Nigeria’s Fuel Subsidy and its Greedy Upper Class

The seemingly never ending debate over the Nigerian Federal Government’s oil subsidy to the national public has never really got to grips with one very important, and basic, point. That the subsidy is in earnest, and in essence, an indirect tax on the poor to benefit the rich.

A few weeks ago came the news that the senate had passed the 2015 NGN4.493trn budget, which was claimed to exclude a provision for the oil subsidy (although it turns out that the budget did include a subsidy expense that had merely been reduced from the original allocation). My first thought: I pray to the dear Lord Jesus that the subsidy stays out of the House of Representatives recommendations and is duly passed. You see, I do not pray only for myself and people I know.

My prayers have so far been unanswered. Although if the recent activities at the Subsidy Reinvestment and Empowerment Programme – which overseas the supposed ‘savings’ from reductions in the oil subsidy – are anything to go by, the Good Lord may still yet have heard my call. Nevertheless, as of late last week, the House of Representatives was still taking umbrage over the motion, put forward by Rep. Sunday Karimi, calling for the removal of the federal government’s subsidization of domestic oil consumption. Despite gaining support from the Deputy House Leader, Hon. Leo Ogor, the motion was rejected by the House. In defence of his position, Hon. Ogor stated that the votes on the subsidy regime needed to be redirected to other priority areas.

Let me list a mere handful of the public policy areas in which the literally billions of dollars the Nigerian government spends subsidising the country’s oil consumption could be better spent. An almost non-existent sewage system; a barely functioning healthcare system; a sorry excuse for a national pensions scheme; a continuously eroding civil service; a poor universities’ structure that continues to make it really rather easy for some of our best minds to flee to the bosoms of the Universities of Exeter, London, Birmingham, East Anglia, Columbia, even that of Manchester for goodness sake! A flagging national secondary schools curriculum. To go on would be to engage in a self-indulgent depression.

You will excuse me then if I cannot help but wonder as to the logic, economic or otherwise, by which the federal government is made to spend $8 billion (in 2011) on the oil subsidy, which accounted for 30% of federal government expenditure while only $2.2bn was allocated to education and similarly to healthcare. These are policy areas that would, and do, actually benefit the entire country. Whether you are rich or poor, be you male or female, old or young, whether you live in the country or abroad, these are policy areas upon which the internal health and the external reputation of the country lives or dies. These are the areas in which our success or failure indelibly colours the lives of all those who would proudly proclaim themselves Nigerian on whatever shore they may find themselves. Meanwhile, the government continues to haemorrhage billions of Naira in payments to oil marketers even as federal revenues from oil exports continue to fall due to low oil prices. Back in 2013, Business Day reported that the government had spent over NGN4.9trn between 2006 and 2012 on oil subsidy allocations alone.

Indeed, so far down the subsidy hole have we burrowed that a fuel shortage crisis is currently being played out across the landscapes of one of the largest oil producers and exporters in the world as marketers and international traders fear another attempt by the government to finally remove the subsidy.

From the so-called ‘Occupy Nigeria’ movement which came in response to the government’s attempt in 2012 to remove the oil subsidy, it is clear that many Nigerians – including the working classes – have found it of particular importance that our government continue to subsidise our domestic oil intake. And our government, leaders of men that it is, has pandered year after year to that demand.

Not only is it worrying that our government has chosen to cower like a bunch of school children instead of telling us that due to the sorry state of our refineries and decades of corruption under the same old guard that still has the audacity to pipe up and tell us what our country needs, over 70% of the oil we sell in domestic markets is imported. It is not free; we do not produce it, and you have to pay for it if you insist on using it.

What is infinitely more distressing is that while most of the ‘occupy movements’ across the world have been an attempt by the working and middle classes to redistribute wealth from the 1%, here we are giving it back to them. The fact that the people that benefit the most from an oil subsidy are rich gas-guzzling car drivers does not seem to cross, and if it does it does not stay firmly in, our minds. Nigeria’s majority poor are not the ones who drive the SUVs and the fancy cars that require litres of petrol and diesel to run. And how, indeed, does one prove to their friends that they are ‘somebody’ if you are not driving around a city in a daft car meant either for the off-road country side or a Milan race course. That would be to die of shame. Although it does not appear to kill us dead in mortification that due to a severely underfunded and nearly decrepit public health system, a full 20% of all child deaths under five in the entire Sub-Saharan region occur in this, our glorious, country.

I am not unaware of the fact that the majority of the population that held the country at a standstill in 2012, were in large part from the working classes. Many were taxi and bus drivers whose reliance on cheap oil is obvious. And their concern is patently understandable. Indeed, I cannot help but question why bus drivers (especially those of the ‘danfos’ and ‘molues’) have to pay for the petrol in their vehicles at all. Their costs should be fully covered by the government since they function almost exclusively in absentia of a fully functioning national transportation system, and upon which the majority poor rely.

Aside from these, most other sections of the majority working classes do not benefit from the oil subsidy; and certainly not to the extent to which their large (and multiple) vehicle and generator owning upper class counterparts do. I suggest that the reason why so many of the working class appear to think that the subsidy is in their interest is because it is the last tangible item they view themselves to be in receipt of from their government. They are not, in many parts, provided with potable water. Their access to basic public education is abysmal. Job security is a laughable concept. And healthcare, well….

I suggest that if the government were to propose the ways in which it would better spend the money it currently pilfers away benefitting those who can well afford to buy their own petrol at its real cost, on areas that would be of genuine and long-term benefit to the majority of the population, then the next time the middle class attempts to rally its working class counterparts to turn out in protest against an oil subsidy cut, the latter will very wisely choose to stay at home.

~ EAMS

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2 thoughts on “Nigeria’s Fuel Subsidy and its Greedy Upper Class

  1. Another apt piece but I have to say that while we talk of taxes Nigeria is one country that allows businesess the ability to pay them as well as govt the inability to account for its usage when paid… What has been done with the taxes FIRS has collected over the years.. All the revenue being collected by govt can not truly be and has never been accounted for.. While I agree that govt shld cater for the bus driversa it will only lead to more corrupt practises we need leaders who can think outside the box and stand up strong to every decision regardless of the reaction of the citizens.. However sadly I will say that even Nigerians are not prepared for true change.. They want the makings of change but not the change in itself.. This I believe is the sorry state we are in as a country as corruption is deeply rooted down to the poor man that change for him means scarificing his egunje for some stable income… This I doubt will be possible to implement.. Anything that means “extra or by the side” is all they know.. Nigeria as a whole my friend is greedy..

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    1. Amy, I definitely understand where you are coming from with regards to taxation. The problem is that we pretty much do not have a taxation ‘system’. At least, not a correctly functioning one. The issue as you have alluded to and which I am sure many Nigerians will agree with is that most Nigerian’s pay some form of taxation (though this is not often regularised or ‘official’) which then goes into somebody’s pocket or to some other unaccounted for area. Nevertheless, we cannot underestimate the benefit of a proper, formalised and regularised taxation system. The fact remains that despite whatever taxes we think we are paying, Nigeria continues to have one of the narrowest taxes bases not even compared to western industrialised countries, but compared to other developing African countries. Here is an interesting report by Price Waterhouse Coopers ow.ly/NJE8s. Taxes are one of the surest and most accountable sources of income for any govt. and only a regularised taxation system will enable the level of accountability and resource allocation Nigerians seek from their govt.

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