies a 'declaration of war'. The Academic Staff Union of Universities threatens strikes over the refusal of the government to implement the extension of retirement age to 70 years at a time that the trend in other parts of the world is towards early retirement.

The US reduces gas prices by reducing taxation at the pump, compared to Europe. In addition, Europa and Americana give their corporations hundreds of billions of dollars in bailouts and stimulus packages, farm subsidies and business start-up capital, such as the $500,000,000 given to the solar company, Solyndra, that just folded up after pocketing half a billion (yes, with a b) US dollars from Uncle Santa. 

As Finance Minister under President Olusegun Obasanjo, Dr. Okonjo-Iweala had announced a fifty billion naira credit for cassava farmers, promising that 30% of that would go to female farmers but she was quickly moved to the Ministry of Foreign Affairs and my guess is as good as yours that some big ogas simply chopped the 50 billion naira just like that. Similarly, Comrade President Yaradua ear-marked 200 billion naira to be disbursed as grants to Nigerians but he was quickly incapacitated by illness and his death was never investigated as Wole Soyinka demanded while the 200 billion naira he proposed just vanished without Nigerians asking questions.

In the US, the debate is whether to raise taxation on the richest one percent to the level being paid by the middle class but the Republicans, calling president Obama a class warrior to his delight, have vowed to maintain the Bush era tax cuts for the richest one percent and are seeking to cut welfare and Medicare entitlements for the poor as their preferred strategies for balancing the budget. Across Europe and Asia, huge sums of money are being doled out as corporate welfare while in Britain, welfare and social services have been drastically cut by the current Conservative government. The recent riots in England and in Greece and the current mass protests occupying Wall Street in America are obviously connected with on-going class warfare against the poor by the rich and the powerful as professor Stuart Hall clearly indicated in a recent article in the UK Guardian. Worse policies appear to be heaped on Nigerians and they continue to endure the hardship along with the insecurity that is bred by phantom capitalism.

My colleague outlined the projects on which the government intends to spend the savings from the withdrawn subsidies but none of the plans for the estimated six to ten billion dollars savings has any reference to the suffering people. Rather they propose to use it to patch up roads that they have multiple times budgeted to patch up with vanishing funds, open new refineries that would soon be handed over to private investors at a discount, generate electricity, build infrastructure, all euphemisms for sharing and chopping the savings because all those things they want to start doing are things they had revenues to do before. For instance, President Obasanjo spent $10b or more on power generation while generator tycoons continued to kill whole families with CO2 poisoning; power ko, power ni. 

No American president will wake up and slap a huge tax on the citizens in the guise of subsidy withdrawal without facing a recall election or mass protests even from members of his own party. What President Obama is trying to do is to get Congress to approve additional stimulus of $450b with which to help to create more jobs in America but Republicans in Senate and even two Democratic senators have blocked that move simply because it includes proposals to raise the taxation rates for millionaires back to what it was under President Clinton.

If you ask me for an alternative since President Jonathan has presented Nigerians with a fait accompli, then for the first five years, all the $10b annual savings should be disbursed directly to the Nigerian people for business start-ups, research budgets in the sciences and humanities, scholarships funding, welfare benefits, housing, free medical access and publicly funded education at all levels for all... That will work out at one thousand five hundred billion naira a year and so every corner of the country will be touched by the entrepreneurial and industrial revolution that will be unleashed when such grants are disbursed transparently. Some of the start-ups will fail but those that succeed will make all the differences in job creation and the government will eventually recoup the investment through corporate taxes and income taxes from the employees in addition to value-added taxes from their sales.

All those Egbesu, Area or Bakassi Boys running around looking for someone to kidnap for ransom or the Boko Haram activists looking for something to blow up may just go back to school, or go to any city and open up a small business or return to their villages and set up an agro business with their #1m naira grant and employ five or more desperadoes or team up with other grantees to set up medium sized cooperative businesses. After five years, then let the politicians give Nigerians half the savings and embezzle the rest as they always planned to do and let EFCC chase after them for that. Of course, as the NLC implied, the government could implement such a massive grants programs to Nigerians without imposing draconian taxes in the guise of withdrawing subsidies

Dr. Agozino is a Professor of Sociology and Director of Africana Studies, Virginia Tech. agozino@vt.edu