Nigeria president’s bungled fuel policy hurts his reputation

Nigerian President Goodluck Jonathan’s bungled effort to raise the country’s fuel prices to the market rate has hurt his international reputation as a potential reformer and infuriated a population tired of decades of rapacious government.

The nation incurred almost $1.3 billion in economic losses during a nationwide strike that followed Jonathan’s announcement Jan. 1 that the government was ending a fuel subsidy that kept gasoline prices low, the National Bureau of Statistics said Wednesday.

In addition, his deployment of troops in response to a protest movement dubbed Occupy Nigeria was widely condemned as residents and prominent people such as Nobel laureate Wole Soyinka and Lagos Gov. Babatunde Fashola, a leading opposition figure, objected to such government action.

“Nigerians are saying enough is enough,” said Kunle Amuwo, Nigeria analyst for the International Crisis Group. “Nigeria is a very rich country, but people are very poor. Nigerians don’t trust their government because there has been a cycle of broken promises by the government for decades.”

Jonathan backtracked and lowered fuel prices Monday, though they remained higher than they had been before the new year. The government set the price at $2.27 a gallon, down from the $3.50 that had set off protests. But he warned that the subsidy would be phased out to provide funding for other expenses, such as roads and education.

The strike, which union leaders called off Monday, and protests, during which about a dozen people were killed in clashes with police, showed deep public disenchantment with a president who grew up in poverty in the oil-rich south and came to power promising to reform Nigeria and deliver a better life for his people. After decades of promises from venal politicians, many Nigerians do not believe the government will redistribute to the poor the estimated $8 billion in annual fuel subsidies, according to analysts.

The fuel subsidy, which reduces the price of fuel for running generators in a country with a poor utility infrastructure, also benefits middle-class and wealthy car owners.

The country is the world’s eighth-largest oil producer but imports almost all of its gasoline because it lacks modern refineries. The subsidy is paid to fuel importers to cover the gap between the fixed price and the market rate.

The arrangement contributes to systemic corruption, with shell companies claiming subsidies for fuel never imported, and other importers claiming subsidies for imports to Nigeria, then shipping their fuel to neighboring countries to sell at the market price, according to analysts.

“Many officials or their cronies are involved in the oil market and importing oil. It’s a cabal and members of the cabal are sucking Nigeria’s wealth through the so-called oil subsidy,” Amuwo said. “But even last year, the government overspent the subsidy by at least 30%.”

Analysts also warn that investors are unlikely to spend billions of dollars to refine fuel if prices are set below the market rate.

“The subsidy has got to go.... The margins are thin enough as it is,” said analyst Kayode Akindele, a Lagos-based partner in the London investment management firm, 46 Parallels.

Akindele said that besides the subsidies, Jonathan must deal with a bill designed to reform the oil industry that has been bogged down in parliament for years. The bill has made little progress because of powerful vested interests, including government oil officials, opposed to reform and transparency in the industry, he said.

Akindele, like others, said the government’s overnight decision to ditch the subsidy exposed popular anger.

“Initially it was a shock because all of a sudden the subsidy was removed on Jan. 1 and the price of food and transport took everyone by surprise,” he said. “But what you see is that people don’t trust the government. People were saying cut government spending and cut government wages and we don’t need 40-car convoys to carry government ministers around.”

Amuwo said Jonathan must follow through with his campaign promises to regain citizens’ trust.

“Jonathan made very beautiful speeches when he was campaigning and Nigerians said Jonathan is coming to power to change things,” Amuwo said. “But now people are saying the Jonathan government is a chip off the old block, despite the promises he made to Nigerians.”

robyn.dixon@latimes.com