Opinion

Retrospect: Tea Party-style folly comes to Nigeria

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Nigeria has been gripped by the power of the street. In response to a government announcement ending the subsidy of petrol there has been a tidal wave of protest and disruption, forcing the government to negotiate with the unions. The new-found power of the Nigerian street is an instance of a global pattern, but the street can dance to many tunes. In north Africa it has faced down autocracy. In America its anti-government agenda was entirely different: a tax mutiny. Are the demonstrations on Nigeria’s streets a variant on the Arab spring or a variant on the Tea Party?

Nigeria is not a repetition of north Africa. Far from an unelected autocracy, the present Nigerian government emerged last April from the fairest elections in the country’s history. But the legacy of past gross abuses of power is that citizens are profoundly suspicious of government. And so a needed reform has ignited protests that resemble the sad folly of the Tea Party.

If ordinary people are sufficiently disbelieving of government, it is entirely possible for populist rhetoric to seduce people into fighting against their own true interest. In the US, despite an extraordinarily low tax burden, dramatically rising inequality and an unsustainable fiscal deficit, poor people demonstrated for tax cuts for the rich.

In Nigeria, despite decades of elite plunder of oil revenues by means of scams such as the petrol subsidy, the poor and the young have turned out to demand its restoration. Convinced government is theft, they cling to the pitiful benefits of a petrol subsidy.

Should the poor have been on the streets? The petrol subsidy was costing $8bn a year; in other words the average Nigerian household was forfeiting more than N750 ($4.70) a week of public money. Much of this expenditure was captured wholesale and shipped out of the country. Even the petrol that was sold locally at its subsidised price disproportionately benefited the better off.

There are a myriad of ways in which public money could benefit poor people more than the petrol scam – for example, children could be given bursaries for attending school. That is what poor people should have been urging on their government, and it should now be the focus of political compromise.

Should the young have been on the streets? The petrol subsidy was a classic instance of squandering the oil revenues on current consumption. As oil wealth is depleted, the government has a responsibility of custody to the next generation. Enough of the revenues from oil must be invested in infrastructure and other assets. This is a responsibility that previous Nigerian governments failed to meet.

At last a Nigerian government is taking its responsibility to the next generation seriously. Nigeria’s youth should have taken to the streets to celebrate this change of policy, not to lobby for a return to the status quo.

In attempting to harness the present oil bonanza for development, reformers in the new Nigerian government are trying to avoid a repeat of the history of plunder. There are powerful interests in favour of plunder, including some prominent government officials, which is why repeating history is the default option. But societies can also learn from their history.

Germany is the best-managed economy in Europe because it used to be the worst: from hyperinflation, Germans learnt “never again”. Germans are locked into sound decision-making by a combination of legal rules, dedicated institutions and a critical mass of ordinary citizens who understood why the rules and institutions mattered and so defended them.

Nigeria is fighting a more complex dragon than hyperinflation and so the rules and institutions will need to be different. But the current experience has demonstrated that Nigeria, like the US, has yet to build that critical mass of economic literacy among its citizens. The necessary foundation, a burning sense of “never again”, is most surely there. But if popular anger gets derailed into populism, whether about petrol subsidies or tax cuts, that potentially valuable social energy is wasted.

Yet while it is evidently possible to fool many people for some of the time, there does appear to be a ray of hope. In the US the Tea Party has fizzled: more recently, streets have been claimed by protesters from the other side of the political divide demanding tax increases for the rich, not tax cuts. ‘We are the 99 per cent’ would make as good a slogan in Nigeria as in America, for a protest demanding that oil revenues be spent wisely and transparently.

The writer is professor of economics and director of the Centre for the Study of African Economies at the University of Oxford

Article originally published in the Financial Times on January 15, 2012 9:12 pm

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