The virtually simultaneous removal of consumer subsidies on petrol and electricity prices is a radical departure from virtually everything that President Muhammadu Buhari has, for many years, stood for. It is therefore being seen as an indication of the emergence of new thinking that could dictate future governance. At the same time, however, it is likely to alienate the president’s most loyal traditional support base amongst the poor of northern Nigeria.
It was the severe economic impact on the country’s finances, caused by the dramatic fall in international crude oil prices, which was the trigger for the policy change. This enabled key people in government to convince Buhari that the time had come to finally remove the subsidies which was something he had previously strongly opposed. The fact that Federal Government revenues have fallen by more than 60% this year means that it can no longer fund its current budget which made it inevitable that Buhari was forced to agree to such a radical change in policy.
External pressure from both the International Monetary Fund (IMF) and the World Bank has also forced the Federal Government to take some of the difficult decisions that have recently been announced. Nigeria is currently seeking a US$1.5 billion loan from the World Bank and the implementation of some of these policies were a pre-condition for the advance to be approved.
Buhari’s new disposition does not, however, come without potential risks. The powerful trade unions are threatening to go on strike to protest about the cut in consumer subsidies. His traditional support base — particularly the poorer Nigerians in the north — is going to be particularly hard hit by the higher prices and this could create problems for Buhari although he is obviously not seeking re-election in 2023. Instead it may be the ruling All Progressives Congress (APC) that could pay the political price of such a loss of support in the next general election.