FT: Abuja's fire hazard; Fuel and religious violence make for an explosive mix

Financial Times ( UK )  

10 January 2012

Abuja's fire hazard; Fuel and religious violence make for an explosive mix

 [Editorial]

Nigerians are justifiably angry. Since President Goodluck Jonathan's government lifted a longstanding subsidy on fuel last week, the pump price of petrol has more than doubled, transport costs have soared and food prices jumped. For tens of millions of Nigerians living on the edge this represents a hardship too far. Moreover, it is one that has been imposed before the government can claim either to have raised living standards or significantly improved service delivery. Predictably, the unions have taken advantage and on Monday launched a debilitating general strike.

Yet the fuel subsidy had to go. Every government for the past 30 years in Nigeria , both civilian and military, has known as much. It is not the cost of the subsidy itself so much as the associated corruption and waste that is problematic. In practice money spent capping the price of fuel subsidises the accumulation of wealth by select importers, middlemen and top officials in the loop more than it helps the general population. It distorts the market, discourages investment in refineries and promotes smuggling across borders. In many areas imported fuel is diverted to the black market before it reaches the pump.

Under Mr Jonathan's brief presidency this waste has spiralled out of control. There is no real explanation, for example, for the near doubling of the cost of the subsidy last year to a record $8bn, and there is reason to suspect some of the proceeds were diverted to electioneering. The cost of the subsidy has risen so much it is now equal to federal capital expenditure, contributing to a yawning budget deficit and mounting public debt. The rationale for lifting the subsidy is sound: it is simply unsustainable if Nigeria is to maintain its recent record of growth.

What is questionable is the timing. An Islamist insurrection is threatening the fabric of the federation and dividing Nigerians along religious lines. Extremists in the barren north are tapping into widespread disaffection. Abuja , under a Christian southerner's control, is seen as doing too little to help the north develop.

To reverse this perception the government needs to free up extra funds for investment in social and physical infrastructure. Scrapping the fuel subsidy is the obvious way to do this. What Mr Jonathan failed to do was convince the population in advance that this is where the savings will actually go. The policy is the right one, but the reckless way he has gone about it risks pouring fuel on existing fires.