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Goodluck Got It Wrong

The FT is warning that Goodluck Jonathan has just gambled and lost the biggest test of his presidency thus far. He is the latest in a line of Nigerian presidents who occasionally try to abolish the country’s costly fuel subsidies. But Nigerians have come to see the subsidies as the one and only benefit they get from the central government.

There is no doubt that the oil subsidy is unsustainably expensive: over the past four years, it has cost the government approximately $22 billion. Worse, the foolishly constructed policy promotes corruption and smuggling and discourages the development of a domestic refinery industry.  Nigeria’s oil policy is a classic illustration of what happens when populism, corruption and incompetence set up housekeeping together.

But President Jonathan seems to have gone about a necessary reform in an unsustainable way.  The subsidies were ended suddenly and without warning, and no serious effort was made to cushion the blow or, as many countries have done, to substitute means tested benefits for unsustainable subsidies to the population at large.

Now he will likely have to back down under pressure and both his authority and his popularity will not easily recover. Nigeria’s economy is paralyzed and losing $600 million every day, according to the central bank governor. Meanwhile, there are riots in the streets.

The president seems to be running out of options. The unions representing oil workers are threatening strikes over the fuel price rise. If an agreement is not reached with the big oil unions this weekend, production will be shut down. And he can’t go down that road, not with oil revenue making up 80 percent, perhaps more, of government income.

Few countries need good government and strong leadership as much as Nigeria, but there seems little hope of positive change even as the country’s problems grow more urgent.

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  • Seun Sanni

    With all due respect. President Goodluck Jonathan should listen to that same voices of the people that brought him into power. I think that could help him restore his lost glory.

  • ibrahim

    removal of the subsidy without curbing corruption is a waste of time.curbing corruption and reducing the overhead cost of governance will do more good to the economy than removal of subsidy.

  • Bruno Behrend

    Privatize the entire national oil company, and give the stock the the citizens.

    Tell them the size of their dividend checks will be bigger if they get rid of the subsidies.

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