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Nigeria: Workers Buck IMF

by William WallisFinancial Times
March 22nd, 2001

The Nigerian Labour Congress yesterday threatened to render Africa's most populous nation ungovernable if President Olusegun Obasanjo went ahead with plans to phase in the deregulation of fuel supplies in an attempt to end chronic shortages.

Speaking at a rally in Lagos, the commercial capital, Adams Oshiomole, the uncompromising leader of the congress, the country's umbrella trade union movement, heaped abuse on Mr Obasanjo's government, saying it had failed on all counts to improve the lives of Nigerians since the corrupt and incompetent rule of the military ended nearly two years ago.

The government was now planning, he said, to make life even more difficult by allowing petrol prices to rise above their current subsidised level of N22 (13 pence) a litre to a rate determined by the world oil market.

"We cannot pay world prices because we do not earn world incomes," Mr Oshiomole said. "When the day comes (deregulation), if monkey goes to market, he will not return," he threatened with a local proverb meaning that those who stir up trouble find them-selves in trouble first.

The rally was sparsely attended by Lagos standards. But members of a 1,000-strong crowd said there should be no mistaking the determination of Nigerians to resist another fuel price rise.

The precedents are there. Mr Obasanjo was forced to back down last year when his attempt to increase prices by 50 per cent resulted in a violent general strike. This in turn strengthened the hand of the unions, which have won back a place at the negotiating table under Mr Oshiomole's charismatic leadership and with the new-found freedom of civilian rule. Barely off the ground Mr Obasanjo's programme of economic reforms is facing rising opposition.

The unions oppose the principle of liberalisation, because of the likely rise in the price of basic necessities controlled, albeit with disastrous consequences, by the government.

Conservatives in the establishment are quick to take advantage of this because eliminating the inefficiencies that exist in the current climate of subsidies and state monopolies will end their access to government patronage.

Yet this year may provide Mr Obasanjo with his last opportunity to drive through painful measures, which could engender improvements in infrastructure and supplies, before the electoral cycle begins again, and all issues become increasingly politicised.

Of these, there is none more sensitive than the fuel crisis. Nigerians have come to believe that governments unable to provide other basic services with the proceeds of Nigeria's 2.2m b/d oil industry, should at least provide cheap fuel.

Unfortunately the state has proved unable even to do that. For the first quarter of this year, the pumps at petrol stations have been dry. The premium-priced black market, which usurped the formal one under the corrupt control of past regimes, has taken over. Smuggling to neighbouring countries where profit margins are greater is continuing at its usual pace.

Africa's leading oil producer could be awash with cheap fuel. Its four refineries have the capacity to produce a third more than domestic requirements of 300,000 b/d. Yet last year, 82 per cent of these were imported.

Despite tens of millions of dollars of state investment, little progress has been made in repairing the refineries, which were allowed to collapse in the past because of the commissions enjoyed by officials involved in the lucrative import trade.

An exasperated Mr Obasanjo said recently that Nigeria was "jinxed" and that he would have to "consult the elders" to find a solution. The former military ruler, who presided when head of state in the 1970s over the nationalisation of Nigerian industries, has since become a passionate advocate of deregulation.

"We have to make it competitive to produce locally. No one in their right mind will set up a refinery to sell at the subsidised price, or to import. And some of the people say 'don't deregulate' because they benefit directly from regulation," he argued recently. But there is logic, too, to Mr Oshiomole's counter-argument, which is certainly more popular. If the government was prepared to break up the state-run Nigerian National Petroleum Corporation, NNPC, he says, and stop corruption at the refineries, it could sell Nigeria's cheap-to-produce "Bonny light" crude to the private sector at the same rate of Dollars 9.50 (Pounds 6.60) a barrel it sells it to the NNPC. Then it would be possible both to maintain low prices and to fill the pumps.

It has become a chicken and egg sitution, because the refineries have proved impossible to fix while under state control. Yet they are unlikely to sell at more than give-away prices, say officials charged with privatising Nigeria's ailing state enterprises, unless the government first deregulates distribution and supplies.

This time, Mr Obasanjo appears determined to push ahead with a gradual rise over the next year towards market determined fuel prices. But as Mr Oshiomole has warned, he risks in the process making Nigeria even more ungovernable. For regional reports,

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