The Removal of Oil Price Subsidy in Nigeria: Lessons in Leadership and Policymaking in a Trust-Deficit Environment

To the cursory observer, the current crisis and street demonstrations in Nigeria are fueled by the attempt to withdraw the government’s price subsidy on gasoline, but the reality is much more than that. Nigerians feel the government must bring down the cost of governance, credibly fight corruption, and improve the security of life and property. Citizens are demanding some concrete results from government and feel that the wealth of the nation is enjoyed by a few; that states and local governments have failed in their obligations; and that the respect for the governed requires leadership and a policymaking process that is authentically Nigerian ­ consultative and inclusive.

The current crisis holds salient lessons in policymaking and leadership styles in an environment with a trust-deficit, like that which exists in Nigeria. Nigerians are not averse to the government, they simply want it to be better and to command the respect of the citizens, and, in turn, respect the citizens themselves in a quid pro quo manner.

It is important to characterize the trust-deficit environment that exists in Nigeria, where poor implementation of policies, as evidenced by poor budget performance and elite corruption, have been pervasive and where credibility and often legitimacy of the government have always been questioned. This environment is characterized by weak electoral processes that disenfranchise many, producing a weak responsive government. Citizens and civil society are also fiercely vocal in protecting the autonomy of domestic economic ideas. Although the current regime did not create this environment, it is still now required to manage it with all its will, capacity and competence.

In this atmosphere, taxation or removal of a subsidy requires responsive politics, negotiation skills and leadership style that is outward and inclusive. There were several options open to the government to address eliminating the oil subsidy. First, the issue could have been included in the presidential campaign. By voting and choosing President Jonathan, the electorate would have exercised their sovereignty over the policy choice so that some of the voices we are hearing now would have been muted.

Post election, other options open to government included: declaring an emergency and removing all subsidies at once; adopting gradual price increases and incremental removal of the subsidies; or postponing implementation but adopting the radical approach.[1] Unfortunately, in choosing the radical approach immediately, the government failed to address and plan for the consequential costs of such major change, which proved to be the reform’s undoing. Instead, the government should have gradually built a coalition of supporters including the legislature and used a well-designed communication strategy that was led by the President and other elected officials. Trust could have been built by demonstrating that this government was capable of providing public goods efficiently by minimally stabilizing electric power supply, fixing strategic roads, prosecuting corrupt high-level officials and getting the refineries to work at half their installed capacity. Dealing with these trust-building supply-side issues would send a credible signal to the citizens that the government is capable of delivering on its promises.

Why was this path not followed? My experience in Nigerian government is that policies, including key policies, are not seriously debated in terms of clear options that take into account factors such as alternative scenarios and their trade-offs as well as timing and sequencing of these various alternatives. Even though, in principle, the Federal Executive Council (the Cabinet) has collective responsibility for all decisions emanating from the Council, many ministers are simply concerned with what happens in their individual ministries and defer to key vocal cabinet ministers, often technocrats who have the voice and often the ears of the President on broader policy issues. In regularly deferring to this group, the President effectively forecloses further debates. I was hoping that a younger generation of leadership would create an atmosphere where policies are more robustly contested and moderated. It seems that we are not there yet.

But there lies the danger. True leadership, especially in this environment, requires policies made with both the head and the heart, and that the non-experts are invited to moderate the voices of the technocrats. Consequently, leadership is both substance and style, almost in equal doses. While the mastery of the facts, logic and arguments are important, of equal if not of more importance, is the emotional connection with the citizens. Thus, communication, persuasion, empathy, personal sacrifice and the strength found in weakness should be part of a decision making process. In a trust-deficit environment, leadership styles acquire additional significance. In communicating the oil-subsidy removal, the elected leaders took the back seat while the technocrats doled out cold facts. Rather than persuade, they tried unconvincingly to frighten the citizens into submission.

To make matters worse, rather than build a coalition of domestic support, they encouraged foreign voices to openly support the impending policy, exhibiting great insensitivity to a matter the active civil society, the middle class and the general populace find offensive. Nigerians value their policy independence and paid a great price for it in the past. The heavily debated $12 billion paid during the Obasanjo’s regime to liquidate Nigeria’s foreign debt was explained as necessary to buy the nation policy space and for Nigeria to chart an independent, self-determined economic course devoid of any outside imposed conditionalities. This insensitivity to foreign intrusion has helped fuel the crisis and is a huge lesson in policymaking.

Post Crisis Management

Whether the government succeeds in removing the oil subsidy or not, it has to contend with post-crisis management and the style of leadership it entails. This crisis has, therefore, presented both a challenge and an opportunity. The challenge is how to manage both the psyche of an agitated citizenry within the context of a widened trust-deficit and a vanquished citizenry if the subsidy is removed. In the latter, you have a mass of disaffected people who may now be tempted to deliberately sabotage government’s policies to prove a point. But this agitation, if interpreted correctly, would also present an opportunity for additional reforms in public service that would deal with the bloated work force and deeper reforms that would address structural transformation of the economy targeting industrialization and job creation. Both the challenge and opportunity would require negotiation skills, creative and inspirational leadership.

In concrete terms, it would require the President to take advantage of the present crisis to address corruption. In particular, he should seize the impetus of the crisis and confront the 36 governors and 774 local government chairmen on the imperatives of good governance.

In a federation, separation of powers hamstrings coordination of accountability oversight at all levels of governance. In order to overcome this, the federal government should design mechanisms for performance review and be prepared to name offenders. The new office of the special adviser to the President on monitoring should be given the resources to perform an ombudsman-like function for the nation. This office should collaborate with the National Planning Commission to design and implement a monitoring and evaluating framework across all the tiers of government in order to set up a system that can report on public sector performance nationally. All of these would require a new thinking in government; an incentive system that rewards good performance and punishes bad behavior. Setting aside matching funds from the federal budget can provide the incentive for this process.

The States and Local Governments Must be held Accountable

Part of citizen’s frustration directed at the federal government emanates from the poor performance of the leadership at the state and local governments. At this level, the system of checks and balances has broken down and citizens and civil society seem helpless in the face of the rampant abuse of office, brazen acts of corruption and lack of accountability. A simple review of budget performance and public expenditures in some states and local governments would reveal significant deviations of actual expenditures from the proposed budgets, year after year, in magnitudes that would shock anyone and make mockery of the budgetary process. Further evidence of corruption can be gleaned from the number of former governors that are facing serious corrupt charges once out of office when their constitutionally guaranteed immunity from prosecution is lifted.
 
Focusing on good governance is critical because 48 percent of all revenues, including those accruing from the subsidy removal would go to the states and local governments. Other countries in Africa such as Kenya, whose new constitution devolves power and authority to counties, have huge lessons to learn from Nigeria. The devolution must be backed by solid structures of accountability, such as the establishment of a performance review mechanism, in order to meet the expectations of citizens that the closer the government is to the people, the more responsive it would become in the provision of public goods.

The Failure of Politics

The fact that this policy was not canvassed during the election by a dominant ruling party points to a failure of politics in Nigeria. A lack of consensus within the ruling party as evidenced by the different positions taken by the legislature further buttresses this point.

Nigeria’s political class cannot continue to ascend to power on the basis of ambiguous ideas, ambiguous promises, zero plans and zero strategy. The way ministers and commissioners at the state level are chosen and allocated portfolios illustrate this more clearly. If there is a plan and strategy, then only certain people with certain skills and aptitudes would be fit to execute the plan. The current attitude towards politics and public political office overly favors distributional politics rather than merit and competence. The fundamental message is that Nigeria must fix her politics for her economics to be right.

Key Lessons 

• Radical approach to policymaking in a trust-deficit environment is not likely to be successful;
• In such an environment, policy reform should follow a process of open consensus building with a leadership that understands citizens rights in a quid pro quo;
• Key reform cannot be implemented in isolation of a broader strategy that addresses other governance issues;
• The strategy for communicating and managing the reform process must be robust and people-centered;
• That external voices must be minimized to protect the integrity and the domestic autonomy of the process;
• That in a federation, a strong national oversight structure should be established in order to ensure accountability and performance at all levels of governance; 
•  Steps must be taken to fix the political process because it greatly influences economic outcomes.

In conclusion, the crisis following the removal of oil subsidy in Nigeria is an assertion of citizens’ rights and an agitation for broader governance reforms targeted at addressing corruption and public sector inefficiency. Progress or further decline in Nigeria will depend on how the leadership exploits the platform of this agitation to negotiate and implement additional reforms that address the people’s legitimate concerns. To that extent the current tension is good. In the words of Martin Luther King Jnr., “constructive, non-violent tension is good for growth.”

[1] For a thorough discussion on policy making during a crisis see Kimenyi, M.S. and Mwabu, G. (2007). “Policy Advice During a Crisis”, Journal of Third World Studies, vol. 24. No.2.