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Support Of Oil Subsidy Removal: Shame On You, United States

December 1, 2011

“So, shame on you, Barack Obama. It is time you ran a campaign consistent with your messages in public, that’s what I expect from you.” That was an unhappy Hilary Clinton pouring scorn on what she perceived to be the double-standard campaign tactics of Barack Obama.

“So, shame on you, Barack Obama. It is time you ran a campaign consistent with your messages in public, that’s what I expect from you.” That was an unhappy Hilary Clinton pouring scorn on what she perceived to be the double-standard campaign tactics of Barack Obama.

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Today, millions of equally unhappy Nigerians say “shame on the United States,” in response to statements credited to the United States Ambassador to Nigeria, Terence Mc-Culley stating that “the US is in support of the planned removal of fuel subsidy in Nigeria:  

The proverbial removal of the log in one’s eye before pointing out the speck in another is clearly applicable in this instance. Focusing on agriculture alone, The United States Government annually subsidizes its agriculture with an estimated $30 billion in cash, not counting other forms of payment.  Aside from outright subsidies, the US government is known to spend over $200 billion USD annually on diverse agricultural support programs.

Successive United States Governments have argued that agricultural subsidies do not make ‘economic sense’. However, in the face of the strong lobbying power of the farmers union, it has been almost impossible for the government to stop subsidizing the nation’s agriculture. Just like in the United States, removal of oil subsidy does not make economic sense to the elites in power in Nigeria, but the Nigerian masses do not have the strong lobbying power of the United States farmers, therefore they must be at the receiving end of poverty inducing market reforms. 

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However, unlike the Nigerian situation where the effect of oil subsidy is largely limited to the domestic economy, US subsidies affects the global market negatively, especially the commodity dependent countries in Africa. Over 60 percent of US subsidized agricultural products are for export, making the country the largest exporter of grain by a wide margin.

According to an Oxfam report; “by driving down the prices for its farmers, US taxpayers … bear a direct responsibility for poverty in Africa.”  How so?  Take the case of cotton for instance, the United States subsidizes production for its farmers by almost 86%. The farmers are able to export cotton for much less than the actual production costs. Conversely, the poor African farmer with an uncaring leadership does not get a penny in subsidy. If he is a Nigerian farmer, then he lives in constant fear of increased production cost should the only fuel subsidy he receives from his government be taken away. Oxfam reports that African exporters loose over $1 billion USD annually to food subsidies by the United States and other EU countries.

Admittedly, the call by the US Ambassador is not out of character considering his nation’s antecedents.

Through its Bretton Woods establishments, the World Bank and the International Monetary Fund, the United States has been calling on the few African countries who dare to provide a measure of subsidy to  farmers to desist from such act. Against World Bank’s advice, government of Malawi in 2008/2009 spent $186 million to subsidize agricultural input for poor farmers.  “Malawi’s success in this program against donor advice, has made the country a grain exporter and helped contain food costs,” reports the Food and Agricultural Organization.

Just as the case in Nigeria today, Economists from the World Bank and other multilateral agencies from the West had initially criticized the government of Malawi, arguing that “subsidies would worsen the budget deficit and create distortions in the market.” Malawi’s recent success has confounded those Western “experts”.  The United Nations Food and Agricultural Organization reports that “the phenomenal increase in maize production – from 1.2 million tonnes in 2005 to 3.4 million tonnes in 2008 “has saved Malawi a yearly budget of US$120 million it had spent in 2005 importing food.”

Clearly, the United States would have preferred Malawi to remain dependent on it for its food imports. According to Erl Butz, President Richard Nixon’s Secretary of Agriculture, “food is a weapon”.

In 1989 the United States threatened retaliatory actions against the Government of Nigeria for daring to ban the importation of wheat in order to grow its own wheat industry. 

Under intense pressure from the Government of the United States, at loss on where to export its hugely subsidized grains, Nigerian government lifted the ban in 1992. For years since then, Nigeria has remained “the number one export destination in the world for U.S wheat”. No statistics is available on Nigerian wheat production in the records of the International Grains Council as “it is too small to be recorded.” According to the Minister of Agriculture, Akinwunmi Adesina, Nigeria spends a total of N635 billion per annum (official figures) on the importation of wheat alone.

Moreover, quite unlike Europe which gives recipients of food aid the option of cash to purchase their own choice grains, the United States insists on exporting its often genetically-modified grains to African countries as a means of dumping its surplus grains. In the words of the United States representative to the Berlin Conference on Food Aid in October 2003, “Beggars can’t be choosers.”

In essence, the United States is the leading country when it comes to subsidizing certain sectors for its populace. There is hardly any ethical, economic, political or social justification for the country, through its Ambassador,  to take sides with the Nigerian government against the masses.

Nigerian government is hinging its argument for the removal of oil subsidy on the existence of a cartel that benefits from the current situation. Despite one’s strong disapproval for the United States agricultural subsidies, the title of an essay in defense of it by New York Times columnist Mark Bittman is worth citing; “Don’t End Agricultural Subsidies, Fix Them.” There is a lesson there for the Nigerian Government. Despite global outcry and domestic resistance by some progressive minded Americans, the United States has no plans to remove its own subsidy, but is trying to fix it.