Economic Literacy is a new series in which our experts review and score popular economic writing on Nigeria. In the first installment, Abimbola Agboluaje and Ladipo Oye-Somefun review and score Simon Kolawole’s article “How Not to Remove Fuel Subsidy“.
The scoring system I am using will be around four areas:
- Does the piece educate the reader: ie inform with evidence (Score: 3/10)
- How knowledgeable about the topic is the writer and does he share that knowledge (Score:2/10)
- What are the key points (Score: 4/10)
- Is there any follow through on points raised or does the writer use the scatter gun approach (Score: 1/10)
Total Score on an average calculation: 2.5/10
Does the piece educate the reader: ie inform with evidence
Mr Kolawole moves in and has access to the most elite parts of Nigerian society. These include people at the height of business, politics and media. Therefore when I picked up the piece to read it I was looking forward to being educated by someone knowledgeable and also to know the key points about the whole fuel subsidy issue.
I understand that journalism has to be populist in order to be commercial, however I think a duty to educate remains.
The piece is fairly comprehensive and touches on a broad range of topical issues affecting Nigeria. However I am disappointed that I have not learnt anything new. The article is riddled with anecdotal comments about 1) private jets on a terminal; 2) over-invoicing; 3) fuel subsidy as an incentive for rent seekers.
I would have expected to be “schooled” on these issues with comments backed by evidence. Nigeria has experienced tremendous economic growth over the last decade and therefore it is quite possible for people at the top of multi-billion naira enterprises to lease jets. The comment about over-invoicing is left dangling without any further explanation. People who have not run businesses or sat in a business studies class may not understand what over-invoicing actually means. In addition Mr Kolawole accepts the fuel subsidy as incentive for rent seekers without discussing the intricacies involved nor using examples from other Nigerian administrations or overseas.
I feel rather than be educated, this piece may infuriate the casual reader who may be angry at the GEJ regime without actually knowing the reasons why he should be angry. If we must debate fuel subsidy then it would be better to have a more knowledgeable readership.
How knowledgeable about the topic is the writer and does he share that knowledge
The piece does not appear to display or demonstrate the writer’s knowledge on the issues at hand nor does it show whether any comprehensive research was conducted or carried out. The use of the royal “we” and lack of mentioning or describing specific sources further weakens any claims to knowledge. There is a plethora of populist terms which further alienates the reader: “government” ; “buccaneers”; and “fuel importers” amongst others. Specifics would have strengthened the case being made.
What are the key points
The piece is strong with regards to the key points. It quickly identifies these within the first two paragraphs. I believe these to be 1) social contract between the ruled and the rulers; and 2) behavioural economics.
These two key points are highlighted and interrelated. The ruled as sovereign provide the rulers with space and resources to carry out their duties, while the rulers have a duty to create an environment where the welfare of the ruled can be improved upon. Whether this means the rulers allocating resources on the behalf of the ruled or providing a framework for the ruled to provide these for themselves.
The rulers having campaigned and won elections have made a case of their credibility and credentials to the ruled. They have claimed competence and understanding of the social contract.
In respect to behavioural economics, the piece touches upon this when it mentions the opportunistic pricing behaviour of transporters as well as the ability of rent seekers to put pressure on the social contract through allegedly corrupt practices.
The piece does lose marks though because it does not explicitly set these key points out.
Is there any follow through on points raised or does the writer use the scatter gun approach
At this point it is instructive to recall the title of the piece was : “How not to remove fuel subsidy”; the piece could have been much improved if it focused on one or two points and followed through. I do not believe there was consistent follow through.
The reader is left to run a gauntlet of different threads. These threads vary from a feeling of being cheated by political elites, comments about the inefficiency of the fuel subsidy regime all the way to government officials reportedly flying first class. Once the reader’s mind has settled down he is then met with four narrations which are provided as a conclusion. These narrations on their own could stand and form four separate articles, each with sub-topics.
The lack of any serious follow through on the various points raised has, in my opinion, weakened what could have been a good article.
Ladipo is a qualified accountant and MBA holder. He works in Corporate Finance in London.
Total Score: 1/10
Mr. Kolawole is guiltier of obfuscation than economic illiteracy. One was very glad about a year ago, when Mr. Kolawole, who used to be fully in support of the fuel subsidy, changed his mind and turned against it. In this article, he is guiltier of obfuscation than economic illiteracy. He has succumbed to what Lucy Kellaway of FT once described as WET – Weak Excuse Syndrome. Let’s go through the detours and diversions in Simon Kolawole’s article:
1. Mr. Kolawole writes “….I am pro-subsidy (it may be fuel or something else).” He justifies this on the grounds that 90 % of Nigerians live on less than $2 a day and because we “would be courting trouble to declare that every single thing should be left to market forces”. He adds, even in “extremely capitalist countries”, they don’t leave everything to market forces, they provide a “bundle of safety nets for the vulnerable”.
Almost every word is misleading or untrue in some way. Many people live on $2 per day not because they need more subsidies but because resources, which could be spent on stuff that will “tempt” businesses to invest and create productive employment, are being frittered on subsidies. Likewise, Nigeria is so poor because the state meddles in everything (steel mills, paper mills, palm oil mills, banking, aviation, telecommunications, lands, construction etc), sucking up and wasting resources. Nigeria didn’t become poor because things were abandoned to “market forces”. In “extremely capitalist countries”, they target subsidies towards the poorest e.g. people riding to work in decent comfortable buses rather than those riding in personal cars, consuming fuel which could be sold abroad for higher prices and used to obtain foreign exchange and develop infrastructure.
So when Mr. Kolawole writes “The closest thing to social security that people enjoy here is the fuel subsidy”, it makes one wonder what sort of “social security” is consumed by the better-off (probably less than 10 % of Nigerians living in a few cities consume 85 % of the fuel subsidy.)
2. Mr. Kolawole writes “In Nigeria, there is virtually nothing for the people. The rich and the powerful gather like vultures and tear into the national treasury at will, leaving the people high and dry. They ride all the cars, own all the houses and eat all the food. At our expense, of course! ”
Again, the implication here is that market forces are to blame. When people become extremely rich without creating jobs, they are not “exploiting” the masses in the classical sense, i.e. extracting labour in factories or plantations and keeping too much of the surplus value created. They are simply stealing and this plunder is much better facilitated by opaque policies that place billions of dollars in the drawers of bureaucrats and politicians.
3. Mr. Kolawola also has a problem with those who argue that the best way to eliminate the corruption associated with the administration of the subsidy is to remove the incentive for it i.e. the subsidy. In his thinking, the “removing the incentive for corruption” argument is invalid because, amongst other reasons, “…if we have to follow it through, we may soon privatise our rotten police force”. This is the best of Nigerian “economic journalism” which feeds public thinking about policy i.e. “arguments” that are perplexing because they are superficially logical but which you know to be complete baloney immediately they leave someone’s mouth or pen. To extend Mr. Kolawole’s logic, a big and/or over-extended state with deep and diverse economic powers is not a problem conceptually or in reality – all its managers need to do is suddenly summon the reserves of discipline they have kept unused since 1960. For him, whittling down the economic roles of the state is a cowardly and unworthy shortcut.
4. And it gets worse. In his January 22 piece, Mr. Kolawole takes issue with Sanusi Lamido Sanusi’s distinction between subsidizing consumption versus production subsidy. He argues that when he rides his car to work, he is involved in “production”, so he is entitled to the fuel subsidy just as the barber and pepper grinder. This is just something you expect pepper grinders to say in their own defence. Why on earth should the Government subsidise The Editor of ThisDay to get to work to “produce” this sort of article! Well, here’s the injustice of it: 30 people (artisans, market women, unemployed etc) on a bus to Apapa = 3 litres of subsidized fuel. I person (well-paid Editor blowing air conditioner) riding in his car to Apapa = 2.5 litres of subsidized fuel. And those pepper grinders? These are just human shields used by well-off Nigerians to defend the fuel subsidy-the poor have the most to gain when the funds (even if 50% of it is stolen) are redeployed to schools, hospitals, mass transit schemes which middle classes will not use.
5. Then Mr. Kolawole throws the final howler “Agriculture is heavily subsidized in Europe. Every farmer gets financial incentives to keep farming…When agriculture is subsidized, the produce is cheaper. Everybody who goes to the market to buy carrots or milk enjoys the same low prices”. What agriculture subsidies does for everyone in Europe is raise prices by paying a guaranteed income to farmers, that is why cheaper imports have to be kept out through high tariffs. And this is sustained by politics, with the the farm lobby pocketing politicians to do their bidding (nearly half of the European Union’s budget is spent on the Common Agriculture Policy through which farm subsidies are administered). What the state does is to help the poor buy the food through subsidies, food stamps, tax credits etc. And better-off citizens who are hit with income tax of between 30-40 % pay both for the farm subsidy and welfare (Nigerian equivalent pay only tithes). There is always someone somewhere paying for a free lunch!
6. Simon Kolawole is a very fine and insightful writer when he writes about what he knows very well – politics and history. His view on the fuel subsidy has reverted to the populist fare of Nigerian journalism. His second piece contained the usual critique of the imperial remuneration of Nigerian politicians, yet he states in the same article that he is “thoroughly impressed” by David Mark, the Senate President who is rumoured to enjoy a remuneration package of about N600 million per annum, because he “acted as a good mediator and seasoned crisis manager…” in retaining the fuel subsidy (though at a reduced level). Shouldn’t the number 3 citizen of the country have a view on his party’s critical economic policies? Mr. Kolawole can celebrate the messy and appalling end to the fuel subsidy saga because he has no clear view of the cost to the Nigerian economy, or the role subsidies and other forms of economic interventions play in promoting corruption.
Never rely on a WET!
Abimbola writes from Lagos, Nigeria.