This was not how he had envisioned the job. Ibrahim Kadu, 38, and his workers were half way through the construction of a school about three hours from his home in Maiduguri, northeast Nigeria, when he caught the news in the street. The engineer himself had not had time to listen to the inaugural speech of the brand new president. But five words from his message now reverberated everywhere.
“The fuel subsidy is no more.” The government billions that in recent decades ensured that Nigerians could buy fuel for a few dimes per liter, but which also hung like a millstone around the country’s economy, had been abolished. Poof, go.
“We knew it was coming,” Kadu sighs by phone a few days later. “But that it would go so abruptly, never.” Barely 24 hours later, fuel prices at filling stations across the country shot up from 185 naira, about 35 cents, to 500 and in some places even 600 naira. Almost immediately his material also became more expensive, says Kadu. Cement, wood and cables that had to come from Maiduguri. “Suddenly that also went up by 35 percent. I had to stop everything, it is impossible to do that.”
The money from the subsidy can be put to good use elsewhere. But how do we know this is actually happening?
Ibrahim Kadu contractor
In his speech to hundreds of heads of state and other dignitaries flown to Abuja, Bola Tinubu, 71, wasted less than an hour fulfilling one of his most painful but, according to experts, also necessary election promises. Of a national debt that continues to increase was the subsidy, which the government last year about $10 billion cost, has long since become unsustainable.
“We will now invest this money in public infrastructure, education, healthcare and jobs that will substantially improve the lives of millions,” Tinubu promised.
The blow is hard on the majority of Nigerians, who live on a few dollars a day and who have already felt the pain of an inflation rate of now 22.2 percent. In recent decades, they have barely benefited from Nigeria’s oil giant status, because of corruption, but also because of a still valid paradox: Africa’s largest oil producer, with no working name refineries, has to import almost all of its petrol and diesel.
Make-up
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Nigerians regularly queue for hours and sometimes days at gas stations because of fuel shortages. They not only need them for their cars and scooters, but also for their generators that have to keep their homes and businesses running when the power goes out again – which happens almost every day. The low pump prices, as a result of the subsidy, were therefore a rare good thing from the state.
But the grant was also inefficient and, above all, wasteful, says Fadekemi Abiru, chief analyst at Stears, a data research firm in Lagos. “Ultimately, it was mostly wealthy Nigerians who benefited, not the poor, as is often said.” Much also disappeared across the border, where the dirt-cheap fuel was resold at higher prices. So doubled the day after Tinubu’s speech in neighboring Benin the fuel prices.
The subsidy also weighed heavily on the budget, says Abiru. “Just look at last year’s. In it, 4.4 trillion Naira (about 9 billion euros) was budgeted for the subsidy, more than for education, health care and infrastructure combined.” The burden was therewith increasingly heavier due to Nigeria’s declining oil revenues: partly due to insecurity and theft, production fell to less than 1 million barrels per day. At the same time, the war in Ukraine caused fuel prices to rise internationally.
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Tinubu, who won the election in February, is not the first president to do something about the fuel subsidy. In 2012, then-President Goodluck Jonathan preceded him. It led to days of protests, which almost brought the country to a standstill. Eventually Jonathan backed down. Even now, the country’s largest trade unions are making themselves heard. The Nigeria Labor Congress (4 million members) had announced a mass strike for this Wednesday, but it was cancelled prohibited by the court.
The union is demanding that Nigeria’s state oil company NNPC (Nigeria National Petrol Company) reverse the price increases at its gas stations. They point out that a full tank now costs almost as much as the minimum wage in Nigeria: 30,000 naira (about 60 euros). But according to the director, the NNPC must make the prices “compliant with the market”: the state would still owe the company $ 6 billion in subsidies already paid. “We cannot let this get any further,” CEO Mele Kyari told reporters.
A change had already started under Tinubu’s predecessor and fellow party member Muhammadu Buhari. When he took office in 2015, Buhari, who also made himself oil minister, vowed to tackle the sector. In 2021, he introduced a new law to open up the state-dominated market, including through the NNPC a commercial company in which the state has shares.
Import licenses
That law also opened the door to ending the fuel subsidy. But Buhari eventually left that to his successor, with an item in the budget for the subsidy that was sufficient until the end of June. On paper that is, because according to CEO Kyari, it was ultimately his company that largely paid for the costs. “Like you [de staat] can’t pay, you can’t expect us to carry the burden.” news agency Bloomberg him recently. In addition to abolishing the subsidy, President Tinubu also wants to grant licenses to companies to import gasoline and diesel. Now international purchases go through the NNPC, which resells the fuel locally.
The new president is aiming for another windfall. Two weeks ago, Africa’s richest man Aliko Dangote opened a mega refinery on the periphery of Nigeria’s economic heart Lagos. Once at full capacity, it will have the capacity to refine 650,000 barrels of oil per day: enough to make Nigeria self-sufficient and to be able to export oil, according to Dangote.
It’s not that far yet. For now, the festive opening was only ceremonial, mainly intended to allow President Buhari to leave his mark on the project, in which the state has a 20 percent share through the NNPC. The first oil is not expected to be refined until the end of July, after which production will increase from 100,000 barrels per day next year to 200,000 in 2025 and 300,000 a year later.
Moreover, it is still questionable whether Nigeria will actually become self-sufficient thanks to Dangote. “There is no known agreement that a percentage of production is reserved for the Nigerian market,” Ese Gladys Osawmoniy, an analyst at SBM Intelligence, told the French newspaper. Le monde. Another factor is that the project was significantly delayed and the costs rose from USD 9 billion to USD 19 billion. Osawmoniy: „There is a lot of pressure to make a profit. That makes export interesting.”
Nigerians have no choice but to take the blows. The long lines that panicked in front of petrol stations on the day of Tinubu’s speech have disappeared. Even in Lagos, notorious for its endless traffic jams, the roads are emptier. Buses have doubled their fares, as have taxi apps like Uber and Bolt. There are fears of a further rise in food prices, which have already risen sharply in the past year due to inflation.
In April, the Nigerian government closed a loan of $800 million to the World Bank to mitigate the consequences of cutting the subsidy for the poorest. But so far no measures have been taken. “That’s the problem,” says Ibrahim Kadu, the engineer from Maiduguri. “We know that the money from this subsidy can be put to good use elsewhere. But how can we trust that this will actually happen?”
The classroom that Kadu was building is now half finished. “The clients understand that I cannot continue for the agreed price,” he says. “They will come back to me next week.” Until then, it’s scraping, he says. As the eldest son in a family of nine children, whose father died thirteen years ago, he bears all the burdens. “It is now in God’s hands. Hopefully prices will drop again soon.”
A version of this article also appeared in the June 7, 2023 newspaper.