Fuel Subsidy & Its Removal: Facts and Myths

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The Nigerian ruling class has declared an open war on the fuel subsidy. During the 2023 general elections the flag bearers of the All Progressive Congress (APC), the People’s Democratic Party (PDP), the Labour Party, and the New Nigerian People’s Party (NNPP), expressed their consensus on the fuel subsidy regime. They all expressed the view that the subsidy is bad and is the primary cause of our increasing indebtedness. 

More importantly, they are in agreement that the only solution is to remove it completely and adjust the economy to unsubsidised petroleum products. This is a position that imperialist financial institutions such as the World Bank and the International Monetary Fund (IMF) have pushed for years.

In 2012, under strong pressure from the IMF, the Goodluck Jonathan-led administration removed the subsidy on New Year’s Day, sparking a nationwide uprising that we would come to know as “Occupy Nigeria”. This massive resistance led by the trade unions forced the government to reverse its policy and in part doomed President Goodluck Jonathan’s re-election chances.

But the ruling class regrouped and now both the incumbent President, Muhammadu Buhari, and his successor, whoever the tribunal decides that is, agree: fuel subsidy MUST be removed. The president-elect, Bola Ahmed Tinubu, has vowed that he will end the subsidy. And the Buhari administration said the subsidy program must not go past June. The IMF, excited by this rapid neoliberalisation has announced a staggering $800 million loan to Nigeria to use as a palliative to cushion the effects of subsidy removal.

But what really is the truth about the fuel subsidy? While it is no doubt true that the system is riddled with corruption and extremely expensive, is it also true that the only solution is to end the program, an action that would exacerbate the cost of living crisis that the working people in Nigeria are already embroiled in?

The Nigerian ruling class, bloated by its own self-prioritisation, has for the past several years waged a media war to turn public opinion against the subsidy, with dangerously mixed results. More and more members of the shrinking  middle class have now adopted this “ideology of growing pains.” Let’s do it now, they say. Things will be hard but it will be worth it. Patriotism, they call it.

But they have failed to consider all the other options which have been kept out of the conversation by Nigerian capitalists and their media outlets, forever willing to tout whatever the IMF line is.

Nigeria has vast crude oil reserves, there is no reason why petroleum products should not be cheap, much cheaper even than what it is sold for today after subsidy is applied. But the Nigerian capitalist class has been a loyal servant to the international capitalist order that maintains economically underdeveloped countries in the global south as extractive outposts, and sources of cheap raw materials for the industries of western countries. 

Nigeria exports crude oil and imports refined crude products and has been doing so for decades, since just shortly after winning its flag independence. Six decades and three refineries later, we are still exporting crude oil and importing refined petroleum products. Why is that? And more importantly, why is this not being identified as the root problem? In whose interests is it to adopt such a surface-level analysis that harps on the cost burden of subsidy and not why Nigeria is still importing refined petroleum products?

On 16 August 2021, President Buhari signed the Petroleum Industry Act into law. The law paved the way for the full privatisation of the NNPC, without addressing the moribund situation of the country’s refineries in any significant way. 

Ten days later, the now NNPCL announced that it had invested $2.7 billion in the Dangote refinery, which was then under construction. The CEO of the NNPCL, Mele Kyari said the privately owned refinery would spell an end to the importation of petroleum products in Nigeria. He also said Nigeria needs $12 billion to revive its state-owned refineries. 

This raises questions as to why that $2.7 billion, which by the way was borrowed, was handed to a private refinery. Under Kyari’s leadership, the NNPCL has spent a further $1.1 billion on the Ajaokuta-Kaduna-Kano pipeline project. That is, on crude extractive and transport infrastructure, but not on refining/processing infrastructure. This should tell us something important about the role the Nigerian ruling class sees for itself within the global capitalist system. 

Earlier this month, bombshell reports emerged that Mele Kyari and the Chief Financial Officer of the NNPCL, Umar Ajiya, paid themselves billions in gratuity fearing that they would be replaced by the next administration, which would be sworn into office on May the 29th. They have both admitted to doing this but somehow retain their jobs. And Kyari has for years been a proponent of ending subsidies because it is “too expensive”. Billions in gratuity to two individuals is affordable, but the subsidy is not. That is the logic of the Nigerian ruling class, insistent on leeching this country dry as they mismanage it into the dark ages.

It is very clear to anyone who spends a few minutes considering the facts, that the solution to the issue of fuel subsidy is to get the state-owned refineries operational, and going further, to nationalise the petroleum industry placing it under the democratic management and control of working-class people. 

This will give us full control of the sector and also keep the wealth from our resources in our collective purse, and not in the pockets of the Western multinationals that currently control the sector, and the few self-serving capitalists who are their junior partners. 

The leadership of the labour centres (the Nigeria Labour Congress and the Trade Union Congress) seem even weaker and more compromised now than they were in 2012, and the Nigerian left must learn a critical lesson from this. Defeating the ruling class in one battle is not enough. The bosses have regrouped, re-strategized, and come back more energised, while the Nigerian working masses are again on the defensive. 

Concessions are important in the class struggle, they bring material reprieve and energise workers to continue waging the struggle. But they are not as conclusive. We have to win a revolutionary transformation of society, to put lasting benefits for working people in place. The goal of conscientised workers must be to fight the incumbent and incoming administration, not just to a standstill, but to defeat. We must put forward clear concise demands on the direction in which industrial development must go. It must be one that is people-centred, humane, and environmentally conscious, and that can be established only by working-class people themselves being in power. 

Fuel subsidy removal is only an indication of what is to come. Our response will demonstrate how prepared and committed we are to defending our class interest, and emancipating ourselves.

by Kayode Somtochukwu ANI

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