On the first of January this year, the Nigerian government announced it was going to completely remove the subsidies on petrol also claiming it was just huge and unsustainable .
In the UK, the immediate reaction was a sudden massive increase in the numbers of installation as the announced cut was only going to take effect from 12th December.
In Nigeria, the removal was effective from the minute it was announced meaning there was no time for anyone to stock up or make any other arrangements.
One subsidy was targeted at a renewable energy source while the other was directed to fossil fuel.
Both announcements caused an uproar and protests. In the UK it was fought and challenged mainly in the courts by environmental groups and the renewable energy industry. In Nigeria it was sorted out on the streets with mass protests in a combination of Arab Spring style and Occupy Movement style.
In the UK, the object of challenge was the legality of the action especially the procedures followed. In Nigeria, the actual existence of a subsidy was questioned and doubts raised on the eventual utilization of any savings resulting in the removal of subsidies.
In the UK, the subsidy was initially introduced to encourage the uptake of renewable energy technology and to help meet the country's high carbon reduction targets. However, the governments now claims that the aims have partly been achieved and that the tariff has to reflect the present costs and ease of installing the technologies. The government was worried it was running out of the £867m budget it set aside for the Feed In Tariff.
In Nigeria, the subsidies existed because the country has large deposits of crude oil but lacked the refineries that would turn it into petrol. The citizens thus see the subsidies as the only was they benefited from the country's oil wealth. The government now claims that the subsidy benefited only the importers of fuel and those who smuggled it to neighboring countries where petrol was a lot cheaper.The government is proposing using the $8 billion it spends annually on fuel subsidy for infrastructure projects.
The immediate consequences of the removal of petrol subsidy in Nigeria is the tripling of the pump price of petrol with directs effect on other commodities and services especially transport. In the UK, the immediate outcome is not certain but a reduction in the price of panels is expected.
After a week of protests that brought the country to a standstill, the Nigerian government backed down and reintroduced part of the subsidies. In the UK despite two court rulings that the action was legally flawed, the government is taking the challenge to the Supreme court.
These two cases raises the following questions.
- What's the best way to protest against government policies?
- What is the true cost of energy?
- Should there be any subsidy?
- What should be subsidised?
- Who benefits from subsidies?
- Are we willing to pay more in bills to fight climate change?
I can understand removing subsidy on renewable energy sources even though I still have my reservations about the whole climate change agenda and all the rest of it.
ReplyDeleteWhen our incompetent governments in Nigeria both past and present start fixing decayed infrastructure, provide world class education, functional healthcare, stable power supply, jobs etc, then they can come and have a debate about subsidy removal. But for now, it remains immoral in my view.
I get your point. I have followed the subsidy removal debate in Nigeria very closely. I agree that it amounts to setting the cart before the horse despite the good intentions behind it. The government seems to have realised that given the firefighting activities it resorted to following the strikes such as promising to create jobs, mass public transport etc.
DeleteIt is a bold step though a bit insensitive. It can be remedied though by taking a wide range of affirmative actions. It will have to hand in hand with fighting corruption and investing in development.