Response to Ethan Zuckerman on “Occupy Nigeria”

On January 1st, the Federal Government of Nigeria removed its subsidy on petroleum products. The price of fuel rose almost immediately from 65 Naira to at least 140 Naira, though I have heard the price hit over 250 Naira in some places. The removal of the fuel subsidy has unleashed mass popular anger, resulting in protests in different cities and plans for an indefinite national strike, which begins tomorrow.

The protests and the fuel subsidy controversy have generated a number of analyses. CNN, the BBC, and Think Africa Press have nice overviews of the situation.

The analysis that caught my eye though, was by Ethan Zuckerman, who directs the Center for Civic Media at MIT and is a renowned blogger. Although I have great respect for Zuckerman’s writing, in his piece on Nigeria he makes two arguments that I disagree with.

The first is that removing the fuel subsidy was a good decision. Zuckerman argues that the expense of the subsidy is a crippling burden on the government’s budget, and that the money would be better spent on building infrastructure. Zuckerman is, however, aware of some arguments against removal. He notes,

Given the history of corruption in the Nigerian government, it’s not hard to understand why many Nigerians are skeptical that the monies released from the subsidy will go anywhere other than in politicians’ pockets,

but he also says,

It’s possible to imagine a Nigeria where imported petroleum products were less necessary, if the country had functioning rail systems, a reliable power grid minimizing the need for generators, and refineries that could produce diesel and gasoline locally.

Zuckerman’s second argument is that the demands of the Nigerian protesters are out of sync with the broader global “Occupy” movement. Zuckerman writes:

I’m interested to see Nigerian take on some of the rhetoric and tactics of the Occupy movement, including the occupation of a public square in Kano. I’ll be intrigued to see whether any of the global energy over Occupy goes to support the Nigerian protesters. The irony, I fear, is that while the global occupy movement seeks to equalize income disparities and fight government corruption, the Nigerian movement [by this I think Zuckerman means the Jonathan administration - Alex] is currently pursuing radical and important reforms, and the Occupy Nigeria protesters are fighting against that change. Read one way, Occupy Nigeria is a conservative movement fighting to keep a dysfunctional status quo in place, which seems at odds with other branches of the movement.

I disagree with both arguments and I find their pairing strange. I also reject the premise of the second argument. I do not believe that just because some Nigerian activists “take on the rhetoric and tactics of the Occupy movement,” that makes the current protests a “branch” of the movement. The protest organizers and the controversy itself predate Occupy. Nor do I believe the politics of the fuel subsidy protests should be judged according to how they measure against goals of protesters in the United States and Europe. Nor, finally, do I believe that the fuel subsidy protests are “reactionary” or “conservative.”

In any case, is protesting the removal of a fuel subsidy really out of line with Occupy’s goals? I am not a member of the Occupy movement, but I thought one of its underlying values was to support the welfare of the “99%” over interests and policies that favor the “1%.” Yet the voices Zuckerman cites in support of fuel subsidy removal are those of the International Monetary Fund and some of the most powerful ministers in the Federal Government of Nigeria – these are voices more likely to speak for the 1% than the 99%, no? Contrast this with the voices speaking out against subsidy removal: labor unions, civil society organizations like the Nigerian Bar Association, students’ organizations, etc. These are more likely to represent the 99%, yes?

One could of course make the argument that the 99% don’t recognize their own true interests, and that the short-term pain they feel now is necessary for their long-term prosperity. But that sounds suspiciously like the arguments for austerity that have been invoked by the 1% around the world to justify slashing pensions, firing government employees, and other measures that always seem to add up to a lot of pain, but never seem to bring that promised shared prosperity for the 99%.

So will the removal of the fuel subsidy help or hurt the 99% in Nigeria? So far, the answer is that it is hurting them. The price of fuel has more than doubled, and has already begun to push the prices of other goods, especially food, upwards. People are struggling to get to work, to buy food, to put fuel in their generators at home and in their shops. The political uncertainty generated by removal, moreover, adds to an existing climate of tension and insecurity given ongoing religious violence in various parts of the country. If next week’s strike turns violent, it will most likely be members of the 99% who are injured or killed. Fuel subsidy removal has so far made life more costly, and less secure, for ordinary Nigerians.

Now, what about the future? What about the promised benefits of removing the subsidy? I agree with Zuckerman that the money could be invested into infrastructure and a broader transformation of Nigeria. But Zuckerman has no answer for Nigerians’ pessimism that the money will go to public goods instead of private enrichment. Zuckerman notes that there is corruption involved with the subsidy – but removing the subsidy is not guaranteed to end corruption, and could simply shift it elsewhere.

Nigerians’ pessimism seems justified to me. If we trace the latest round of the fuel subsidy debate back to last year, it really got going around the time that the Federal Government began insisting that state governments begin paying a newly passed minimum wage. Governors protested to the Federal Government that they could not afford to pay the new wage, and the idea of removing the fuel subsidy (re) surfaced, as a proposal to free up money (a related proposal was to increase the share of oil revenues that states received, in order to help them pay the minimum wage). Now it’s a new year, and the subsidy is gone, but some states are still being accused of dragging their feet on paying the minimum wage. If the promises of the past have not come true, how can ordinary Nigerians be expected to have faith that the money saved by removing the subsidy will benefit them? Moreover, if removing the fuel subsidy is a good and/or necessary step, why could it not be done gradually, so as to minimize the shock to people’s wallets and to the overall economy?

The fuel subsidy debate in Nigeria touches on core issues of government’s relationship with the people and of ordinary people’s struggles to survive in one of the world’s most politically turbulent countries. Political struggles over the subsidy predate the Occupy movement by decades, and even if the current protests are partly influenced by Occupy, or by the Arab revolutions, that does not mean that Nigeria’s protests have become merely one “branch” of a global phenomenon. Rather they are deeply rooted in histories and politics that are particular to Nigeria. The merits of removing the subsidy deserve to be judged according to how the decision affects the Nigerian people, not according to a supposedly universal political spectrum designed by activists elsewhere. And if there is a universal set of values to be invoked concerning the interests of the world’s 99%, the 99% in Nigeria seem to be speaking solidly in favor of keeping the subsidy.

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22 thoughts on “Response to Ethan Zuckerman on “Occupy Nigeria”

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  2. Pingback: …My heart’s in Accra » More thoughts on Occupy Nigeria

  3. We heard the same thing from Babangida when he forced the IMF mandated structural adjustment program (SAP) on us in the eighties. Of course it made some economic sense, the Nigerian government saved from bankruptcy and IMF protected bankers in New York and London got their money plus interest back. But the social costs of that policy still haunt us today.

    Babangida gave the same promises, buses were commissioned and distributed like they are being commissioned today, but it was all hollow, empty. The social costs of this policy may be too much for the Nigerian state to bear.

    I can now see the wisdom in the Chinese maxim “cross the river by feeling for the stones”. Americans believe in instant gratification and it is not hard to see that thinking reflected in American dominated institutions like the IMF and the World Bank. (Our finance minister spent twenty years at the World Bank and she is the brains behind this policy)

    • A competent American economist would have told them not to completely remove the subsidy overnight and that they had to clean up governance*. If it had been part of a much larger effort done gradually this might have been far better. As it is this could, depending on personalities and party concerns, be suddenly reversed and show that the government isn’t strong enough to put something in place and keep it.

      *Of course those sort of points tend to push African nations to lenders who don’t ask questions and don’t demand a reduction in corruption.

      • Well, in the nineties Russia was expected to make a transition overnight from a command economy to a free market economy. There were a lot of Harvard and Yale trained economists pushing that line.

        The rest is history, the social and political consequences of that bad advice live with us today. (Stiglitz wrote about it in “Globalization and its discontents”).

        IMF has always been about IMMEDIATE cuts (social spending, infrastructure etc). I had the privilege of growing up in Nigeria in the eighties and I know that the devaluation of the currency was immediate, cuts to education spending were immediate, deregulation was immediate etc.

        The shocks were immediate and the social consequences difficult to eradicate. (The whole point of the grossly inefficient and oversold “Aid Industry” is to deal with these social consequences).

        On your point about corruption. Africa is corrupt and is likely to be corrupt for the rest of our lifetimes. There is no point making unreasonable and unrealistic demands on African nations. Take Africa for what it is, like the Chinese. We need to stop this silly belief that development cannot take place in corrupt nations, it can.

        If we can spur economic growth regardless of the corruption, it gives rise to an informed middle class that is the best weapon against corruption. But if you continue to withhold FDI due to corruption, you neither empower the middle class nor strengthen institutions nor set the stage for the eradication of corruption. You just keep the nation stuck in time and worse off (high population growth rates, more unemployment, declining human development indices etc).

        You are just setting the stage for the next corrupt generation.

        **Given the outcome of the global economic crisis, do competent American economists exist?

      • I’ve met competent ones (or at least ones that got their jobs done), often at the lower levels of implementation. Possibly part of the problem is the higher up you go, the inherent politicization and lack of investigation of problems on the ground might grow larger.
        As for the middle class theory (that growing wealth leads to more political opening) that seems to have a mixed record. In Singapore it isn’t clear if poor handling of housing and immigration was the reason for a symbolic rebuke in elections or if it was corruption. Malaysia might be a case but the ruling party coalition is still in power. China has seen more protests and riots but I was under the impression that those were more from villagers who had been negatively impacted by economic changes and corruption.
        Admittedly those are East Asian examples and Africa might show differences. South Africa actually seems to be more corrupt than it was in its initial post-apartheid era. In Nigeria has the middle class shown more or less chance of political awareness from economic prosperity?

    • Nothing breeds corruption like poverty and instability. If I am well educated and my salary can cover the needs of my family and the political environment is stable then I am less likely to be corrupt.

      If these conditions don’t exist, then corruption thrives. Notice that as the middle class in countries like Indonesia grew, the tolerance for corruption declined. It is quite simple, if I have a stable job it is more difficult for a politician to offer me $5 to vote for him or help him rig elections.

      Singapore consistently scores very highly on transparency index ratings. Singapore is a lot less corrupt than say, Greece. So Singapore isn’t really a good example.

      Coming back to Africa. There are very few African nations that are not natural resource economies or aid dependent. In natural resource / aid dependent economies, corruption is a given. The presence of a vibrant business community or the need for tax revenues creates the need for a level of competence in governance (look up Somaliland). Unfortunately, the Aid Industry and unrealistic demands by Western donors / investors stifles the natural evolution to a competently managed nation state.

      On the other hand, Chinese “no questions asked” investment model is more likely to lead to a sustainable African Middle Class and better governance than any Western initiative (which usually changes from decade to decade – in the sixties it was industrial development, in the eighties it was structural adjustment, today it is all about “Millennium Development Goals”).

      In Lagos where I live, the Chinese are building a special economic zone to handle manufacturing. The Lagos State Government is looking forward to the tax revenues from that zone, but in order to raise those revenues it has to ensure that infrastructure and electricity supply are adequate. In the process of doing that, governance is improved, the locals are employed, employed locals are empowered to educate their children and the middle class is expanded.

      Contrast that with the typical Western approach of sending handouts and spending half the aid budget on accommodation in luxury hotels, expensive consultants and marketing.

      Which approach is more sustainable and better suited for Africa?

  4. Just to elaborate further, by instant gratification I meant “shock therapy”. It was tried in Russia. The IMF believe that Russia could make the transition from a socialist command economy to an market economy in an instant.it failed and led to crony capitalism and the social costs were immense.

    Nigeria cannot transit from fuel subsidy to no fuel subsidy over night. That is American inspired “instant gratification” at work. It did not work in Russia and it is not likely to work here.

  5. Analysis of IMF indicates capitalist at its core. IMF is one goal and that is ensuring liquidity plenty enough to get banks and stakeholders paid. The faith of “99″, does not phase IMF.

    • Of course the IMF is capitalist. To quote an anarchist publication on their capitalist practices ‘capitalism is the name of the game’. That doesn’t mean that it’s wrong, it means that the IMF prefers nations and businesses to have balanced budgets, free markets and profits. It’s putting that into practice, especially in nations with little history of free market or clean governance that’s the challenge.

  6. What is ’99%’ (the public) and ’1%’ (leadership and business elite) varies very greatly from nation to nation.

    In any case it seems to be popular to decide that protest movements have their roots in some big global phenomena going on at the moment. I respect Steve LeVine, but I still can’t see why he links Russian and Kazakh protests to the ‘Arab Spring’.

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  11. a lot of the people taking the stage yesterday in Lagos were trying to compare the protests here with what happened in Libya, Tunisia, Egypt, and so on…The desire to make sure that Jonathan is “marketed” as a caricature of a dictator was striking….this is a chance for Nigerians to start fresh…but bloodshed is not the answer….it never is…

  12. According to President Jonathan, in 2010 $13billion was spent to
    purchase fuel for self-generation of electricity in Nigeria. That’s
    about 6.7% of the 2010 GDP. Not only has the demand for fuel for
    self-generation of electricity, since then, grown but the subsidy
    removal has now doubled all those costs. What would be the impact of
    that on inflation and ultimately on the GDP as the costs of
    self-generation of electricity goes over 10%? Everyone seems to be
    taking subsidy removal as an economically sound recommendation without
    any attempt to assess the particulars.

    The Governor of the Central Bank of Nigeria displays acute symptoms of
    tunnel vision in basing his assessment of the impact of the subsidy
    removal on the insignificant weight ascribed to fuel for
    transportation in the Consumer Price Index. Sanusi seems incapable of
    seeing both the forest and the trees. As far back as October 2011,
    about the time the Jonathan govt. began to suggest that it would
    remove the subsidy, I looked at possible scenarios after a removal of
    the subsidy, exploring the possible impacts on the individuals earning
    the proposed, new minimum wage (of course, over 90% of the working age
    population won’t be so fortunate to as to earn even that measly sum of
    about $110).I used the CPI weights for my projections, and it didn’t
    look pretty then. Needless to say, subsequent events have more than
    confirmed my calculations. This has given me cause to wonder what
    those making policy in Nigeria with the better data that they must
    have do to earn their keep.

    Implementing that new minimum wage was one of the triggers for the
    removal of the fuel subsidy.And, I wonder how the economic hit woman
    who has nothing to recommend her beyond being a career technocrat and
    ‘world renowned Economist’ proposes to solve the problems and fiscal
    strains Government would encounter on the expenditure side when actual
    prices are higher than budget projections. Okonjo-Iweala should
    already be familiar with such fiscal strains. The removal of the fuel
    subsidy will do worse to the economy than the benchmark oil price
    ‘peg’ that undergirded the 2005 & 2006 budgets and which caused so
    much deficit financing. It got to a point in 2006 that a supplementary
    budget was sent to the National Assembly and the Executive would have
    continued to press for the approval of that supplementary budget if
    the IMF hadn’t prevailed on them to withdraw it at the time.

    It isn’t only the people that would experience hardships due to
    inflation; Government would, too, in translating its capital vote in
    to projects and in working to hit its developmental targets, and since
    it’s the self same, long suffering people who were meant to benefit
    from those projects and safety nets, that would be ‘double wahala for
    deadi-bodi.’ The government seems oblivious to the fact that it is
    sawing off the very branch on which it is currently sitting by
    removing the fuel subsidy. I guess I must sound ridiculous myself for
    pretending the Govt. has any intention to serve the people in any
    meaningful way, quite sad but true.

    The IMF has been leaning on Nigeria to deregulate and privatize for
    over a decade, and the Fund began to see some adoption of the
    strategies it suggested with the return to civil rule in 1999.
    Although the state had not, and still hasn’t, provided adequate Power,
    the IMF continued to urge deregulation beginning with Telecoms,
    instead of with Power. Banking has also followed, along the path of
    restructuring, and the field of Retail has seen an opening up of its
    gates to all comers. Cement manufacture, a major sector of the
    Construction industry also saw major privatizations.

    In this period of privatization and deregulation, Nigeria has seen
    remarkable GDP growth. Some of that, of course, is due to rising oil
    prices. But all that growth has not automatically translated into
    Human Development. Growth has, however, resulted in Telecoms, Banking,
    Retail and Construction expanding and demanding more fossil fuel for
    self-generation of electricity. Herein lies the contradiction in
    prescribing the standard medication of deregulation and privatization,
    beginning with Telecoms, without first attempting a sound diagnosis of
    the particulars of the Nigerian condition.

    It fascinates me to no end when recommendations are made for the
    privatization of Nigeria’s public institutions where the assets and
    revenues have, for all practical purposes, been privatized through
    Corruption. There usually is no sign of an awareness that what is
    being suggested is a second order action which obeys a different set
    of rules from the privatization of ordinary, inefficient public
    agencies. A case for deregulation and privatization can be made but I
    doubt those should be the priority in Nigeria. Even so, the order in
    which the present strategy has been executed is clearly unsustainable.
    Furthermore, a sound economic case for the removal of fuel subsidy
    still hasn’t been made for Nigeria.

    Brazil which also has to grapple with the challenges posed by a
    population of over 100million, just like Nigeria, learned the hard way
    under Henrique Cardoso that deregulation and privatization are not
    magic cures. By the way, Brazil imports about 60% of the gasoline it
    consumes locally, similar to Nigeria, but Brazil plans to build 5
    refineries, through Petrobras, solely or in joint ventures. The
    Nigeria Govt hinges its own hopes for the development of new
    refineries on private investment.

    There’s already a marked excess capacity for refining globally. Demand
    in the first world for petroleum products is already showing the
    impacts of recessions, ageing populations, environment friendly
    legislation and sentiments, the improvements in the fuel efficiency of
    autos and the exploration of alternative energy. Oil industry players
    are declaring losses on their refining businesses, closing down
    refineries, selling off their refining businesses all due to the
    dwindling margins. The UK, Total, Shell, the list goes on, and even
    the most cursory research will confirm this.

    China, Brazil, the Middle Eastern oil exporters are the ones buying
    and building refineries and they are all doing it with heavy
    government investment. The Jonathan Govt. which has argued that the
    subsidy is the reason why there have been no private investment in new
    Nigerian refineries seems to have missed all this.

    Considering that other oil producing countries that have withdrawn
    their fuel subsidies used to subsidize their citizens’ consumption of
    petroleum products to prices below the cost of refining locally and
    that Nigeria is subsidizing for the cost of NOT refining, one wonders
    what basis for comparison even exists. If the 4 refineries worked the
    subsidy would not even be necessary. And one may want to consider the
    substantial value of lost GDP that the failure of Govt to operate the
    Nigerian refineries optimally has been costing the people of Nigeria.
    What Sanusi interprets as an arbitrage opportunity that fosters
    smuggling and which he says highlights the difference between Nigeria
    and Saudi Arabia, Saudi being surrounded by other oil exporters, is
    actually the existence of a legal, ready market for petroleum products
    refined locally in Nigeria. Saudi ought to be jealous.

    I know that if the local refineries met local demand, the pump price
    of gasoline would be, at least, 38% less than the price of subsidized
    fuel. And since the Govt (PDP has been in power for over a decade;
    Jonathan as an individual has been in leadership for 4 years, 7 months
    and over 15 days to date: first as VP, then as Acting President, then
    as President, then as elected President) has due to malversation and
    ineptitude failed to justify the large sums invested in turn around
    maintenance of those refineries, and none of the defalcators have been
    brought to book– not for once has the Attorney General of the
    federation gone to court to seek to recover funds lost to such black
    holes or to repudiate the claims of the creditors of odious debts. In
    short Govt. wishes to sweep Corruption under the carpet, finding it
    more convenient to inflict hardship on the 99%– the symptoms of Moral
    Hazard are everywhere apparent.

    I’d just venture a few more words on Development as I’ve focused
    largely on issues relating to governance and GDP Growth. The Subsidy
    Reinvestment and Empowerment Programme (SURE) which has been proposed
    would annually appropriate sums that the programme’s Board and
    secretariat cannot disburse effectively. Annual budgets have been
    seeing less than 60% disbursements, that’s through the channels of the
    bloated, grasping Ministries, Departments and Agencies. The SURE
    programme with a staff strength that is a negligible fraction of MDA
    staff strength would successfully disburse, over say 40 months, a sum
    that would be about 83% of the 2012 budget?

    There are no mechanisms for accountability integral to the SURE
    programme design. The Monitoring & Evaluation is to be contracted out
    to an ‘independent body.’ The programme most surely would duplicate
    constitutional channels, leading to more wastage. The SURE document
    itself is a remarkable development document that has not the requisite
    log frame nor does it provide the projected cost implications of its
    12 or so schemes. All these are warnings. The by now familiar M.O. of
    Corruption and waste.

    Based on Govt’s own numbers, the formal sectors, including both the
    private and public, accounted for the employment of less than 5million
    people in 2002. Let’s be generous and assume that privatization and
    deregulation have raised that number to 15million in the past 9 years.
    That’s still 15million jobs to support a population of over
    160million! Since most of the poverty indices would be based on the
    formal sector numbers which are more easily acquired and tractable is
    it any surprise that close to 70% of the Nigerian population are held
    to live in poverty when the population is supported by a formal
    workforce of less than 10%?

    It’s not in question that the informal sector is what has kept the
    real Nigeria humming along. That’s where most of the large number of
    unemployed, working age youth have been earning some kind of income.
    Indeed, it’s what’s compensating for Govt’s long standing failures to
    create or facilitate the creation of jobs. And, based on my knowledge
    of a large number of the micro-enterprises that sustain both the rural
    and urban poor, Gasoline is a significant input in the many varied
    forms of production. These are people who have evolved means of
    livelihood in adaptation to that lack of infrastructure.

    What then is this case for the removal of subsidy? That crude oil
    receipts do not cover the subsidy for the fuel on which the whole
    economy runs?

  13. To Mr. Kuffour! Thank you sir! I am almost in tears and the brilliance of your piece. I beg your leave as I am going to forward your wonderful missive to all my friends and others who it seems do not have the critical reasoning (and the facts) to understand what is truly at stake here. How dangerous the impact to the actual economy of the removal of subsidies when it is that underground ‘self starter’ economy fueled by gasoline that is keeping the economy afloat and serious affray at bay! You are a prince amongst men! I must say that analysis like yours also make me call into question how supposed technocrats like Okonjo-Iweala and Lamido-Sanusi can possibly justify their voodoo economics. Like you rightly put it, ‘na double wahala for deadi-bodi’. We will fight such farcical measures to the end and I, a member of the so-called ‘middle class’ who is self-employed but with a university degree (with honours), have marched every day and will continue to march in protest side by side the less fortunate members of our society. It is either this or wait for the coming anarchy to leave them no choice but to one day rise up and butcher us (for you can be sure the govt. functionaries would have escaped at the first sign of mayhem). I do it also because i cannot continue to employ 5 people if the new regime holds and i hold my responsibility to those folk and their livelihoods a trust and with a deep passion. All so we can finance more kleptocracy and waste? Never!!!!!

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