Misfortunes of a Mismanaged Fortune: Revealing Nigeria’s Oil Crisis

 

Dr. A. F. Ahokegh

Department of History & International Studies, Kogi State University, Anyigba, Kogi State-Nigeria

 

 

INTRODUCTION:

During the colonial era, and even in the immediate post-colonial period; extending up to the late 1960s, agriculture provided the most stable source of revenue for Nigeria. The colonial government had used this resource to provide infrastructure facilities, which only a few like railways, harbours and housing can be mentioned for purpose of illustration. It is often argued that these colonial infrastructures were meant to serve the purpose of exploiting Nigeria’s resources. However, the point of relevance for this paper is that unlike today, that the oil revenue is mismanaged by Nigerian governments, income derived from agriculture was used to sustain the economy of Britain. If not corruption and lack of maintenance, the Nigerian citizens should have the advantage of using these colonial facilities today.

 

Under indigenous leadership, consequent upon Nigeria’s independence in 1960, the agricultural sector began to shrink, the technology that accompanied it equally contracted. Oil production for export increased dramatically as British and American oil corporations recognized increased investment opportunities.  Consequently, by the year 1970, oil appeared to be a better substitute; a quick revenue deriver, and indeed, the oil boom of the 1970s made the country’s economy ranked among the most buoyant economies of the world. In 1971, Gen. Yakubu Gowon created the Nigerian National Oil Corporation (NNOC), and declared in 1972 that all oil properties not currently owned by foreign entity, legally and automatically

became properties of the government. This was further encapsulated in the Nigerian constitution that all minerals, oil, and gas are the exclusive property of the federal government, which negotiates the terms of oil production with the private firm.¹  Most exploration and production activities were/are carried out exclusively by multinational corporations, but they operate under joint venture contracts with the Nigerian National Petroleum Corporation (NNPC).  In this partnership, the NNPC, the country’s oil company, contributes between 55 to 60 percent of production contracts and claims the same ratio of total revenues.²  The multinational companies such as Shell BP, Mobil, Chevron, Elf, Agip, and Texaco are all currently operating in Nigeria, although the Shell joint venture is clearly the most dominant operation, producing over half of Nigeria’s crude oil production.³ By 1975, Nigeria had the fifth largest stock of foreign direct investment in the developing world.⁴

 

Ironically, this oil fortune has not been a source of blessing to the nation. Firstly, it has ever accounted for the soaring price of foods in the country culminating in the agrarian stagnation and crisis of the 1980s and 1990s in Nigeria.  Stagnant or declining output, large increases in food price inflation, the virtual disappearance of agricultural exports and the rapid increase in food imports, and massive external debts are considered a few of the many problems related to the Nigerian government’s growth strategy that is based on oil.⁵  However, while these problems may be attributed to undesirable government policies, it is necessary to interpret them in terms of the various domestic and international pressures that have limited the capacity of various Nigerian governments to embark on an independent development plan.  The most prevalent of these forces, it can be argued, arose from Nigeria’s neglect of the agricultural sector and overdependence on oil production and exports, which have been entrusted to the Multinational oil conglomerates that have the financial and technological means to invest in this sector.

 

Secondly, it has been a source of confrontation between the civilians and the military who insist to remain in power in order to control the oil wealth, between the Niger Delta communities in attempt to outplay one another for control of the oil fortunes and between the Niger Delta communities and successive governments for compensation over their spoiled agricultural resources caused by oil spillage.⁶

 

Thirdly, it has perpetuated corruption in Nigeria and encouraged laissez-faire on the part of the constituent states and local administrations, which depend on statutory revenue allocation from the central government and rivalling over acceptable sharing percentages. While some states complain of favouritism in the allocation of funds, the oil producing ones continue to demand for special derivative fund, to pay-off for the environmental damage being caused by oil spillage. The non-oil producing states pick quarrel with the issue of special fund for the oil producing states, arguing that prior to the advent of oil, the non-oil but agricultural states had provided the revenue that was used to develop facilities in the entire Nigeria at large.

In the face of these crises for oil revenue, the ordinary Nigerian kept a stake with the government only in the area payment of subsidy on petroleum products. This had several advantages for the masses, expressed in a better standard of living. When therefore the government of President Goodluck Jonathan announced the withdrawal of subsidy on petrol, on February 1, 2012, the masses were angered and took to streets in protest. The withdrawal has been implemented, and its multiplier effects have worsened the poverty situation in the country. This paper takes a look at the disorders in Nigeria occasioned by the removal of oil and how this has imparted on the civil populace.

 

Oil Subsidy Removal: An Historical In-Road

For quite a long time, successive Nigerian governments have contemplated the removal of subsidy on petroleum products.  However, the ability of past leaders to perceive what would be the reaction of the masses of Nigerian against total removal of oil subsidy has always paved the way for alternative action of price increase.  In 1978, the military government of Gen. Obasanjo raised the price of fuel from 8. 4k to 15. 37k and in 1982, the Shagari administration raised the price of fuel to 20k. Since then, domestic consumption of fuel has suffered the fate of incessant price hike with memorable consequences. During the Gen. Ibrahim Babangida and Gen. Sanni Abacha military regimes, the battle shook the nation when the Nigerian Labour Congress (NLC) tackled the increases. In 1986 the Gen. Ibrahim Babangida government increase the price of fuel to 39.5k and it led to tension and mass protests across the country. In 1994 the Gen. Abacha junta increased the price of fuel to ₦15, from ₦3.25 but after massive street protests, it reduced it to ₦11.  Clashes between the NLC and the military regimes of Babangida and Abacha led to the dissolution of the NLC’s national organs, in 1988 and in 1994.⁷ In 1998, Gen.  Abdulsalami Abubakar increased fuel price from ₦11 to ₦25 but after days of sustained protests, it was reduced to ₦20. In 2000, the Obasanjo civil government attempted to raise fuel price to ₦30 but protests and mass rejection forced it to reduce the increment to ₦25 and later to ₦22.  During the April 2003 election, Nigeria was engulfed in four nationwide stoppages over fuel subsidies, caused by a legal battle over the extent of the right of labour to strike. The price of fuel this time was pegged at ₦40.00 a litre and in 2009, it rose to ₦70.00 a litre. The government was at the same time planning outright removal of oil subsidy when Umaru Musa Yar Adua was elected as the new President in 2007 and reduced fuel price to ₦65.00 per a litre.

 

However, the masses of Nigerian have ever stood firm in rejection of the reasons given by the Nigerian governments to justify increase in price of fuel and subsidy removal. Instead, they argue that the problems bedevilling the national economy revolve around corruption and lack of transparency, and it neutralises any reason or justification by the government. This explains why labour movements, civil right groups, students and other individuals have always championed protests against successive governments. For instance, individuals like the late Chief Gani Fawehinmi had once battled various governments that tinkered with subsidy or petrol pricing. Apart from mobilising the people to protest against the acts, Fawehinmi brought the fight in perspective during Obasanjo administration when he published a book documenting the many times the administration had increased fuel prices within his eight-year rule.⁸ While activists such as the late Chuma Ubani, Prof. Wole Soyinka, Dr. Beko Ransome-Kuti,  Mr. Femi Falana, Prof. Tam David-West and Cardinal Olubunmi Okogie have also been very active in the struggle, the trade unions have often led the populace against government anti-populist oil policies. Thus, the masses of Nigerian looked in the direction of the Nigeria Labour Congress, Trade Union Council, National Union of Petroleum and Natural Gas Workers and Petroleum and Natural Gas Senior Staff Association of Nigeria to lead them against the plague called fuel subsidy removal.

 

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The Battle Line Drawn: The Government versus the Masses

On February 1, 2012, the battle line was drawn. It was the battle over Nigeria’s oil resource, which for a long time had been a source of confrontation between the military and the civilian politicians, the political heavy weights, the government and the Niger Delta youths, and the government and the civil society. The President, Goodluck Jonathan announced on this day his government withdrawal of subsidy on petroleum products, raising the price of fuel to ₦141.00, about 120%. Prior to this, his predecessor, late President Umaru Musa Yar Adua had reviewed downward, the price of fuel from ₦70.00 to ₦65.00.⁹

 

Resistance to the presidential statement was followed on January 2, 2013 by mass protests; civil disorder and demonstrations across the country by the generality of the civil society. When Labour and other Allied Union failed to prevail on the government to reverse its decision, an ultimatum was issued to the government on February 5, indicating a general strike on Monday January 9. The declaration of strike by Labour did not only result to the boycott of official duties, it also spurred further demonstrations, especially in cities such as Kaduna, Lagos, Kano, Ibadan and all the state headquarters. The methods of demonstration were peaceful as no destruction of public property was mentioned anywhere in the country. This was a deliberate policy by organisers to sustain the demonstration and evoke the sympathy of the international community. However, the government had from onset appeared to be far from being moved by the demonstration to engage Nigerians in meaningful dialogue. Instead, it reasoned awkwardly and dished out instruction to security agents that “the best way to stop the protests was to kill at least one of the protesters.”¹⁰ Consequently, the first casualty, Muyideen Mustapha was feared dead on January 3, in Ilorin.¹¹

 

As the government strategy of shooting protesters paid little positive results, it added propaganda and press censorship. A minister in the Jonathan’s cabinet told Nigerians that the pains of the subsidy removal would be overran by its long-term benefits of construction and rehabilitation of the railway, refineries, federal roads, hydro stations, information technology, and water projects.¹² But the problem of these public utilities is not of lack management finance, it is the problem of corruption. Contracts for the resuscitation of the railway and electricity regeneration have been awarded by past regimes but not a little was done and nobody was held accountable. In fact the striking masses lamenting the hardships that subsidy removal would engender in society revealed that they were against the following: corruption in government and public service, high rate of poverty in the country, etc.¹³

 

The unbelievable issue is President Jonathan’s position that fuel subsidy cost his government a whopping amount; between ₦1.3 trillion to ₦1.5 trillion a year. The basis for the masses disbelief rests with the fact that the Olusegun Obasanjo administration, which the Umaru Yar Adua/Goodluck Jonathan preceded, was spending ₦300 billion a year to subsidise the cost of petrol. When the Obasanjo government left power in 2007, the country as the ₦30 billion debt he met was fully repaid. Thus the problem of the Jonathan government, which warrants its inability to continue subsidising the price of fuel has not been explained, and so, not justified. It is equally on note that the federal government shares huge sum of money as excess crude revenue with the local governments every year and such money ends up in private pockets.¹⁴       

 

 

It is pertinent to note that the masses of Nigerian have always seen organised labour with contempt, based on past antecedents. Thus, the massive turn-out was not really the belief that labour would provide the required direction for the strike, but induced by self enthusiasm to stamp the abuse of democratic principles. For what was termed the “mother of all strikes” planned by labour for Monday January 9, 2012, Denja Yakub of NLC highlighted labour intended actions as:

 

We are shutting down the Nigeria airspace to local and international flights from Sunday night. If a revolution will solve our problems, why not, what is going on already shows that our people are prepared for a revolution, but we will not ask for a revolution that will bring back the military, they are a part of the problem.¹⁵

 

Surprisingly, “the mother of all strikes” was abruptly shelved and the labour leadership agreeing PMS price of ₦97 per litre announced the suspension of the planned strike. Individuals and organised civil society groups vowed to continue the strike in spite of this betrayal by labour. However, the general morale was weakened, it was also an excuse for the government to arrest and detain or kill in the name of illegal public disturbance.            

 

Those who insisted on continuing the strike averred that the ₦97 downward review by the government was absolute nonsense, especially in the light of the meagre minimum labour wage of Nigerian workers that is pegged at N18, 000.  When compared with labour wages and petrol price in the other oil producing countries as shown on Table 1, the promises made by the government of a better future remains a dastardly action.

 

The table shows that Nigeria ranks 6^th in oil production out of the ten OPEC countries. With a total population of 167, 000000, which is more than the total population of all the OPEC countries put together, the government pays its workers a minimum wage that is the least.

 

Oil Subsidy Removal: The Aftermath

“The Prices of everything will increase - transport, housing, school fees, food, etc, the common man will not be able to survive.” Perhaps, everything that constitutes the aftermath of the fuel subsidy removal revolves around the issues raised by Ganiat Fawehinmi, wife of the late legal luminary and social activist, Chief Gani Fawehinmi at the onset of the strike. January 1, regardless of the year, is a festive day, in celebration of every New Year. So, was January 1, 2012 a day that Nigerians who had travelled to celebrate the New Year with their families were thrown by the government decision and the concomitant increase in PMS Price. So the first prize that the People paid was to abscond from their places of work due to lack of enough transport money.

 

Given the low level of the nation’s economic development, oil subsidy removal has had immeasurable negative consequences on society. Increase in Price of fuel from ₦65 to ₦97 is astronomical and therefore, its multiplier effects are being felt, especially by people outside the corridors of power.  More than 50% of worker’s monthly income is being spent to cover the cost of transportation, thereby reducing the propensity of such income to provide for health, clothing, food, education and other essential needs. A survey conducted after the oil subsidy removal indicated a more than 100% increase in transport cost, and its effects are spread proportionately to other essentials of live. Also unconfirmed figures of HIV/AIDS casualties as a result of inability to access antiretroviral drugs, due to their high cost, are tentatively put at three hundred a day.¹⁶     

 

 

 

Table 1: Comparative Figures of PMS Price and Minimum Wage of OPEC Countries, January 28, 2012 (in Naira)  

	OPEC Member	PMS Price/Litre	Minimum Wage	Population	Production (2007) bPD
1	Venezuela	₦3. 61	₦95. 639	29, 105, 632	2, 340
2	Kuwait	₦34.54	₦161, 461	3, 566, 437	2, 340
3	Saudi Arabia	₦25.12	₦99. 237	27, 136, 977	9, 800
4	Iran	₦102. 05	₦86, 585	75, 330, 00	3, 700
5	Qatar	₦34. 54	₦101, 250	1, 696, 563	810
6	UAE	₦78. 18	-	8, 264, 070	2, 500
7	Algeria	₦63. 55	₦55, 957	36, 423, 000	1, 360
8	Libya	₦26. 96	₦23, 813	5, 670, 688	1, 650
9	Iraq	₦59. 66	₦25, 813	30, 399, 572	1, 481
10	Nigeria	₦97. 00	₦18, 000	167, 000000	2, 250

Source: "This is why we need to fight this fuel hike..." Linda Ikeji's Blog. January 5, 2012

 

Institutionalised corruption has been an anti-development agent that maraud every ingredient to socio-economic development of the country. Fuel subsidy removal has in a way created an avenue for more of financial corruption to take place. There are glaring evidence of money generated from past partial subsidy removal and the present complete removal been mismanaged. The House of Representatives’ probe of oil subsidy revenue between 2009 and 2011 showed reckless looting. For instance, part of the report unveiled among others, how 35 firms collected allocations that were not registered with the Corporate Affairs Commission, recommending that certain marketers be made to refund a huge sum of ₦1.1 trillion as money collected for petroleum products not supplied. It also revealed that the Nigerian National Petroleum Corporation collected ₦295, 098 billion above the recommendation of Petroleum Products Pricing Regulatory Agency.¹⁷

 

After, the removal of fuel subsidy, the government attempted to prove that it meant to properly utilise the huge revenue arising from it as promised. This culminated to the institution of the Petroleum Revenue Special Task Force, headed by Mallam Nuhu Ribadu to retrieve outstanding oil revenues payable to the federal government since 2002. The committee uncovered fraud in the Nigerian oil sector amounting to ₦4.64 trillion.¹⁸ Perhaps, it is worth mentioning that these discoveries of oil companies colluding with Nigerians, possibly government officials to ruin the economy are being made as a result of the strike.

 

But Nigerians are not unaware of the deceits of government. It is well remembered that subsidy had been removed for kerosene and diesel, and the government promised to resuscitate the ailing refineries. Sadly enough, they have remained in their dilapidated state. Even at the time that the government contemplated the removal of oil subsidy, Nigerians never concealed their emotions, stating categorically that they are not against subsidy removal, but against the timing, procedure and the deceit of the government. Accordingly, oil subsidy removal could be accepted if it will improve the welfare and living standard of the ordinary Nigerians, by reducing poverty and unemployment.¹⁹ However, none of the promises of the Jonathan administration have been realised, as the railway is moribund, electricity supply remains epileptic, nearly all the roads that traverse the country are torn off, the hospitals are in shambles without the required drugs, and life in the rural areas remains a threat.  It is no wonder how these essential facilities could be provided when the much accumulated revenue is mismanaged. The post fuel subsidy removal situation vindicates the demonstrators who feared that the government would not properly utilise the subsidy revenue, even if subsidy is withdrawn.       

 

The Right Thing That Was Not Done

The government of President Jonathan that defied the masses of Nigerian by removing subsidy on PMS and inflicting intolerable hardship on the citizenry is a democratic one. Therefore, the right thing, which the government should have done, was to tackle the issue democratically. This argument is built-up with an explanation of democracy as defined by Abraham Lincoln, “a government of the people, by the people, for the people.”²⁰ To him, the electorate is indeed the government, simply directing their representatives to do exactly their will and the representatives have no options than to do what the electorate desired. The practice of a true democracy therefore hinges on a well articulated electoral process and strict adherence to, which leads to issues relating to legitimacy of government such as improvement in welfare and the uphold of the rule of law. These virtues collectively account for good governance. Thus, four elements of democracy namely; popular consent, political equality, majority rule and popular consultation are identified.²¹   

 

It is therefore right that President Goodluck Jonathan unveiled this sweeping policy during his electioneering campaigns. If the masses had decided to vote him in power, in spite of the revelation, the implication would have been that they accepted the withdrawal of subsidy. Even after the election, democracy provides for consultations with the electorate, which in other words, is referred to as the participatory principle. Recourse to the Nigerian constitution, 1999 by government was also the right thing that was not done. Section 14 (1) and (2a) of the 1999 constitution (as amended) states clearly, the alienable rights of the citizens.²² It the government was one that respects the rule of law; the situation could have been avoided. 

 

The government of Jonathan unilaterally and arbitrarily carried out the anti-populist subsidy removal policy, thereby slighting the very essence of democracy. Therefore the demonstrations, protests and strike were meant to show the level in which the masses were dissatisfied with the government and that legitimacy to rule has been retrieved. It is therefore pertinent to mention that if the faulty election that brought Jonathan in power as President was not enough reason to make his government illegitimate, the removal of subsidy on PMS has made it.     

 

Nigeria is not the first country to remove subsidy on fuel, countries like Venezuela, China, and Chile, to mention a few, have done it. But before these countries adopted the policy, a suitable social and economic environment was put in place. They employed schemes that involved making small single or periodic payments to low income families. In adopting the measure, the Nigerian government failed to take into cognisance the peculiar nature of the nation’s economy that is underdeveloped: the economy is monoculture, rural and urban poverty, corruption, unemployment, etc. Indeed, the United Nations did not state any universally applicable model for subsidy removal; instead it opined that the policy should be determined by local economic peculiarities.²³ 

 

Consequently, the local peculiarities that government needed to have addressed are the ones that hover around social welfare such as;

a.       Upgrading facilities in the transport sector: There was every need as a prerequisite for fuel subsidy removal for the government to have resuscitated and expanded the dilapidated railway system, the road network that have become death traps, caused a rebirth of the water transport system. Supplying vehicles as indemnity is meaningless because their effects are not felt anywhere.

b.      Resuscitate the existing refineries and build additional ones. Since this was not done, it is clear that the subsidy is import-driven, which is to say that much of the revenue accumulated would be used to import refined petrol.

c.       The manufacturing sector faces acute inadequate energy supply. Efforts to resolve this problem were started by the Obasanjo administration, but ended up in waste of money, as the situation remains of epileptic power supply. Since the supply of electricity could not be stabilised because of corruption, and since corruption was not eradicated, the much generated revenue would go into private pockets.

d.      The problem acute poverty was not attended to before the policy. The government needed to have reduced poverty abysmally through employment, increase in minimum wage and the stepping up of public utilities.          

 

SUMMARY AND CONCLUSION:

The paper examines the ironies of Nigeria’s oil fortune, beginning with the military attempt to permanently strangle democracy in Nigeria and remain in control of the oil resource, the scramble for the oil wealth by the politicians, the inter-ethnic conflicts in the Niger Delta in the name of the struggle for oil wealth and the war between Nigerian governments and militant groups demanding reparations.  

 

The central issue discussed in the paper is the removal of subsidy on PMS on January 1, 2012 and the masses’ reactions. The paper agrees that subsidizing energy products generally has the consequence of creating a drain on the budgets of developing economies, including Nigeria. It increases national debt and causes a drain on the national budget that could be dedicated to other sectors like education and health care.  However, the essence of every government is to provide for the masses’ welfare. This makes it imperative for government to continue to subsidise energy products, if that generates welfare. This is more obvious for a government like Nigeria that has not put in place the prerequisites for the policy

 

ENDNOTES/REFERENCES:       

1.       In 1979, in an effort to establish further control over the industry, the government merged and restructured the NNOC and the Ministry of Petroleum to form the Nigerian National Petroleum Corporation, an entity which would exert more power over the allocation and sale of concessions than the NNOC. By 1979, the NNPC had also gained 60% participation in the oil industry.

2.       Hajzler, C. Quoted in Ene, E. “Oil and the Environment in Nigeria: the Shape of an Environment Policy.” In The OPEC Bulletin, Vol. 25, 1994.

3.       International Monetary Fund, “Nigeria: Experience with Structural Adjustment.” Washington: IMF, March 1997.

4.       Human Rights Watch. “The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria’s Oil Producing Communities.” New York: Human Rights Watch, 1999.

5.       Europa. The Europa World Year Book 1997 (Vol. II).  Europa Publications Ltd., 1997

6.       Human Right Watch (2005) “ Rivers and Blood: Guns, Oil and Power in Nigeria’s Rivers State”

7.       Onwuka, A. “Subsidy Removal: A History.” In Vanguard, October 9, 2011

8.       Lasisi, A and Augoye, J.  “A history of protests against subsidy removal.” In The Punch May 25, 2013

9.       Afam Okereke “Removal of Oil Subsidy in Nigeria, the only way forward” http://www.nigeriafilms.com/news/15816/ 49/removal-of-oil-subsidy-in-nigeria-the-only-way-for.html

10.     See Security Report “Kill at least one person.“ OMOJUWA .COM. January 5, 2012

11.     Shittu, H. “Fuel Protester Killed 3 Days after Graduation.” This Day, January 5, 2012

12.     Onuba I. “Subsidy Removal: Nigerians Won’t Suffer In Vain.” The Punch, January 8, 2012

13.     Busari, S. “What is Behind Nigeria Fuel Protests? – CNN.com” Retrieved January 9, 2012

14.     Fani-Kayode, F. “Who Will Deliver Us From This Goodluck?” –   ModernGhana.com, January 4, 2012. Retrieved January 10, 2012

15.     Occupy Nigeria www.wikipadia.com

16.     The rough statistical figures were derived through the author’s contacts with medical personnel in some Nigerian hospitals. The Federal Ministry Health was not visited, because the author is aware of the privacy of such information, especially regarding this sensitive issue, which threatens the Jonathan democratic government

17.     Sango, S. Oil Subsidy Probe: A Peep into the Capitalists’ Chambers of Fraud. In Socialist Democracy, July – August, 2012

18.     Ambush, O and Al-Makura. “Ribadu Committee Uncovers ₦4. 64 trillion Oil Fraud.” In ENVISION envisionnigeria.com/index.

19.     Onuegbu, C. “Issues with Oil Subsidy in Nigeria.” In NEWSDIARY, November 2, 2011

20.     Ogundipe, D. O. “Analysis of Fuel Subsidy Removal by a Young Nigeria.” In Elombah, Monday February 11, 2013 http://www.elombah.com/index.php/special-reports/14517

21.     Sullivan, D. G et-al (1980) How America is Ruled, New York: John Wiley and Co, Pp. 31-34

22.     Constitution of Nigeria, 1999, Section 14(1) “The Federal Republic of Nigeria shall be a state based on the principles of democracy and social justice”, (2a) “Sovereignty belongs to the people of Nigeria from whom government through this Constitution derives its power and authority”

23.     Gani-Ikilama, M. W. “Removal of fuel subsidy in Nigeria: proposed guidelines.”http://thelawyerschronicle.com/index.php? option=com_content&view=article&id=139:removal-of-fuel-subsidies-in-nigeria-proposedguidelines&catid=45:current-affairs& Itemid=57